Saturday, July 07, 2007

Raj Abhyankar's new company LegalForce has a long but interesting article on patent part of offshored legal services. The motivation for clients to use patent preparation and prosecution related offshoring is articulated is articulated well. Of particular interest is commentary on the nature of LPO firms providing patent services, some snippets:

There are three basic forms of legal process outsourcing:

1) Full Service Providers:
Full service LPOs ostensibly provide a set of services mirroring that of a patent law firm, but deliver these services using foreign attorneys and engineers. Many such models, with the exception of a handful, are led by non-patent attorneys. Such organizations compete with law firms for legal work, and often seek to position themselves as being able to offer services at a substantial discount from that of U.S. patent attorneys. The ability of such companies to perform legal services is limited to the extent to which the engineers or attorneys that they hire in foreign countries like India can replicate certain tasks performed by U.S. patent attorneys.

Companies that fit this model include Evalueserve, Pangea3, Lexadigm Solutions, Office Tiger, and a number of others. In such organizations, the training received by these foreign engineers or attorneys to ensure quality and consistency of work product is often minimal. Many such full service LPOs depend on either their clients or retained patent attorneys for short-term legal training. Because these LPOs are formed as corporations rather than law firms, the numerous protections offered by U.S. patent law firms, including attorney client privilege, attorney work product privilege and confidentiality, are lost. Furthermore, state bar regulations governing accountability for the validity of certain work product and preventing conflicts of interest are also not enforceable in such models. As such, full service LPOs often lack credibility with clients and are viewed as a threat by U.S. patent attorneys in private law firms.

Some of these companies have made efforts to adjust for their shortcomings. They have tried, for example, to employ U.S. patent attorneys to review work product at certain stages in an attempt to improve the quality of their services. However, the differing styles of U.S. patent attorneys in private practice has proven to be a challenge when training foreign support staff, and these companies have not been able to enforce a consistent set of quality control and best practice metrics in conformance with U.S. patent legal standards.

2) Support Service Providers:

This second category of LPOs provides support services to U.S. patent attorneys, usually through a foreign company. Such companies prefer to operate primarily as back-end
providers rather than interfacing directly with end clients. Examples of such companies include Intellevate, Bluefile, Brainleague, and Mantan Services. Some of these foreign companies have been started by U.S. patent attorneys and established U.S. patent law firms. For example, Intellevate was started by partners of Schwegman Lundberg Woessner & Kluth, a law firm in Minnesota, and partners of Lee & Hayes in Seattle helped launch Bluefile. As such, many companies in this category have the benefit of highly specialized training programs conducted by U.S. patent attorneys. Such companies do provide valuable services to U.S. patent attorneys, particularly those in small firms or having solo practices, and they manage much of the docketing, paralegal, and support functions that are required to keep a law firm operating smoothly.

Outsourced support providers realize that they may not have the skills or internal resources to hire and manage their own U.S. patent attorneys. Hence they usually choose to partner with U.S. patent law firms who handle the front-end legal work while they provide the firms with paralegal and technical support services. The principle challenge for this type of legal outsourcing company is growth. Their growth may be limited because they only provide a limited spectrum of support services to a very specialized market segment. To fuel growth, some of these companies have begun to work with clients directly. For example, Intellevate now works with Microsoft in addition to supporting more than fifty separate law firms. By working directly with end clients, however, support providers may breed distrust in law firms supported by such companies or practicing patent attorneys. They may begin to feel that their support services partner has ambitions to compete with them directly in the future.

3) Offshored Subsidiaries:

The third type of legal outsourcing company is a wholly owned subsidiary of a foreign or U.S. law firm that leverages labor arbitrages created by globalization in offering legal services. Examples of such law firms include IP Horizons, Global IP Services, Raj Abhyanker LLP, Evergreen Law Group, and Lawrence Ho & Associates. These firms usually have offices in two or more countries, and employ attorneys and engineers in their foreign offices to support U.S. patent preparation and prosecution work.

The advantages of such a model are that the U.S. law firm owns the offshore subsidiary, which allows both an extension of state bar privileges to the subsidiary and ensures that both quality and confidentiality concerns are closely monitored. The biggest challenge for such globalized law firms has been training and retention of personnel in the offshore subsidiary. Ensuring uniformity in training is expensive and is difficult to accomplish without significant investments. Retaining good employees also requires policies that encourage participation and a sense of ownership.