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Ronald Panitch has fielded his share of cold-call pitches from vendors during his 40 years of practicing intellectual property law. But one he received last week included an eye-opening business proposition.

The offered service was a team of 80 lawyers who could handle legal research, document review, patent proofreading and litigation support for between one-third and half the price of using American paralegals.

The catch is the cold call was an e-mail sent from halfway across the globe. The company in question, Manthan Services, is based in Bangalore, India, and would be doing the work while Panitch and his colleagues from Akin Gump Straus Hauer & Feld are sleeping.

Outsourcing legal work to India, particularly in intellectual property practice, is a trend that began at American law firms and in-house legal departments roughly two years ago. But it has not yet caught on in the Philadelphia legal community.

“Could they craft a patent application overseas?” Panitch said. “Yes. But I wouldn’t want to be the pioneer. Over time, they might learn how things are done over here. I just don’t want the first car off that assembly line.”

“I know some companies look at it as a way to control costs but I’m reluctant to be the guinea pig,” Drinker Biddle & Reath intellectual property chairman Gregory Lavorgna said.

While firms expressed reluctance to use Indian companies, a much-cited report from Forrest Research of Cambridge, Mass., predicts that roughly 8 percent of American jobs in the legal profession will have shifted abroad by 2015.

Nowhere is the outsourcing trend more prevalent than India, which has more than 200 million English-speaking, college-educated citizens, according to Leon Steinberg, a Minnesota-based entrepreneur who started an outsourcing company called Intellevate two years ago.

Intellevate handles paralegal work largely in patent prosecution matters, with more than 100 employees based in India and another 40 in the United States. He said the company’s team of lawyers and scientists work with American in-house and law firm clients on patent applications, handling illustrations and proofreading, as well as technical marketplace intelligence.

Steinberg said Intellevate has between 25 and 30 American clients, with 60 percent being corporations and 40 percent law firms. He said one Philadelphia law firm is a client but the firm does not wish to have its name released to the media. Most Intellevate clients, Steinberg said, are based in Silicon Valley, though Microsoft, which is based in suburban Seattle, is probably the most prominent.

“At first we would get clients because of cost issues,” Steinberg said. “But they stay with us for cost, capacity and expertise. We can spend two or three times as long doing research and still come in at half the price of American paralegals. So we can afford more quality control mechanisms and invest more into training.”

Most firms with IP practice said they have been solicited by firms or companies that do outsourced legal work. The only one to admit to using one is Woodcock Washburn, Philadelphia’s largest IP boutique.

Quality Control

Partner John Donohue said he has used the services of IP Matrix, run by Ash Tankha, an India native who has an American law degree and operates the business out of Washington Township, N.J.

Tankha said he coordinates and supervises assignments with six employees in Bangalore. The work usually revolves around nonlegal research, such as checking databases and the Internet for competitive intelligence regarding a patent at half the price of what it would cost in the U.S. But he admits that he must carefully review the work coming in from India.

“You are getting a lower-quality work product,” Tankha said. “English is the second language over there, so there can be a slight comprehension problem. So I think the perception from American firms is that the work is inadequate. You need really good quality control measures to meet the level of the American legal profession. The quality of legal work in America is just higher. That’s why I just don’t see a significant increase in outsourcing [in the future].”

Mike Walker, chief IP counsel at DuPont, said the chemical company has used Indian scientists to handle patent drafting work. He said the company has recently completed a pilot program for outsourcing and plans to do more. Walker said the quality of the work was fine and that a good vendor will make sure to properly train and supervise India-based employees.

Walker said DuPont was originally lured by the prospect of cost-savings but soon found there were additional benefits from the 10-hour time difference, such as being able to send assignments as you leave for the day and having the work completed when he arrived the next morning. He said the advanced technical training of the Indian work force is also quite impressive.

“We’ve done limited work and we found that it takes some extra effort on our part to make sure the quality is where we want it,” Walker said. “But they can take the application pretty far before we finish it up.”

Walker added that, when using Indian employees, DuPont and other corporations and law firms must make sure to abide by complicated Technology Export Control Laws enforced by the U.S. departments of State and Commerce.

Reed Smith partner Ajay Raju helped form the Global Indian Chamber of Commerce in 1999. Based in Philadelphia, the not-for-profit organization helps connect Indian businesses to opportunities across the globe. He said India’s enormous, educated work force, particularly in the math and science fields, makes outsourcing legal work in the IP practice an extremely attractive option.

Though Reed Smith does not outsource, Raju said firms seeking IP, immigration, litigation coding, real estate and transactional due diligence work have turned to India with greater regularity.

“That kind of work can be done by an American paralegal for between $150 to $200 per hour or it can be done by a trained lawyer in India for only $30 to $40,” Raju said. “And there are American-based project managers that deal with quality control issues.”

