Global credit crisis leads to boom times for LPOs specializing in IP

In adversity lies opportunity and no more so than in the fledgling Legal Process Outsourcing (LPO) industry. Peter Ollier from MIP has authored a brilliantly researched article on how, amongst other reasons, the gloomy economic scenario in the West is actively forcing American companies to cut legal costs, by outsourcing to the Indian LPO industry, tasks such as patent drafting, prior-art searches, due diligence and also litigation support in the form of document review. The article points out that outsourcing to India can apparently slash costs by 50% to 75%. For example patent proof reading can be done for around $70 to $80 in India while the same costs between $120 to as much as $750 in the U.S. Similarly a standard prior-art search can be done for about $450 in India, which is about half of what is charged in the U.S. A freedom to operate search which costs about $2500 to $4000 in the U.S. can be done for about $1000 in India. Interestingly cost-cutting is not the only reason for the increasing outsourcing of work. Ollier points out that some of the work is being outsourced because of a shortage of manpower in the U.S. In addition litigation support review is also being offerred by some LPO firms resulting in huge savings for companies involved in litigation in the U.S. The one area of work that the LPO sector is lagging in is the field of patent-drafting. The reason for this is because patent drafting is a highly skilled task and there is general shortage in India of skilled patent-drafters.

Provided the LPO industry maintains consistent quality controls and assures safety of data, the industry is expected to grow to over $200 million dollars by 2012 from the current $40 million dollars in 2008. The top 5 firms listed by MIP are Evalueserve, Pangea 3, CPA, Lexadigm & Clairvolex. Surprisingly only one of these firms is an offshoot of a conventional IP firm i.e. Clairvolex is backed by Lex Orbis. I am a little intrigued as to why other Indian IP firms have not forayed into this highly lucrative field of IP outsourcing especially since most of them will possess the skills to carry out basic processes such as prior-art searches and proof reading. In addition most of these firms already have several international clients.

Creating an adequate legal framework for the LPO industry

One of the first concerns that jumps to mind in the context of outsourcing is data protection especially since other spheres of outsroucing have been affected by it. This concern is probably magnified by several times when the data in question pertains to confidential legal information. The recent amendments to the IT Act provide for a stringent data-protection law and along with the Indian Penal Code, will help in providing for a strong legal deterrent against data theft. The real concern however, in my opinion, is whether or not the professional communications between employees of the LPO industry and their clients in foreign jurisdictions will be protected by the conventional client-attorney privileges in all national jurisdictions.

Historically client-attorney communications are privileged in common law countries like U.S., India & the U.K. The common law privileges can be split into litigation advice privilege and legal advice privilege. The former covers all communications made by the litigant once the decision to initiate litigation has been taken, not only to his lawyer but also to his servants. Legal advice privilege protects only those communications made between the lawyer and the litigant and not all communications between the litigant and his servants. In all probability legal advice rendered by a patent agent to their clients, before the decision to initiate litigation, will not be privileged under common law.

In countries like India the Evidence Act deems inadmissible as evidence, in a court of law, any communications between clients and advocates. But the term advocate covers only those who are enrolled with the Bar Council of India and several patent agents may not be enrolled with the Bar Council of India. Therefore all such communications may be produced in a Court of Law. A more important issue is whether an American court can compel an Indian patent agent to dispose in a case of patent infringement in the U.S.

Almost a year ago AIPPI & WIPO had begun discussions on the need to have a new international treaty to bring about consistency in defining client-attorney privileges in various national jurisdictions especially since IP litigation involves several professionals who may not be covered under ordinary client-attorney privileges. Treaty making is a lengthy process and I’m guessing it will be a long time before we the final text of any such treaty.