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John Carpenter and Charles Kulas had just gotten their patent prosecution firm off the ground when their biggest client asked if they could outsource some of the company’s work to India. Carpenter was willing to experiment to help the client, a Silicon Valley company, cut costs. But he had to persuade Kulas, who was worried that patent applications written overseas would be of inferior quality and end up costing Carpenter & Kulas money. Indeed, the firm’s initial experience was pretty dismal. The two attorneys had to completely rewrite applications they sent to a couple of Indian shops. But they eventually found the right company and trained its non-lawyer employees how to write solid applications. Now, a year later, Carpenter & Kulas has filed more than 100 patent applications that were outsourced to India. “I had reservations, and still do, about holding ourselves out to be the Wal-Mart of patent prosecution,” Kulas said. But, he added, “The client is happy, and the patents are good, and we’re profitable, so it’s working out.” In the past few years some law firms and corporations have begun outsourcing legal work such as managing documents, drafting contracts and briefs and doing discovery work. Forrester Research, which tracks offshore outsourcing of American service jobs, projected last year that the number of domestic legal jobs moving offshore would increase from 6,000 in 2003 to 79,000 by 2015. But writing patent applications is a more complex task, and it’s only been in the last year that a small number of companies and law firms have started outsourcing some of this work overseas. Companies typically ask their U.S. counsel to manage the offshore outsourcing, most of which seems to be going to India. Cisco Systems Inc. and LSI Logic Corp. are among the local pioneers. Other Silicon Valley companies, such as Hewlett-Packard Co., Oracle Corp. and Intel Corp., have decided not to send patent work overseas, at least for now. Since outsourcing is controversial, many companies have not publicly disclosed that they are doing it. The law firms and outsourcing shops that work with them also have kept clients’ identities confidential. The appeal for companies, of course, is the cost savings. Kulas said he typically charges $10,000 to $12,000 to write a patent application, while the Indian company he works with charges $6,000. Kulas declined to identify the foreign firm for competitive reasons. Sandeep Jaggi, LSI Logic’s chief IP counsel, said his company began cutting costs in 2000 by sending patent work to law firms in the Midwest, which charge half the rate of Silicon Valley shops. A year ago, LSI began outsourcing some of the work to law firms in India and other countries, reducing its expenses even further. “If I can maintain quality and get 30 percent off, I’m extremely happy,” Jaggi said. NOT AN EASY SELL Some corporations, such as General Electric Co., have set up offices in India to handle some of their legal work. Many others are using Indian law firms or technical shops that specialize in patent work. Some of the most prominent outfits include Evalueserve Inc. and IP Pro Inc., which draft patent applications, and Intellevate LLC, which does prior art searches, illustrations and proofreading of issued patents. All three firms have been trying to drum up business in Silicon Valley. Evalueserve co-founder Alok Aggarwal acknowledged that it’s often not an easy sell, as many lawyers and executives are wary that the quality of work done overseas is not as high as that done by U.S. firms. They also worry about the added oversight costs and abiding by U.S. export controls. “The reaction is very mixed, both from law firms and from clients,” Aggarwal said. Some say their firm will outsource abroad over their dead bodies, while others believe the practice is inevitable and don’t want to be left behind, he said. Aggarwal, a former IBM Corp. employee who launched IBM India Research, co-founded Evalueserve in 2000. Based in Chappaqua, N.Y., the company’s New Delhi offices have 53 engineers and two lawyers in its intellectual property group. Aggarwal said the team has written 480 patent applications for U.S. firms, including 78 Silicon Valley startups, two Fortune 500 companies and one Fortune 100 company in Silicon Valley. U.S. law firms review the applications and file them with the U.S. Patent and Trademark Office. IP Pro has a similar business model. The Palo Alto, Calif., company was started 18 months ago by Nishith Desai, founder of the Indian law firm Nishith Desai Associates, and Chicago inventor Sam Pitroda. IP Pro has eight full-time employees in India, including engineers and lawyers, that perform prior art searches and draft patent specifications and the first set of patent claims, which are subsequently reviewed by U.S.