David S. Langdon Senior Economist U.S. Department of Commerce Economics and Statistics Administration Intellectual Property and the U.S. Economy: Industries in Focus 1 Washington School of Law, American University Raleigh 21 June 2012

2 IP in the U.S. Economy Report On April 11, 2012, Secretary John Bryson announced the Intellectual Property in the U.S. Economy: Industries in Focus report in a White House press conference oReport is a collaborative effort by economists in the ESA and USPTO, both bureaus in the DOC oFocusing on patents, trademarks, and copyrights – identifies the 75 most “IP-intensive” industries in the US. demonstrates the large positive impacts these industries have on U.S. employment, exports, and overall value-added in the economy. industries run the gamut from electronics and pharmaceuticals (patents), to retail and services (trademark), to publishing and entertainment (copyright).

3 Economics and Statistics Administration A new era at the USPTO oDavid J. Kappos, Director & Undersecretary oOffice of Chief Economist created March 1, 2010 Economics and statistical research oWe see the purpose of research as »An input into evidence-based policymaking »Gaining, and contributing to, knowledge about the workings of the IP system, and the role that the USPTO plays in that system oActively building an infrastructure to do and support economics and statistical research »Deploying resources and capabilities to accomplish some of these tasks internally »But also deeply interested in tapping external expertise and resources

4 Economics at the USPTO A new era at the USPTO oDavid J. Kappos, Director & Undersecretary oOffice of Chief Economist created March 1, 2010 Economics and statistical research oWe see the purpose of research as »An input into evidence-based policymaking »Gaining, and contributing to, knowledge about the workings of the IP system, and the role that the USPTO plays in that system oActively building an infrastructure to do and support economics and statistical research »Deploying resources and capabilities to accomplish some of these tasks internally »But also deeply interested in tapping external expertise and resources

5 Office of Chief Economist: Responsibilities and Duties 1) Support evidence-based policymaking bringing capabilities into the USPTO to analyze ongoing & planned efforts 2) Support research on important IP questions internally externally, partner with foundations, organizations, and academics 3) Communicating economic thinking about IP internally, at the USPTO externally, to stakeholders 4) Data rationalizing USPTO data for internal uses facilitating data migration to stakeholders, researchers, and the public supporting data matching efforts across USG, to other microdata sources 5) White papers examining the role of innovation and creativity in promoting competitiveness and economic growth

6 Background – Economics and the US Patent System Economists champion economic efficiency, and maximizing the benefits (welfare) to society Innovation is intimately tied to economic health in the long-run - as much as ¾ of economic growth since WWII attributable Basic governmental functions in this area (NEC-CEA) - provide government funding for basic research - provide a workable property rights system in intangibles Role of the Patent System? - incentives for innovation - technology entrepreneurship; - role in competition - markets for technology Patent Quality and Timeliness - reduce costs associated with uncertainty

7 Background Identify which industries produce or use significant amounts of IP and rely most intensively on IP protection - patents - trademarks - copyrights Develop several industry-level metrics on patent and trademark use Employ these measures to identify a set of the most IP-intensive (4-digit NAICS) industries in the U.S. economy

8 IP in the U.S. Economy Report Important findings: oThe entire U.S. economy relies on some form of IP, because virtually every industry either produces or uses it. oIP-intensive industries accounted for about $5.06 trillion in value added, or 34.8% of U.S. gross domestic product (GDP), in oMerchandise exports of these industries totaled $775 billion in 2010, accounting for 60.7% of total U.S. merchandise exports. oIn 2010, these industries directly and indirectly employed 40.0 million Americans, or 27.7% of all employment in the economy. oBetween 2010 and 2011, the economic recovery led to a 1.6% growth in direct employment in the IP-intensive industries, faster than the 1.0% growth in non-IP-intensive industries.

9 IP in the U.S. Economy Report Important findings: oEmployment growth in the copyright-intensive industries (2.4 %) and the patent-intensive industries (2.3%) has been particularly strong, contributing highly to recent job growth. oJobs in IP-intensive industries pay well compared to other jobs. Average weekly wages for IP-intensive industries were 42% higher than the average weekly wages in other (non-IP-intensive) private industries. This wage premium nearly doubled from 22% in 1990 to 42% by oPatent-intensive and copyright-intensive industry jobs pay particularly well, with wages averaging almost 75% higher than wages in other (non-IP-intensive) industries.

Patent-intensive industries defined (1) 10

Patent-intensive industries defined (2) 11

12 IP in the U.S. Economy Report

13 IP in the U.S. Economy Report

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15 IP in the U.S. Economy Report

16 IP in the U.S. Economy Report

17 USPTO Operational Moves to Serve Innovators and the Innovation System 1. Examiner point-system / bonus reform (employee incentives) 2. Create 21 st Century IT infrastructure E.g., End-to-end examiner interfaces in both patents & TMs 3. Quality Metrics Reform 5-measure performance criteria 4. Reform of MPEP – “disclosure and specification” (notice) 5. Three-track applicant timing initiative Menu of timing choices offered to applicants 6. Increased hiring of examiners, and increased training 7. Geographic diversity (labor markets – proximity) Satellite offices – Detroit, Michigan 8. The America Invents Act (September 16, 2011) Array of reforms

18 Summary Innovation is an important determinant of U.S. economic growth The evidence suggests that patenting plays an important role in innovation »Competing, securing funding, supporting business models The USPTO’s focus on the needs of innovators reflects this understanding »The 3-track Initiative: Applicant control of examination timing »Small business & micro entity discounts »Focus on quality and timeliness, reducing backlogs and pendency »The AIA