Overview of Patent Outsourcing Market in India Revenues estimated at $47 million for 2007 Revenues estimated to reach $206 million by 2012 Potential patent offshoring market estimated at $2 billion 1550 people employed in industry in India end of 2007 7000 people estimated to be employed in industry by 2012 U.S. companies account for 60 percent of client base Currently around 50 companies offering services Larger KPO and BPOs will acquire smaller players in patent space Source: ValueNotes Research Report – Offshoring Patent Services to India (June 08)

Revenues estimated at $47 million for 2007

Revenues estimated to reach $206 million by 2012

Potential patent offshoring market estimated at $2 billion

1550 people employed in industry in India end of 2007

7000 people estimated to be employed in industry by 2012

U.S. companies account for 60 percent of client base

Currently around 50 companies offering services

Larger KPO and BPOs will acquire smaller players in patent space

Source: ValueNotes Research Report – Offshoring Patent Services to India (June 08)

Preliminary considerations for IP handling In-house Con: Large overhead, limited budget Con: Time allocation concerns Pro: Maintain high level of control Pro: Potentially efficient and cost-effective if done right Outside counsel (attorneys and agents) Con: Expensive - $160,000 starting salaries Con: Sluggish turnaround Pro: High quality of work Pro: Minimal liability concerns

In-house

Con: Large overhead, limited budget

Con: Time allocation concerns

Pro: Maintain high level of control

Pro: Potentially efficient and cost-effective if done right

Outside counsel (attorneys and agents)

Con: Expensive - $160,000 starting salaries

Con: Sluggish turnaround

Pro: High quality of work

Pro: Minimal liability concerns

Preliminary considerations for IP handling Domestic vendors Con: Moderately expensive Con: Hit or miss quality Con: Complete loss of control Con: Inability to scale up? Pro: Good access to resources, sometimes local Pro: Specialized expertise in most fields Pro: Reputable, reachable Offshore vendors Con: Hit or miss quality Con: Complete loss of control Con: Liability/malpractice issues Pro: Low cost Pro: Good access to resources and easily scalable Pro: Specialized expertise in most fields Pro: Reputable, reachable

Domestic vendors

Con: Moderately expensive

Con: Hit or miss quality

Con: Complete loss of control

Con: Inability to scale up?

Pro: Good access to resources, sometimes local

Pro: Specialized expertise in most fields

Pro: Reputable, reachable

Offshore vendors

Con: Hit or miss quality

Con: Complete loss of control

Con: Liability/malpractice issues

Pro: Low cost

Pro: Good access to resources and easily scalable

Pro: Specialized expertise in most fields

Pro: Reputable, reachable

Preliminary Considerations – Cost Benefit Analysis Will the savings realized justify the effort and risk? Understand internal processes Calculate on the following assumptions: Reduced efficiencies at the outset? Need for hands-on training? Export licenses? (IP specific) In-house realignment? (IT, support staff, etc.) There will be substantial “labor vs. labor” cost savings What are the required resources? Leading internet research tools can range from $2k to $10k per seat per year What are the estimated labor costs? Offshore Onshore management In-house efforts

Will the savings realized justify the effort and risk?

Understand internal processes

Calculate on the following assumptions:

Reduced efficiencies at the outset?

Need for hands-on training?

Export licenses? (IP specific)

In-house realignment? (IT, support staff, etc.)

There will be substantial “labor vs. labor” cost savings

What are the required resources?

Leading internet research tools can range from $2k to $10k per seat per year

What are the estimated labor costs?

Offshore

Onshore management

In-house efforts

Export Control Regulations: USPTO Notice July 23 2008 Press Headlines: USPTO Ends Patent Outsourcing to India The facts! Notice does not change existing law Foreign Filing License allows export of subject matter abroad for purposes of filing foreign applications Foreign Filing License does not allow export of subject matter abroad for preparation of patent applications to be filed in U.S. Exporting subject matter abroad for preparation of patent applications to be filed in U.S. may require export license Contact the Bureau of Industry and Security (BIS) for the appropriate clearances BIS has promulgated Export Administration Regulations (EAR) for exports of subject matter abroad

Press Headlines: USPTO Ends Patent Outsourcing to India

The facts!

Notice does not change existing law

Foreign Filing License allows export of subject matter abroad for purposes of filing foreign applications

Foreign Filing License does not allow export of subject matter abroad for preparation of patent applications to be filed in U.S.

Exporting subject matter abroad for preparation of patent applications to be filed in U.S. may require export license

Contact the Bureau of Industry and Security (BIS) for the appropriate clearances

BIS has promulgated Export Administration Regulations (EAR) for exports of subject matter abroad

Export Control Decision Tree Are your items and activities subject to the EAR? Is the technology publically available? Is the subject matter technology as defined by EAR: “specific information necessary for development, production or use of a product." 15 CFR 772.1. If subject to the EAR and not publically available then classification of item on the Commerce Control List is necessary Classify yourself or with assistance of BIS – BIS has a duty to provide a classification to you Determine if a License Exception is available If no License Exception is available you must obtain a license

Are your items and activities subject to the EAR?

Is the technology publically available?

Is the subject matter technology as defined by EAR: “specific information necessary for development, production or use of a product." 15 CFR 772.1.

If subject to the EAR and not publically available then classification of item on the Commerce Control List is necessary

Classify yourself or with assistance of BIS – BIS has a duty to provide a classification to you

Determine if a License Exception is available

If no License Exception is available you must obtain a license

Export Control Decision Tree (contd)

Commerce Control List 0 - Nuclear Materials, Facilities and Equipment and Miscellaneous 1 - Materials, Chemicals, “Microorganisms,” and Toxins 2 - Materials Processing 3 - Electronics 4 - Computers 5 - Telecommunications and Information Security 6 - Lasers and Sensors 7 - Navigation and Avionics 8 - Marine 9 - Propulsion Systems, Space Vehicles and Related Equipment

0 - Nuclear Materials, Facilities and Equipment and Miscellaneous

1 - Materials, Chemicals, “Microorganisms,” and Toxins

2 - Materials Processing

3 - Electronics

4 - Computers

5 - Telecommunications and Information Security

6 - Lasers and Sensors

7 - Navigation and Avionics

8 - Marine

9 - Propulsion Systems, Space Vehicles and Related Equipment

IP Services Unaffected by the Notice ? Invalidity Search: no requirement to export technology. Requires research to invalidate an existing patent i.e. publically available information Proofreading issued U.S. patents: publically available information Freedom-to-operate search: export of technology either not required or capable of being tailored Office Action Responses: Office Actions available in the Public PAIR Patentability/Novelty Searches – may not come within EAR definition of technology, or on CCL, and/or disclosure can be tailored so as to not infringe regulations

Invalidity Search: no requirement to export technology. Requires research to invalidate an existing patent i.e. publically available information

Proofreading issued U.S. patents: publically available information

Freedom-to-operate search: export of technology either not required or capable of being tailored

Office Action Responses: Office Actions available in the Public PAIR

Patentability/Novelty Searches – may not come within EAR definition of technology, or on CCL, and/or disclosure can be tailored so as to not infringe regulations