Brookings Report Finds Patents Driving Economies of U.S. Cities

Lisa Shuchman

Corporate Counsel

2013-02-04 16:01:08.0

Patents may be the cause of headline-grabbing lawsuits and smartphone wars, but there is evidence that they are also a major driver of the U.S. economy, according to a new study by the Brookings Institution.

The findings of the report, “Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas” [PDF], conclude that the rate of patenting in the United States has been increasing in recent decades and stands at historically high levels. It also finds that inventions, embodied in patents, are a major driver of long-term regional economic performance, especially if the patents are of high quality.

“Despite claims to the contrary, we have not found evidence that patents stifle innovation,” Jonathan Rothwell, a senior research associate at the Brookings Institution and one of the authors of the report, told CorpCounsel.com.

The rate of patenting by U.S. inventors is not only at its highest point since the Industrial Revolution, but also patents are more evenly dispersed among owners than in previous decades, the study states. Patent ownership has become broader and more competitive. In 1976, for example, 2,677 companies or organizations such as universities or federal agencies were granted exactly one patent each; by 2011, that number had soared to 9,909, Rothwell said.

While this is good news for the nation as a whole, not everyone is benefitting from the increased innovation, according to the Brookings report. The nonprofit research and policy think tank found that most of the nation’s innovation, as measured by the number of patents granted in a given region, is clustered in 20 of the nation’s 360 statistical metropolitan areas. Those 20 metro areas—home to 34 percent of the population—generate 63 percent of the nation's patents, the study revealed.

In fact, the five most patent-intensive metro areas accounted for 30 percent of all patents from U.S. inventors, the report states, noting that the average resident in those five areas is 2.4 times more likely to hold a patent than the average American.

Not surprisingly, the San Jose metro area of California, home to Silicon Valley, leads in total patents and its rate of patenting per capita. And San Francisco, New York, Los Angeles, Seattle, Boston, Chicago, San Diego, Minneapolis-St. Paul, and Detroit fill out the top 10 in terms of total patents. But university towns such as Burlington, Vermont; Rochester, Minnesota; Corvallis, Oregon; Boulder, Colorado; Ann Arbor, Michigan; Austin, Texas; Santa Cruz, California; and Poughkeepsie, New York, (where IBM has a large facility), come out on top in terms of patents per capita.

Patent-intensive metro areas enjoy higher incomes, even when compared with cities of comparable size and education levels, the study finds. The 10 metro areas with the fastest patent growth from 1990 to 2010 had an average unemployment rate of 4.9 percent, as compared to 6.2 percent for large metro areas with slow patent growth, according to the study.

It is possible for other regions to change and become patent hubs, and the study shows how some regions, including Silicon Valley, changed dramatically over the past few decades.

“But it’s clear that having a science or research-oriented university or laboratory plays a key role,” Roswell said, “and it concerns me that 243 metro areas have no science or research facilities at all.”

The Brookings report also tackles some timely policy issues. At a time when the federal government is looking to make spending cuts, the researchers note that many high-quality patents are the product of funding for research and development from the U.S. government.

Finally, the report touches upon the need for further reform of the patent system, especially regarding non-practicing entities (NPEs). It discusses ways in which the government might deal with the surge of activity from NPEs, often called “patent trolls,” that buy up patent portfolios with the sole purpose of extracting payments from productive companies through negotiation or litigation.

In addition, it talks about the need for the U.S. Patent and Trademark Office to improve the patent examination process and grant more high-quality patents. It also suggests that the courts clarify rules with respect to the granting of software patents—a subject that has created a great deal of controversy in the patent world.