India is no where close to countries like US, Japan and China, when it comes to filing patents. But it still does a significant bit in the IP space. A lot of it's happening through patent service outsourcing in India. This means, a lot of background work for the numerous patents that are being filed by other countries, are being done out of India.

Experts say, patent services outsourcing, the high value work of legal process outsourcing (LPO) has been a fairly new phenomenon here, hardly four to six years old. According to estimates last year, more than 1.8 million patent applications were filed worldwide.

And the filing costs for these was between $30 billion to $32 billion. But what's driving growth in the worldwide patent outsourcing market is: Increased offshoring of R&D activity, lack of manpower and the impact of the US Patent Reform Act of 2007.

A study by ValueNotes, a Pune-based research firm shows, revenues from the Indian patent services offshoring industry are estimated at $46 million for 2007. It's expected to reach $206 million by end 2012. The study reveals the current addressable value of the patent services offshoring market is estimated at $2.2 billion.

"We believe that the Indian patent offshoring industry will grow 35% per annum over the next four years. As for the number of employees, our estimate is that about 6,950 people will be employed by the end of 2012," says Subha Kalathur, senior analyst with ValueNotes.

As Navtej Saluja, head of intellectual property, Evalueserve, one of the leaders in this space, explains, "A lot of LPO work being done in India has been glorified BPO jobs like filling up forms etc. Patent outsourcing, on the other hand, is a more high end KPO job that requires specific skills and understanding." It involves end-to-end search jobs before a patent is being filed, drafting the papers, patent analytics. No wonder, vendors who do this niche job hire engineers, scientists, lawyers and train them for IP work.

Last year, there were about 50 vendors offering patent services from India. As of now, US accounts for 60% of the work. "IP currently accounts for over 45% of the LPO market and is expected to lead the growth in this sector in the next three to five years," says Bhaskar Bagchi, country head, CPA India.ValueNotes classifies the patent services offshoring industry in India broadly into three groups: captives, third-party multi-service providers and third-party pure play patent service providers. Third-party vendors account for more than 75% of the industry.

The good thing is, India hardly has any other competitor in this space, especially for patents being filed in English. Eastern Europe is the frontrunner in multi-lingual patent outsourcing service. Philippines, too, is doing some low-end work.

Kalathur feels quality issues could be a major growth inhibitor in the short term for India. "However, availability of quality professionals will improve in the medium-to-long term, driven by investments made by vendors in training," says Kalathur. Once that happens, the sector can look at a bigger growth curve.