Outsourcing management of IP can boost profits

By Dr Sushil Kumar, Clairvolex Knowledge Processes

K nowledge and research have become important resources and key elements in the new business prototype of economic development, so it has become essential to identify and commercialize these resources.

Asian law firms and specialized agencies have caught up with the trend of harnessing their knowledge pool and skills to earn business opportunities from overseas.

Dr Sushil Kumar

In intellectual property, this has created a new profile for outsourcing that includes the provision of services such as patent drafting, novelty and prior art search, IP prosecution and management, patent landscaping, processing of standard forms for licensing, IP docketing and the like. Also labelled as “intellectual arbitrage”, it supplants the traditional core competencies of many businesses.

Companies in the US and Europe have been able to build up business competencies and volume by outsourcing knowledge-based IP utilities. Significantly, both startups and established companies can use this outsourcing to improve their capital utilization.

According to GlobalSourcingNow, knowledge process outsourcing (KPO) business should hit US$17 billion by 2010 and 70% or US$12 billion of that will be done in India. This could create 300,000 new jobs, up from 25,000 now. IP outsourcing has come a long way; and the picture is only getting better.

The availability of highly skilled service providers attracts foreign companies and has changed how they benefit from economies of scale. The new business model of IP management essentially consists of outsourcing to low cost locations to lower costs and boost competencies. With opportunities growing daily, there is a steep rise in the number of professional service vendors.

Outsourced work centres on providing client specific functionality and drafting and is driven by the depth of knowledge, experience and judgment. Minimum entry barriers and low setup costs also encourage professionals to start with focused KPO centres.

The relationship between the outsourcer and the service provider is symbiotic. The outsourcer can cut costs and maximize efficiencies while the supplier gets lucrative business opportunities.

Indian firms process patent applications for as little as US$4,000, while the comparative costs in the US are US$15,000-25,000. And, given the vast English-speaking population, Indian firms are ready to take on more work.

It has even become possible for foreign companies to increase their patent filings. One global software firm doubled its filings to 3,000 per year by outsourcing almost 80% of the work offshore. The question of “make or buy” is passé. The prospects for cost savings in outsourcing patent preparation and prosecutions propels companies to farm out rather than to use in-house personnel.

There are also hybrid multi-sourcing models consisting of a judicious mix of onshore and offshore outsourcing.

Overall, the quality and expertise of the service providers is assessed on factors like technical proficiency; skill sets available; the availability of legal, techno-legal or paralegal analysis; research databases; data security; turnaround time; and the maturity of the IP structure in the country.

In turn, the challenges for the service provider include acquiring the necessary skill sets, maintaining qualified personnel, handling data security and confidentiality concerns and managing conflicts of interest while providing quality services.

Increasingly, outsourcers are questioning the quality, security and technical soundness of the vendor.

Issues regarding confidentiality are gaining importance and the companies appraise the processes followed by the offshore organization to maintain it. This includes signing non-disclosure agreements with employees as well as maintaining technical and data security levels to curtail seepage of information.

More foreign agencies, law firms and companies are working with Indian law firms or third party vendors. This clearly proves that outsourcing of patent drafting to foreign countries is a necessity rather than an alternative resource to confront global competition. The outsourcers can unlock their growth potential by strategically managing their IP work.

IP outsourcing is emerging in countries with high educational standards and skilled professionals and India scores well on both counts.

However, to extract maximum commercial benefits, outsourcers have to shop around for the supplier that best meets their specific requirements.

This is the most important step to achieve optimum operational and cost benefits. High quality expertise can be accessed by a careful survey and assessment of the organization’s competencies, security procedures, skilled staff, technical stability and the adoption of best practices.

Companies also support educational and certification organizations to generate a supply of talent in the selected locations.

Delegating core and non-core jobs offshore gives an organization more freedom to operate. It also gives them more time to build business networks, get communications and insights from inventors and construct strategies that increase their top-line revenues.

Dr Sushil Kumar is vice-president of Clairvolex Knowledge Processes, a Delhi-based legal outsourcing firm.

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Clairvolex Knowledge Processes

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