Dr. Alok Aggarwal
Ready to Bring AI Automation to Your Business?
Let's DiscussWhen conversation turns to IP and offshoring things can often get heated. But whether people like it or not moving certain types of IP work to countries such as India is here to stay. And, if done properly, it can also bring major cost savings without any drop in quality.
The number of patent and trademark applications being filed with the United States Patent and Trademark Office (USPTO) and in other developed countries has been rising substantially, whereas the increase in the number of registered patent agents in these jurisdictions has not been keeping pace. For example, while patent applications grew by 6% annually between 1995 and 2005, the number of active patent attorneys grew by just 3.5%.
As is to be expected, this mismatch is leading to substantial increases in costs.
To contain these costs, many IP divisions of large, medium and small organisations, as well as many IP law firms, are already outsourcing some of their work – such as drafting of figures, literature searches, prior art searches and invalidation studies – to third parties in their home jurisdiction and to other countries. However, since both the price of, and the demand for, IP services has been increasing substantially, and since the corresponding budgets (for IP creation and maintenance) are only growing at the rate of inflation (if that!), more and more companies and many law firms are now beginning to look offshore to contain costs without jeopardising quality.
In spite of all of the hype surrounding the offshoring of legal and IP services, and forecasts about how many billions of dollars this is going to generate for Indian offshoring companies, research actually shows that as of 31st July 2006 only 1,750 professionals were providing offshored legal services from India, a number that is expected to grow to approximately 6,500 by December 2010. Furthermore, the Indian companies and the subsidiaries of large multinationals are likely
to generate approximately US$69 million from such work during 2006 and US$300 million
during 2010. Of the total of 1,750 professionals, only 610 IP professionals are providing offshored IP services from India, a number expected to grow to approximately 2,000 by December 2010. Furthermore, the revenue generated by these Indian companies from providing offshored IP services is likely to be approximately US$26 million in 2006 and approximately US$96 million in 2010. Finally, although there are reportedly more than 40 organisations (including third party vendors and subsidiaries of multinational companies) providing IP services, only five have more than 15 IP professionals.
Within intellectual property, the services that are being offshored include:
A patent application typically consists of the following activities: prior art searching; conducting interviews with inventors; drafting background; drafting specifications; drafting, claims; drafting summary; preparing drawings; and a final review, modifications and filing. Although the final step must always be performed by a attorney or agent registered with the relevant patent office,
other activities can be either completed by IP professionals in the relevant jurisdiction or in
a remote location. Currently, several very large companies are experimenting with three
models of patent application drafting in India.
Model one
The IP professionals in either a captive subsidiary or a third party firm draft the complete application (including drawing, say, USPTO compliant figures), while the internal IP attorneys review and modify the draft and then file it with the relevant patent office. In this model, a typical internal attorney spends between seven and eleven hours in performing some – or all – of the following tasks:
This model seems the most robust and if 100 or more applications are written in this model annually, then the total cost for drafting and filing an application (including the cost of internal attorneys and that of the offshore vendor) can be reduced to US$3,500 to US$4,000 per patent application.
Model two
The offshore, third party IP professionals draft the complete application (including drawing, say, USPTO compliant figures) while the IP attorneys from the client’s external law firm who are based outside India modify the drafts and then file the application with the relevant patent office. In this model too, a typical external attorney spends between seven and eleven hours in performing some – or all – of the tasks mentioned earlier and ultimately these attorneys become the attorneys of record with the relevant patent office.
This model seems to work quite well, but requires an internal champion within the client’s organisation whose focus is to make the process efficient, cost-effective and ultimately successful. If 100 or more applications are written in this model annually, then the total cost for drafting and filing an application (including the cost of external attorneys and that of the offshore vendor) can be reduced to US$4,500 to
US$5,500 per application.
Model three
A third variation has the third-party IP professionals drafting the complete application (including drawing, say, USPTO compliant figures). They then send the application to the IP attorneys of an external law firm who modify the draft and, in turn, send it to an internal attorney within the client’s organisation for final review, modification and filing. This model is probably the less compelling of the three because all the cost advantages are lost with two
different attorneys reviewing the drafts.
Additional help
Besides helping patent attorneys in drafting patent applications – in part or in their entirety – many offshore firms can also provide a technical assessment of the prior art cited by the patent examiner during the prosecution process. Furthermore, depending on the requirements of the patent attorneys, these firms can span from providing the basic material for drafting the response to the corresponding professionals drafting the complete response to the examiner’s objections themselves (which is then reviewed, modified and filed by the patent attorney).
Finally, as a lot of research and advanced development is beginning to occur in India, the drafting of complete technical disclosures seems to be a rapidly growing area, especially with respect to the inventions coming out of India-based organisations (because, as mentioned earlier, many attorneys find it extremely difficult to interview the inventors given the time zone difference and cultural complexities).
With respect to offshoring of patent-related services, the following four models seem to
be emerging.