-based attorneys. IP Pro’s director, Vaibhav Parikh, said the firm has completed patent work for two Fortune 500 companies and is currently doing work for several startups. Intellevate, headquartered in Minneapolis, has about 90 employees in its New Delhi and Bangalore offices that do prior art searches and proofreading for a few dozen U.S. firms, including Microsoft. The business was launched by the Minneapolis firm Schwegman, Lundberg, Woessner & Kluth about 18 months ago. CEO Leon Steinberg said that in addition to reducing costs, Intellevate also has an easier time finding staff in India than in the United States. “What Ph.D. biochemist wants to do prior art searching?” Steinberg said. People in the United States, he said, “view this as a transitional job. You train them and six months later they get a scientific job and they’re gone. In India this is not filler work. It’s their career.” Intellevate has some law firm clients, but most of its relationships are directly with in-house legal departments, Steinberg said. While some law firms have resisted offshore outsourcing, he said, most large corporations are open to the idea since they face pressure from their operating divisions to cut costs with outsourcing. In turn, corporations are encouraging their U.S. counsel to outsource work. Just as Carpenter & Kulas responded to a client’s request, so too did Pillsbury Winthrop. Jack Barufka, a partner in Pillsbury’s McLean, Va., office, said that a couple of months ago a client asked Pillsbury to send some of its patent work to a specific law firm in India. Pillsbury agreed to do so. However, he said, it’s too early to tell whether outsourcing will be efficient and cost-effective. Outsourcing creates an extra layer of work since information shipped abroad must comply with U.S. export-control regulations. Certain types of data cannot be transmitted to specific countries, and other information requires an export license from the Commerce Department. “My initial experience has been OK,” Barufka said. “I wouldn’t say great but not horrible either. It requires training [of the Indian lawyers] and we’re going to do that.” Carpenter and Kulas also had a rocky start when they began outsourcing. “My cat could write a better patent application” than the first technicians he worked with, Carpenter said. “At one point, it looked like it would be a colossal failure — until we found the right people,” Kulas added. He recalled one assignment in which a patent writer took the inventor’s comments on his invention and simply pasted them into a template Kulas had provided. The writer then sent the document to Carpenter & Kulas with a $1,500 bill. OUTSOURCING REJECTED Concerned about the quality of foreign-drawn patents and the burden of overseeing shops in other nations, many U.S. companies and law firms are wary of offshore outsourcing. Sanjay Prasad, chief patent counsel at Oracle, said in an interview a few months ago that he had decided outsourcing wasn’t appropriate for Oracle at the moment. “I looked at it and found getting to that point would require an awful lot of work I don’t have time for,” Prasad said. “If you want to save money, you could send work to many other English-speaking countries. London has cheaper costs than in the U.S. There’s nothing particularly magical about India.” Besides the added overhead of having a U.S. lawyer oversee outsourced work, Prasad said there’s the question of whether foreign writers will look at legal problems the same way as U.S. lawyers. “A couple of words can be the difference between a good patent and a meaningless patent,” he said. Stephen Fox, deputy general counsel for IP at Hewlett-Packard, said his company has looked at the possibility of outsourcing patent work, but concluded there isn’t enough of a track record to trust the quality of applications done overseas. “It’s better at this point to do one-stop shopping and have one counsel do the entire thing,” Fox said. “We file thousands of patent applications every year, and we think our processes are quite efficient and competitive with anything you can get in India at this point.” C. Larry O’Rourke, a partner in Finnegan, Henderson, Farabow, Garrett & Dunner’s Palo Alto office, is also skeptical of outsourcing. He said it would require continuous training of people overseas to make sure they are up to speed with changes in U.S. law. Moreover, he said, Finnegan’s litigation experience helps the firm draft its 2,500 to 3,000 applications every year. “We’re familiar with problems that can come up with faulty prosecution,” he said. “Our view is that when it comes to litigation, you would want a solid patent. … I think we’ll resist [outsourcing] for some time until it’s been proven to be successful,” O’Rourke said. Even if offshore outsourcing of patent work takes off in the future, those involved in the practice expect that only a certain percentage of patents will be written outside the United States. Evalueserve’s Aggarwal said he would be surprised if more than 10 percent of work moves offshore. “U.S. firms aren’t going away,” said LSI Logic’s Jaggi. “We still need their expertise.” He said outsourcing is not the wave of the future but simply “another market trend toward globalization of resources.” Although Kulas has been won over to outsourcing, he believes patents written by U.S. attorneys are still better than those that are outsourced. Kulas knows firsthand how important it is to have a strong patent. He helped draft a key Web-browsing patent for the University of California that’s been at the center of a major battle with Microsoft. A federal court ordered the software giant to pay $520 million to UC and its licensee, Eolas Technologies Inc. Microsoft is appealing. If the IP is important enough to warrant serious protection, he said, he tells his clients, “Let me do it for you — I’ll do a better job.”

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