USPTO Ends Patent Outsourcing to India

On July 23, 2008, the United States Patent & Trademark Office published an interesting notice in the Federal Register. This particular notice announced nothing new in terms of the law, but will have an enormous impact on the way patent services are provided to many corporations and law firms. Specifically, it has finally come to the notice of the Patent Office that outsourcing is going on in the patent area, which is in clear and direct violation of the Export Administration Regulations (EAR). 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. My professional efforts over the last 5 years to create a wholly domestic solution to the rising cost of patent preparation work may pay off in a big way, which will be a significant benefit to the US economy as well.

In relevant part the Federal Register Notice explains:

The USPTO has become aware that a number of law firms or service provider companies located in foreign countries are sending solicitations to U.S. registered patent practitioners offering their services in connection with the preparation of patent applications to be filed in the United States. Applicants and registered patent practitioners are reminded that the export of subject matter abroad pursuant to a license from the USPTO, such as a foreign filing license, is limited to purposes related to the filing of foreign patent applications. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances. See MPEP § 140 (8th ed., Rev. 5, Aug. 2006). The BIS has promulgated the Export Administration Regulations (EAR) governing exports of dual-use commodities, software, and technology, including technical data, which are codified at 15 CFR Parts 730–774. Furthermore, if the invention was made in the United States, technical data in the form of a patent application, or in any form, can only be exported for purposes related to the preparation, filing or possible filing and prosecution of a foreign patent application, after compliance with the EAR or following the appropriate USPTO foreign filing license procedure. See 37 CFR 5.11(c). A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States.

The Commissioner for Patents has been delegated the authority for controlling exports of technology for purposes of the filing of patent applications in foreign countries. See 15 CFR 734.3(b)(1)(v) and 734.10(b) and 35 U.S.C. 184. The USPTO grants foreign filing licenses in accordance with USPTO regulations. See 37 CFR Part 5. The scope of a foreign filing license granted by the USPTO is set forth in 37 CFR 5.15. Applicants and registered patent practitioners are also advised that foreign filing licenses (for the filing of a patent application in a foreign country) do not authorize the export of any technology that is not specifically submitted to the USPTO as part of a U.S. patent application or a petition for a foreign filing license. For example, the USPTO has received short abstracts, PowerPoint slides and even titles of inventions as the disclosure for which a foreign filing license is requested. Although the USPTO will usually process such requests, any foreign filing license granted under 37 CFR 5.15(a) or 5.15(b) on such short description may not authorize filing abroad the ultimate resulting patent applications and may not authorize any additional material added after the initial foreign filing license request. Such additional material that was not submitted to the USPTO for its review may be deemed to have altered ‘‘the general nature of the invention in a manner which would require such application to be made available for inspection under such section 181.’’ See 35 U.S.C. 184.

[ Citation to USPTO link that does not work deleted ].

This notice does not change existing law or regulations. Thus, while the notice is effective on July 23, 2008, this notice does not excuse or otherwise affect the legal consequence of a failure to comply with existing law or regulations that occurred prior to July 23, 2008.

Outsourcing has been going on out in the open in the patent area for at least 5 or 6 years without anyone raising any issues. For a long time I have thought that all of this violated the EAR, but no one seemed to agree with me. I personally think strict interpretation of the EAR is going to prevent the exporting of not only the preparation of patent applications but also the outsourcing of patent illustrations and patent searches. This is because the EAR specifically prevents the sending abroad of any information relating to technology that has been developed in the US. The way I read the EAR there is no patent application exception that would save outsourcing. There is a patent application exception, but it relates to the sending of information from the US outside the US for purposes of obtaining a signature by an inventor not located in the US. There are other patent application exceptions, but these apply to published applications. If you look at the EAR the primary exceptions relate to publicly available information and scientific information that is normally shared within the scientific community. Given that patent applications by their nature need to apply to inventions that are not known to exist previously and because the outsourcing would occur before filing (i.e., well before the information would be publicly available and/or published) in almost all situations there would be a prohibition against sending information related to proprietary information overseas, thus killing patent related outsourcing.

I believe there is more US protectionism in this new stance on export regulations than anything else. With this being an election year and the economy being such a big issue and with outsourcing taking more and more jobs away from the US, I suspect this surfacing now is not a coincidence. This new stance will certainly kill all patent outsourcing, but likely will also kill a lot of technical development outsourcing as well, which will bring jobs back to the US. Thus, I don’t expect that there will be any loosening of the regulations in the near future. It is about time that our government does something about all the jobs that are going overseas, particularly when many of these jobs have left the US in clear violation of already existing export regulations!

I have been a vocal critic of the Patent Office for some time now, but I have to give credit where credit is due. Hats off to the Patent Office on this one! Score 1 for the US economy courtesy of Jon Dudas and company!

 This article was originally published by the PLI Patent Practice Center and is reproduced here with permission.