Despite the allure of saving money, local IP lawyers need more convincing. Duane Morris IP chairman Lewis Gould said vendors have contacted him but he has declined their pitches over concerns regarding the quality of work, the fact that nonlawyers often perform the tasks and that Indians do not have direct contact with inventors because of the time difference.

“I understand the siren call for savings from clients, but I just think the negatives outweigh the advantages,” Gould said.

Lavorgna said he believes the time difference, work quality, inability to manage the Indian work force directly and possible malpractice issues would mitigate any cost-savings.

“When I assign work to an associate or a paralegal, they come into my office and we go through several iterations when we are dealing with a patent application,” Lavorgna said. “And that’s just harder to do when they are so far away. We have looked into it and I know it is a way to control costs. I just don’t think it will wind up saving firms as much as advertised when you factor everything into the equation.”

Panitch said he could see a day when his firm uses an outsourcing service. But for now, he wants to see how the trend plays out at other firms. He said he believes the savings from outsourcing will decrease over time as the standard of living in India rises along with the numbers of its educated work force.

Donohue said he is fine assigning nonlegal work to IP Matrix but not patent prosecution matters. He worries about work quality and technology-export regulations. Cozen O’Connor IP chairman Mark DeLuca wondered aloud what malpractice insurance carriers would think of law firms going the outsourcing route.

‘A Tough Sell’

Steinberg said he has heard all of these questions raised by American law firms and in-house legal departments. He admits outsourcing can be a tough sell.

“Law firms and corporations don’t liked to be linked to outsourcing,” Steinberg said. “Though I must say it was a lot worse leading up to last year’s [presidential] election.”

With potential clients reluctant to even accept a free sample of Intellevate’s work, Steinberg has rolled out an aggressive marketing campaign. Patent applications are made public 18 months after they are filed with the U.S. Patent and Trademark Office. He recently had Intellevate’s Indian staff pore over patent applications filed by about 20 different law firms on behalf of clients. He said they found many errors; one that was quite serious. Steinberg then presented the work to the firms. While one partner at a major Washington, D.C., firm was not happy about the intrusion, he said most lawyers responded positively.

“The firms expect there to be some errors but most of the time they said something along the lines of ‘This is good. How much would it cost?’” Steinberg said. “And when you tell them, they often realize they could save money by using us and get quality work.”

Steinberg admits that his Indian employees are often limited in what tasks they can perform due to the time difference. For instance, an Indian lawyer or scientist is not usually able to speak with witnesses before a deposition. That is why Intellevate employs registered patent attorneys in its American offices to communicate directly with clients as well as supervise the Indian work product.

“All of our Indian employees are fluent in English and have either a Ph.D. or a master’s degree,” Steinberg said. “I have found it to be more of an issue with style than grammar. So we train them on technical aspects and how to write in American English.”

As for malpractice issues, Steinberg said American law firms have been using stateside vendors for many years and have long grappled with liability concerns.

“It’s the law firm that has the fiduciary duty to the client,” Steinberg said. “If they hire an incompetent vendor, then they are in trouble regardless of whether the vendor is in India or the U.S.”

Drinker Biddle partner Lawrence Fox, who has served as chairman of the American Bar Association’s legal ethics committee, said outsourcing presents a host of potential problems, including the unauthorized practice of law, disclosing the usage of the vendor to clients, how to properly supervise the work and how to properly bill the client.

University of Pennsylvania Law School professor Geoffrey Hazard said he does not believe you can bill a client American rates for work done in India.

Fox said ABA Model Rules of Professional Conduct, which form the basis for professional conduct rules in many U.S. jurisdictions, allow lawyers to mark up billing rates in instances where they had to expend a lot of time supervising work.

Morgan Lewis & Bockius partner Michael Bloom said he would have concerns about Indian vendors having conflicts of interest but not being regulated by the rules of professional conduct of any U.S. jurisdiction.

Steinberg said he believes once American law firms and corporations become more comfortable with the outsourcing concept, business will pick up for Intellevate and other vendors.

“What they ultimately want is quality work done in an efficient manner,” Steinberg said. “And if you look at India, we are talking about a highly educated work force that is only going to become more educated and familiar with American law.”

Raju said cooperation between Indian and American business interests should only increase as the Indian government decreases economic protectionism. The Indian Advocates Act of 1961 prohibits foreign lawyers from practicing law in India. But the Indian government has recently proposed a controversial measure to allow foreign lawyers and law firms to enter India at the very least in alliances with Indian firms. Another proposal calls for foreign firms to be allowed to open law offices but not argue cases in Indian courtrooms.

Raju said because India is a signatory to the General Agreement on Trade in Services, it will have to enter into negotiations regarding opening up of service sectors to foreign service suppliers such as law firms. He said the potential opening of American law offices in India would only enhance outsourcing capabilities.

“This is not a fad or a trend,” Raju said. “It’s the reality of the global economy. And the future is bright for India.”

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