Patent Outsourcing to Offshore Service Providers

By Mark Ross.Vice President of Global Sales and Marketing, LawScribe

mross@law-scribe.comhttp://blog.law-scribe.com

Overview of Patent Outsourcing Market in India

• Revenues estimated at $47 million for 2007

• Revenues estimated to reach $206 million by 2012

• Potential patent offshoring market estimated at $2 billion

• 1550 people employed in industry in India end of 2007

• 7000 people estimated to be employed in industry by 2012

• U.S. companies account for 60 percent of client base

• Currently around 50 companies offering services

• Larger KPO and BPOs will acquire smaller players in patent space

Source: ValueNotes Research Report – Offshoring Patent Services to India (June 08)

Preliminary considerations for IP handling

• In-house

– Con: Large overhead, limited budget

– Con: Time allocation concerns

– Pro: Maintain high level of control

– Pro: Potentially efficient and cost-effective if done right• Outside counsel (attorneys and agents)

– Con: Expensive - $160,000 starting salaries

– Con: Sluggish turnaround

– Pro: High quality of work

– Pro: Minimal liability concerns

Preliminary considerations for IP handling

• Domestic vendors– Con: Moderately expensive– Con: Hit or miss quality – Con: Complete loss of control– Con: Inability to scale up?– Pro: Good access to resources, sometimes local– Pro: Specialized expertise in most fields– Pro: Reputable, reachable

• Offshore vendors– Con: Hit or miss quality– Con: Complete loss of control– Con: Liability/malpractice issues– Pro: Low cost– Pro: Good access to resources and easily scalable– Pro: Specialized expertise in most fields– Pro: Reputable, reachable

Preliminary Considerations – Cost Benefit Analysis

• Will the savings realized justify the effort and risk?• Understand internal processes• Calculate on the following assumptions:

– Reduced efficiencies at the outset?– Need for hands-on training?– Export licenses? (IP specific)– In-house realignment? (IT, support staff, etc.)– There will be substantial “labor vs. labor” cost savings

• What are the required resources?– Leading internet research tools can range from $2k to $10k per seat per

year• What are the estimated labor costs?

– Offshore– Onshore management– In-house efforts

Export Control Regulations: USPTO Notice July 23 2008Press Headlines: USPTO Ends Patent Outsourcing to IndiaThe facts!• Notice does not change existing law• Foreign Filing License allows export of subject matter abroad for

purposes of filing foreign applications• Foreign Filing License does not allow export of subject matter

abroad for preparation of patent applications to be filed in U.S.• Exporting subject matter abroad for preparation of patent

applications to be filed in U.S. may require export license• Contact the Bureau of Industry and Security (BIS) for the

appropriate clearances• BIS has promulgated Export Administration Regulations (EAR) for

exports of subject matter abroad

Export Control Decision Tree• Are your items and activities subject to the EAR?

• Is the technology publically available?

• Is the subject matter technology as defined by EAR: “specific information necessary for development, production or use of a product." 15 CFR 772.1.

• If subject to the EAR and not publically available then classification of item on the Commerce Control List is necessary

• Classify yourself or with assistance of BIS – BIS has a duty to provide a classification to you

• Determine if a License Exception is available

• If no License Exception is available you must obtain a license

Export Control Decision Tree (contd)

Commerce Control List0 - Nuclear Materials, Facilities and Equipment and Miscellaneous

1 - Materials, Chemicals, “Microorganisms,” and Toxins

2 - Materials Processing

3 - Electronics

4 - Computers

5 - Telecommunications and Information Security

6 - Lasers and Sensors

7 - Navigation and Avionics

8 - Marine

9 - Propulsion Systems, Space Vehicles and Related Equipment

IP Services Unaffected by the Notice ?

1. Invalidity Search: no requirement to export technology. Requires research to invalidate an existing patent i.e. publically available information

2. Proofreading issued U.S. patents: publically available information

3. Freedom-to-operate search: export of technology either not required or capable of being tailored

4. Office Action Responses: Office Actions available in the Public PAIR

5. Patentability/Novelty Searches – may not come within EAR definition of technology, or on CCL, and/or disclosure can be tailored so as to not infringe regulations