Wednesday, October 08, 2008

Outsourcing again

The Economic Times of India noted:

The US slowdown has kicked off a heated debate in the US legal circles. At the heart of debate is a recent notice by the United States Patent and Trademark Office (USPTO) barring companies who send information overseas regarding inventions and patents without government clearance. While some believe offshoring is good as it cut costs for legal firms, lawyer groups in the US are against it.

Treading on extreme grounds, some also believe the notice might sound a death knell for the LPO industry, while a section of Indian lawyers believe it is the result of hectic lobbying by a section of US law fraternity.

“It is the vested interest of a group, which is blowing it out of proportion. The notice does not mean much to us since we do not outsource any sensitive information. Some percentage of the LPO industry might be affected due to the market sentiment, but it will have no bigger impact,” said CPA Global’s India head Bhaskar Bagchi. CPA is one of the largest LPOs in the world.

Meanwhile, the Wall Street meltdown has resulted in a slew of bankruptcy filings, due diligence and lawsuit drafting work, a lot of which is being outsourced. Many believe that the US notice is just a ploy by anti-outsourcing lobby to prevent more of such work going to India. The cost of preparing a patent application in India averages about $2,000, whereas the cost to prepare the same application in the US ranges between $8,000 and $15,000. The median annual salary of a lawyer in the US is about $95,000, while in India it’s around $20,000 per year. The primary function of this notice is to prevent publication of an application as a patent where such disclosure would be detrimental to the US national security. Additionally, the Act provides for the licensing of applications for export for the purposes of filing for patents abroad.

Says Mumbai-based LPO, Pangea3’s co-founder and CEO Sanjay Kamlani: “This notice is just a reiteration of a rule that already existed before. In my view, by this notice, the US government accepts outsourcing as an inevitable part of economic transactions.” However, some US attorney’s look at it very differently. “Finally, someone has noticed that our export laws prohibit the sending of information relating to technology overseas without a proper license. This should signal an end to the $2.2 billion per year patent outsourcing to India. For admittedly selfish reasons I am happy that export regulations will now be enforced as written,” writes a pro-regulation US patent attorney, Gene Quinn in his blog.

IPBiz notes that it is not clear that the current slowdown "kicked off" this debate, which was simmering on places like Greedy Associates for years. It's also not clear that the "law fraternity" opposes this, as certain law firms in Minnesota and Connecticut have been outsourcing for years. Outsourcing has the potential to be a profit center, just as photocopying and the use of rented attorneys can be profit centers. Clients are billed at a rate higher than the cost to the law firm. ALSO, life in India hasn't been so sweet in days of late. India's Tata Motors announced on Oct. 7 that it would produce its low-cost, high-profile "people's car" [the Nano] in the state of Gujarat, just a few days after abandoning its nearly completed factory in the Communist-ruled state of West Bengal because there was no end to the violence and threats to workers' safety. Tata reroutes 'people's car' to the safety of Gujarat

***Separately, of the recent news about AMD splitting, we have another outsourcing argument -->

Intel Corp on 7 Oct 08 said that the AMD manufacturing split could violate its patents. The chip giant expressed concerns with AMD's latest efforts to outsource its factories and creating a new foreign company. Intel licenses its x86 chip architecture to AMD. [from newsoxy]

eWeek noted:

[The next day] Oct. 8, AMD fired back and charged that the new company does not violate any previous agreement with Intel.

“We are completely confident the structure of this transaction takes into account our cross-license agreements,” Phil Hughes, an AMD spokesman, wrote in an email. “Rest assured – we plan to continue respecting Intel’s intellectual property rights, just as we expect them to respect ours.”

Intel spokesman Chuck Mulloy told eWEEK that the company will defend its chip patents against any violations and Intel continues to review its options. Mulloy added that Intel wants AMD to publish a full version of the licensing agreement – a redacted copy is available – as the deal to create the new foundry company unfolds. (The two companies have been signing licensing agreements with each other since the mid-1970s.)

**Of the AMD re-structuring, eWeek noted -->

The deal that will spin off Advanced Micro Devices’ manufacturing facilities into a new joint venture company will not violate the company’s licensing agreement with Intel, an AMD spokesman said.

On Oct. 7, AMD announced that it would take a bold step and split the company in two in order to better compete in the x86 chip market. While AMD will remain responsible for CPU and graphics development, design and marketing, a new company – temporarily called The Foundry Company – will be formed around AMD’s two Dresden, Germany fabrication plants or fabs. Advanced Technology Investment Company (ATIC), a technology investment backed by the government of Abu Dhabi will own half of the new company.


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