With costs of trade mark management now increasingly under the spotlight due to a recession, the profession is set to embrace a change caused by a growing trend to outsource trade mark management to take advantage of lower costs in certain jurisdictions. And it makes sense. This article examines how best the function can be outsourced and proffers African nations (especially South Africa) as a solution ahead of (or instead of) popular India and other destinations such as Thailand and New Zealand.

Legal process outsourcing

Outsourcing is, simply put, the sub contracting of a service or function. It is not a new phenomenon. Driven by a global market and the temptation of cheaper labour, the outsourcing industry took off in the late 1980s with the rise of outsourcing manufacturing jobs abroad. Since then outsourcing has expanded to services to include knowledge-based outsourcing such as legal services. However, while not all legal services are appropriate for outsourcing, others have been outsourced as a matter of course. Trade mark management services display similar tendencies; certain of these services can never be outsourced entirely, but unlike many other legal services, the bulk of the administrative function that supports a proper trade mark management system is capable of being outsourced.

Decide what to outsource

Outsourcing is best applied to legal services that can be commoditised, have a significant administrative burden and are process driven. Trade mark portfolios are typically a bundle of registered and unregistered trade mark rights that are territory- and goods/service-specific, and represented by a title deed or registration certificate which requires renewing and monitoring. Portfolios range from a single trade mark to tens, even hundreds of thousands, of registration certificates, renewal and filing receipts. The management of this bundle of rights typically involves a considerably well-thought out system that is capable of tracking deadlines and monitoring relationships with agents that span all the territories where those rights are registered or protected. It is this system that is capable of being outsourced and the costs savings can be substantial (see below). Those parts of the trade mark manager's role that are not appropriate for outsourcing may be listed to include strategic trade mark decisions where confidential business strategy plays (or should play) a part, and all work where expert input is required at country level.

Proper outsourcing of trade mark management respects that most jurisdictions require a locally qualified person to represent the trade mark owner and even where this is not required, that the type of value-added (as opposed to deadline management) work undertaken by a country/territory representative is most often not appropriate for outsourcing. The trade mark management continuum represented below helps illustrate the relationships within the trade mark management function. It will be clear that by the very nature of trade mark work, outsourcing takes place frequently. For example, sub-contracting a barrister or advocate to appear before the Registry to argue a hearing is a form of outsourcing just as is asking a law firm to manage a portfolio. This article is interested in the relationship between the trade mark owner and the law firm entrusted to manage the portfolio. In high cost jurisdictions trade mark owners can look to foreign-based law firms that enjoy a lower cost base to manage the trade mark portfolio (or certain aspects of it) or alternatively the high cost jurisdiction law firm can sub-contract certain aspects of its work to low-cost foreign based firms to manage the portfolio, thereby retaining client control. If the client manages its own portfolio then it may also consider outsourcing certain aspects of work because they are too affected by high costs of the jurisdiction.

Trade mark management continuum and work relationships

Incentives to outsource

At every level of the vertical relationship illustrated above there is a cost mark-up to the trade mark owner. An instruction to file a trade mark in Kenya may involve the in-house person instructing local counsel to instruct a foreign-based law firm (sometimes two) to prepare and file the application. This means three sets of costs: (a) the cost of instructing the local attorney; (b) the cost of instructing the foreign attorney; and (c) the Registry cost. In many instances the costs are unavoidable. Despite the apparent commoditisation of the trade mark service environment, there is much to be said of the benefits of using a firm to handle one's portfolio, especially if the portfolio is not large enough for there to be economies of scale by investing in the technology and people infrastructure to manage the portfolio. Other advantages to outsourcing include the outsourced risk associated with deadline management for the trade mark portfolio, the benefit of a group of specialist advisers and specialist international networks (often with direct cost benefits). That all said, whether the business increases cost (a) by managing the process in-house or incurs cost of a local firm it can save significant costs through careful outsourcing of all or some of the most appropriate outsourcing trade mark services. The associated cost savings can be as much as 50%.

Managing outsourcing risks

Trade mark management outsourcing shares most of the common risks or barriers associated with sub-contracting services which typically include lack of direct control, increased risk and quality concerns. The direct control concern is a foe of effective delegation and management generally. However, when a new jurisdiction is introduced the foe becomes much more of a barrier; different cultures, languages (even if all in one's mother tongue), ignorance, service attitudes and distance, consciously and sub-consciously make the decision to outsource difficult because of the perceived risk which, in some cases, may be entirely justified.

It is important that the practitioner has an understanding of the business of the outsourcer – for example, the way in which authority for decisions is obtained and the relationship between the marketing and legal departments. In other words effective outsourcing requires a certain level commitment from both the business and the practitioner to make it work effectively. Communication, especially in the initial phase of the relationship, is key and structured updating and feedback loops are required.

The concern over quality can be managed by depth control. There are already firms that specialise in renewal management. Most will simply provide a list of upcoming renewals generated by a database for instruction which they will implement. Typically, there is no advice or interface on questions of whether say, a re-filing may be preferable to renewal, whether in the EU seniority should be claimed or whether there are strategic reasons for the renewal. This level of advice is retained by the instructor but need not be. A well-chosen outsourcing partner can provide that advice but if the advice is perceived as a risk it can be retained by the outsourcer until such time as trust is developed. Suffice to say that controlling the risks associated with outsourcing does require a certain level of appreciation of the trade mark management function by the outsourcer.