Captive centres formed by law firms
Currently, Indian law does not allow foreign (ie, non-Indian) law firms to practise in India. Hence, some law firms in the US and elsewhere, as well as Indian firms themselves, are setting up subsidiaries so that they do not practise law in India but provide such IP services for export purposes only. For example, about four years ago, Schwegman Lundberg Woessner and Kluth PA – a law firm headquartered in Minneapolis – set up captive centres in Delhi-Gurgaon and Bangalore for one of its subsidiaries, Intellevate India, which currently has approximately 165 professionals, who are mainly involved in patent docketing and patent proofreading. As well as Intellevate, IPPRO and Metrix Services (PatentMetrix) are some more examples of Indian subsidiaries of law firms, although these are much smaller. Interestingly, about a year ago, Computer Patent Annuities (CPA) acquired a majority stake in Intellevate and hence it is unclear whether this model of non-Indian law firms opening subsidiaries in India for export purposes will actually work.
Joint ventures between law firms
Rather than opening their own captive centres, a few non-Indian law firms have started joint ventures with their counterparts in India. A good example is Cantor Colbourn in the US, which has joined hands with Lall & Sethi in India. However, since most joint ventures do not succeed – especially in India – one needs be cautious when treading this path. Furthermore, Indian lawyers practising intellectual property do not generally have an undergraduate degree in science or engineering and hence may not necessarily have a good grasp of technology, which in turn, often leads to a culture clash between the two firms forming the joint venture.
Captive centres of large technology companies
A good example of this model is General Electric, which has approximately 55 IP professionals within its GE Research and Development centre in Bangalore. These professionals seem to be providing many of the services previously described. At least 15 other multi-national companies are currently pursuing this model, but it is unlikely to succeed unless the corresponding centre has at least 100 professionals because it needs to have the critical mass to provide good career opportunities to its professionals. Currently, many of these captives are paying 20% or more above in compensation and are still having more than 50% annual attrition because the job market in India is extremely hot at this time. On the other hand, undoubtedly, some important advantages such as confidentiality, conflict of interest, work-product privilege and discoverability issues are easier to handle for captive organisations.
Third party vendors providing services to law firms
Third party vendors include companies that are providing research and analytics in general, or those that are set up by non- Indian attorneys and are domain specific, providing only legal and IP services. Such companies would almost always hire engineers and scientists in India, and train
them to become proficient in USPTO, PCT and WIPO rules and regulations, so that they
can provide all the patent-related services mentioned above.
The following issues need to be investigated thoroughly by any organisation before it decides to take advantage of IP services provided by offshore locations.
Confidentiality and liability
In addition to signing the non-disclosure agreements (NDAs) and ensuring legal jurisdiction is in the relevant jurisdiction, it is important to understand the processes that the offshore organisation follows in order to maintain confidentiality. This includes signing appropriate documents with its employees as well as taking appropriate technical measures to minimise leakage of confidential information (eg, eliminating writing capabilities on individual PCs). Finally, if the work is being offshored to a third party then it is important to understand the liabilities carried by each party and whether the third party vendor has sufficient Professional
Errors and Omissions insurance coverage.
Conflicts of interest
This is an important issue to investigate especially for patent application drafting and invalidation searching. It is vital to be familiar with the policies, if any, followed by the offshore organisation as well as the processes it uses to manage conflict of interest issues.
Work-product privilege
Some believe that if the offshore organisation is interacting with a non-Indian attorney then the work-product privilege automatically extends to all this work, whereas there are others who feel that to ensure work-product privilege, all interactions should go through a law firm.
Export control
Prior to exporting information outside the United States, for example; either to an independent third party or to part of a domestic organisation located in a foreign country, a company may have to ensure that the export of such information or items is not in violation of export laws. In the US,
this issue comes under the authority of the Bureau of Industry and Security (formerly known as the Bureau of Export Administration), which is part of the Department of Commerce. The Bureau is responsible for implementing and enforcing the Export Administration Regulations (EAR),
which regulate the export and re-export of most commercial items. Most large companies have an internal department that deals with export controls and related issues and would be able to help such companies in handling this issue effectively.
Ensuring good processes at both ends
To obtain good results, it is important that all parties involved in offshoring have extremely well-honed processes. This includes people in the organisation that is sending the work providing timely and detailed feedback to the offshore organisation (so that its professionals can improve their work-product going forward), and the inventors and others responding quickly to the questions and issues raised by the offshore organisation. There should also be a clear understanding regarding the following: clear, written, project specifications; well defined expectations with respect to the work-in-progress and final deliverables; weekly conference calls and progress reports; and a written end-to-end schedule.
Training and staying current with case law
Before providing work to an offshore organisation, it is important to understand the training it provides to its professionals. Furthermore, to obtain the maximum benefit from this relationship, it is worthwhile making ongoing training available to the offshore professionals so that they can stay current with case law from relevant jurisdictions. It may also be the case that proficiency in written English of the IP professionals may not be up to the required standards. Since the entire area of intellectual property in, for example, India is relatively under-developed, most professionals have only a few years of experience; therefore, it is important to understand that many professionals are at best at the same level as an associate with one to two years of typical law firm experience.
