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Microsoft’s savings from using offshore patent support

A two-page, undated handout from CPA describes Microsoft’s use of that company’s people and facilities in India for a variety of IP services. The services include patent proofreading, prior art searching, and docketing.

Marty Shively, Associate General Counsel and Director of Worldwide IP Operations states that “This fiscal year [2007 I think] Microsoft will spend about $3 million on its patent LPO [legal process outsourcing] services in India.” Shively goes on to estimate that the same work would cost about $9.5 million at US prices, so he claims that his law department has saved $6.5 million.

A CPA team of four began supporting IBM’s IP practice in January 2005. “Since then it has grown to 30 engineers and six support executives.” If we broadly assume they each billed 1,850 hours during the previous year, a total 54,000 hours, their effective rate, ignoring disbursements, ran about $45 an hour. The US cost of equivalent work, on these numbers and the ratio between $3 million and $9.5 million, Shively must think would have been about $142 an hour (See my post of June 25, 2008: offshore with 27 references.). It seems that a fair amount of the services are paralegal level,
such as proofreading and docketing, so the $142 an hour feels high.

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