Proper indemnity insurance is also a key issue for the outsourcer. In most jurisdictions the trade mark management function is undertaken by law firms that are governed by strict rules which include indemnity insurance, ethical standards and complete transparency in the billing process. The outsourcer can be assured by these institutional comforts or otherwise make them part of the contractual arrangement.

Choosing the right partner

It will be plain from the discussion above that the selection of firm, individual (at that firm) and the type of interface between outsourcer and firm (that is, single contact or multi contact) is important. Legal publications such as Managing IP, Legal 500, Chambers and World Trade Mark Review have all done extensive research on law firms and individuals. The internet is also very useful for helping to choose a firm and individual appropriate to your requirements as both law firms and lawyers are (or should be) adept at ensuring that their organisations and professionals have updated and easily obtainable profiles that can analyzed online. LinkedIn is also another source of very valuable, and free, online information.

The decision to choose one individual or a number of individuals at a firm is one of personal preference for both the firm and the outsourcer. The former is more easily managed and empowering for the individual at the firm, while the latter gives the outsourcer the advantage of continuity (in case the person is ill or leaves the firm) and more options when it comes to advice. In almost all instances it is not possible (nor cost effective) for one senior person to undertake all the work so at the very least there should be transparency in who is doing the work, their charge out rates and contact details in case the individual is away or there is an urgent query. It is useful for there to be a mechanism so that the entire team is kept up to date with the business.

Although the principle of outsourcing (especially to other countries) involves distance, this does mean that the right partner needs to be available. A commitment to availability may mean taking a call in middle of the night (where different time zones are involved) or jumping on a plane to be at HQ on short notice. The commitment required may be substantial and should be understood. An insight to the workload and support of the individual is therefore crucial. It goes without saying that the systems at the firm should be sound. Online access to one's trade mark database is necessary. The outsourcer needs to feel completely in charge of the entire process and the firm should understand this requirement as well as the need to ensure that access is as risk free (from hacking) to the outsourcer as possible.

The skills of the individual or firm as effective brand managers need to be capable of adapting so that a holistic service is offered. As the trade mark business has grown there has been increasing amounts of micro-specialisation, meaning that some practitioners just do filings, some just the oppositions and some the assignment or licence recordals. This model can make it difficult for a single practitioner to effectively view the entire portfolio and provide the holistic advice to move along the horizontal outsourcing continuum illustrated above. The outsourcer needs to be aware of these specialisms and compensate where necessary. The corollary is that the practitioner whose skills cover the range of services is likely to be of most benefit to the outsourcer, even if all the work is not undertaken by that practitioner but by people in the team. The strategic decision making by a holistic practitioner will be better than that by a micro-specialist.

The outsourcer should also be aware that legal systems work differently in the sense of how trade mark practitioners are categorised and the terminology can be confusing. For example, in the UK, the trade mark attorney is not necessarily a qualified lawyer, yet in other countries the trade mark attorney must be a qualified lawyer. This does not mean that the UK trade mark attorney is inferior (the standard of their examination has a reputation of being very high). However, it does mean that, in this example, the attorneys are products of different systems that may or may not be more appropriate to the outsourcer. The word attorney may also be confusing. In the US an attorney means a qualified lawyer who operates in a single bar system. In the UK, the word solicitor is used for qualified lawyers and they operate in a split bar system with barristers, and very seldom are also qualified trade mark attorneys. The word attorney is used by qualified trade mark attorneys and the majority of trade mark attorneys are not solicitors. Each specialism brings a slightly different set of skills.

Making the case for South Africa

The advantages to outsourcing to Africa, especially from Europe include:

1. Time zone advantages where there is a need to consult during daylight hours
2. Frequent overnight flights to and from Europe assisting in availability
3. Broadband access for ease of hosting access to online systems
4. Large trade mark law firms that have staff equipped to handling single class filings i.e. in other words high economies of scale
5. Inexpensive and well-qualified legal staff
6. A favourable exchange rate that is expected to weaken
7. The presence of a number of practitioners who have studied or worked in other jurisdictions, especially in the UK
8. A strong focus on service and a high work ethic
9. A track record – practitioners already manage large portfolios for clients that have hosted their IP in other jurisdictions such as Extreme International Limited and Alcan's beauty division.

The future is outsourcing

Outsourcing already occurs and is here to stay. The trade mark landscape is a prime area where the considerable benefits to effective outsourcing can be harnessed and South Africa is well placed to compete with India for outsourced work. However, outsourcers need to consider their partners carefully and be prepared to commit to the relationship before the benefits can truly be realised. For law firms in South Africa this time represents an opportunity to promote the country as an effective outsourcing destination.

Darren Olivier

Darren Olivier is head of Bowman Gilfillan's Brand Enforcement Section. Prior to joining Bowman Gilfillan, Darren was a partner at a leading London City firm and spent several years as sole Intellectual Property counsel to Dunlop Slazenger Group Limited managing their IP and licensing model throughout the world. Darren is on the official panel of experts to World Trademark Law Report and wrote the Chapter on UK Trademark law in the World Trademark Law Report Yearbook 2006 and 2007. He specialises in all aspects of trade mark related IP work. He is a dual qualified solicitor/attorney (UK and South Africa), and a qualified Trade Mark Practitioner (South Africa). He is a frequent speaker and writer on legal brand issues. He is co-founder of AFRO-IP, a social networking site and blog aimed at developing and promoting IP interests in Africa. He is currently acting in a number of High Court litigation matters and has developed the firm's trade mark management outsourcing model aimed at foreign clients wishing to manage their trade marks cost effectively.