Getting Samples and doing small pilots before diving deeper
Try to get samples of the work done by the offshore organisation (eg, granted patents, published applications and sanitised versions of prior art searches or IP landscapes) and if satisfied, then start with doing small ad hoc and on-demand projects (in the form of pilots) before embarking on a full-fledged offshore IP programme that may involve a dedicated team. If possible, ask the offshore organisation for references, although most large companies who are doing this well do not want to provide references because their programme is still in early stages, they do not want to risk negative publicity that might arise from offshoring, or they would like to protect their
competitive edge.
Blog Written by
CEO, Chief Data Scientist at Scry AI
Author of the book The Fourth Industrial Revolution
and 100 Years of AI (1950-2050)
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Except where such exclusions are prohibited by law, in no event shall the company nor its respective directors, officers, employees, agents, service providers, contractors, licensors, licensees, suppliers, or successors be liable under these terms of service to you or any third-party for any consequential, indirect, incidental, exemplary, special, or punitive damages whatsoever, including any damages for business interruption, loss of use, data, revenue or profit, cost of capital, loss of business opportunity, loss of goodwill, whether arising out of breach of contract, tort (including negligence), any other theory of liability, or otherwise, regardless of whether such damages were foreseeable and whether or not the company was advised of the possibility of such damages.
To the maximum extent permitted by applicable law, you agree to defend, indemnify, and hold harmless Company, its parent, subsidiaries, affiliates, and their respective directors, officers, employees, agents, service providers, contractors, licensors, suppliers, successors, and assigns from and against any claims, liabilities, damages, judgments, awards, losses, costs, expenses, or fees (including reasonable attorneys' fees) arising out of or relating to your breach of these Terms of Service or your use of the Website including, but not limited to, third-party sites and content, any use of the Website's content and services other than as expressly authorized in these Terms of Service or any use of any goods, digital products and information purchased from this Website.
At Company’s sole discretion, it may require you to submit any disputes arising from these Terms of Service or use of the Website, including disputes arising from or concerning their interpretation, violation, invalidity, non-performance, or termination, to final and binding arbitration under the Rules of Arbitration of the American Arbitration Association applying Ontario law. (If multiple jurisdictions, under applicable laws).
Any cause of action or claim you may have arising out of or relating to these terms of use or the website must be commenced within 1 year(s) after the cause of action accrues; otherwise, such cause of action or claim is permanently barred.
Your provision of personal information through the Website is governed by our privacy policy located at the "Privacy Policy".
The Website and these Terms of Service will be governed by and construed in accordance with the laws of the Province of Ontario and any applicable federal laws applicable therein, without giving effect to any choice or conflict of law provision, principle, or rule and notwithstanding your domicile, residence, or physical location. Any action or proceeding arising out of or relating to this Website and/or under these Terms of Service will be instituted in the courts of the Province of Ontario, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such action or proceeding. You waive any and all objections to the exercise of jurisdiction over you by such courts and to the venue of such courts.
If you are a citizen of any European Union country or Switzerland, Norway or Iceland, the governing law and forum shall be the laws and courts of your usual place of residence.
The parties agree that the United Nations Convention on Contracts for the International Sale of Goods will not govern these Terms of Service or the rights and obligations of the parties under these Terms of Service.
If any provision of these Terms of Service is illegal or unenforceable under applicable law, the remainder of the provision will be amended to achieve as closely as possible the effect of the original term and all other provisions of these Terms of Service will continue in full force and effect.
These Terms of Service constitute the entire and only Terms of Service between the parties in relation to its subject matter and replaces and extinguishes all prior or simultaneous Terms of Services, undertakings, arrangements, understandings or statements of any nature made by the parties or any of them whether oral or written (and, if written, whether or not in draft form) with respect to such subject matter. Each of the parties acknowledges that they are not relying on any statements, warranties or representations given or made by any of them in relation to the subject matter of these Terms of Service, save those expressly set out in these Terms of Service, and that they shall have no rights or remedies with respect to such subject matter otherwise than under these Terms of Service save to the extent that they arise out of the fraud or fraudulent misrepresentation of another party. No variation of these Terms of Service shall be effective unless it is in writing and signed by or on behalf of Company.
No failure to exercise, and no delay in exercising, on the part of either party, any right or any power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or power hereunder preclude further exercise of that or any other right hereunder.
We may provide any notice to you under these Terms of Service by: (i) sending a message to the email address you provide to us and consent to us using; or (ii) by posting to the Website. Notices sent by email will be effective when we send the email and notices we provide by posting will be effective upon posting. It is your responsibility to keep your email address current.
To give us notice under these Terms of Service, you must contact us as follows: (i) by personal delivery, overnight courier or registered or certified mail to Scry Analytics Inc. 2635 North 1st Street, Suite 200 San Jose, CA 95134, USA. We may update the address for notices to us by posting a notice on this Website. Notices provided by personal delivery will be effective immediately once personally received by an authorized representative of Company. Notices provided by overnight courier or registered or certified mail will be effective once received and where confirmation has been provided to evidence the receipt of the notice.
To request a copy for your information, unsubscribe from our email list, request for your data to be deleted, or ask a question about your data privacy, we've made the process simple: