It is no secret that intellectual property protection enhances the U.S. economy. Patents and copyrights encourage inventors and authors to create new goods and services, in exchange for a government-granted monopoly that prevents others from exploiting the fruits of those labors. Trademarks likewise support the economy in many ways, ranging from protecting inventors’ exclusive “brand names” for goods and services, to creating new revenue streams as a result of co-branding, brand extension, trademark licensing and so on. What has not been available — until now — is a robust systematic study to correlate the industries where trademarks bring the biggest benefit to the U.S. economy.
President Obama has repeatedly recognized that investment in intellectual property is “absolutely essential to our future.” The United States Patent and Trademark Office (PTO) has a statutory obligation to provide the president, via the secretary of commerce, with advice on intellectual property protection, including trademark protection. To those ends, the United States has undertaken new efforts to measure the effect of trademark protection on the U.S. economy, on an industry-specific basis.
In March 2010, the PTO established the Office of Chief Economist (OCE). Among its missions, the OCE is compiling evidence relevant to PTO policymaking and U.S. intellectual property policy, with particular focus on measuring how IP protection affects the American economy.
Earlier this year, the OCE released a detailed study entitled “Intellectual Property and the U.S. Economy: Industries in Focus.” The report differed from much of the prior research on the role that IP plays in promoting the economy, insofar as it developed new quantitative measures of how IP enhances the economy, on a measure of intensity by industry.
Of the three major IP disciplines — patents, trademark and copyrights — historically it has been challenging to measure the direct economic effect of trademarks on the economy. Not surprisingly, the most “patent-intensive” industries tend to be high-technology companies, where the number of patents granted often serves as a proxy for the level of innovation of the company. Copyrights have traditionally been most valuable to companies focused on publishing, art, music and software; those industries are not only easier to identify from an industry standpoint, but revenues attributable to copyright licensing also tend to be easier to measure.
Trademarks are a different species. Any company with a name owns a trademark — but not necessarily any patents and maybe not any copyrights. And since every company has a name, there needs to be an effective way to distill economic effects that are due to brand names of goods and services from the overall company name. A further complicating factor is that trademark registration is not necessary to secure trademark rights in the United States, although nearly all “important” trademarks become registered at the PTO. Therefore, this article considers the OCE-identified trademark-intensive industries, and how the OCE has correlated the effect of trademarks on the U.S. economy.
It has long been recognized that trademarks contribute to economic growth in many meaningful ways. Among other things, trademarks support innovation by allowing U.S. companies to identify and distinguish their goods and services from those of competitors, and by helping trademark owners capture, retain and grow market share. Scholarly articles have linked trademarks to increased vertical integration and other aspects of economic support. However, relatively little attention has been paid to identifying specifically which U.S. industries see the most benefit from investments in trademarks.
OCE’S METHODOLOGY AND RESULTS
In planning its industry study, the OCE recognized that there can be various ways to measure “trademark intensity” among industries, and that no one measure would yield perfect results. In identifying the most trademark-intensive industries, the OCE considered the following measures: number of trademark registrations per employee; top 50 trademark-registering companies, by total number of trademark registrations owned; and a random sample of 300 trademark registrations, from among the pool of 166,844 trademark registrations granted to 106,560 registrants in 2010.
There was substantial — though not perfect — correlation in the data across the three methods used. Ultimately, 60 trademark-intensive industries were identified, from among a universe of 313 total industries. These 60 industries reflect those that ranked high in any of the three methodologies: registrations per employee, top-50 trademark-registering company, or random sampling.
The full list of 60 trademark-intensive industries is available at www.uspto.gov/news/publications/IP_Report_March_2012.pdf at 21-22 (table 6). So far, the OCE has not ranked the 60 trademark-intensive industries from most intensive to least intensive.
It is noteworthy that only one industry — beverage manufacturing — appeared on all three measures of trademark intensity. Moreover, when the OCE study correlated the list of the 60 most trademark-intensive industries against an Interbrand list of the top 100 global brands of 2011, the beverage industry had the most individual brands on the top 100 global brands list. Apparently, consumers are both thirsty and loyal to their preferred beverage brands.
Thirteen other industries secured intensity rankings on two of the three methodologies used. In alphabetical order and by North American Industry Classification System category, those industries were audio and video equipment manufacturers; commercial equipment merchant wholesalers; gambling industries; household appliance manufacturing; insurance carriers; motion picture and video industries; management and technical consulting; newspaper, book and directory publishing; other miscellaneous manufacturing; scientific research and development; soap, cleaning compounds and toiletries; software publishers; and sporting goods and musical instrument stores.
The OCE study identified several ways that trademark-intensive industries (and the broader set of IP-intensive industries, which include patent-, trademark- and/or copyright-intensive industries) contribute meaningfully to economic development. Among the findings are the following:
• IP-intensive industries directly accounted for 27.1 million American jobs in 2010, of which 22.6 million jobs were in trademark-intensive industries. Moreover, every two jobs in IP-intensive industries support an additional one job elsewhere in the economy, such as through supply-chain jobs and other indirect employment. Thus, IP-intensive industries support more than 40 million jobs either directly or indirectly.
• Jobs in IP-intensive industries pay more. Salaries for IP-intensive jobs were 42 percent higher than non-IP-intensive industries in 2010. The wage premium for jobs in IP-intensive industries nearly doubled from a 22 percent premium in 1990 to a 42 percent premium 20 years later.
• IP-intensive industries accounted for just above $5 trillion in value added, or about 35 percent of U.S. gross domestic product in 2010.
• Exports by IP-intensive industries totaled $775 billion in 2010, accounting for over 60 percent of total U.S. merchandise exports.
• From 2010 to 2011, job growth in IP-intensive industries outpaced job growth in non-IP-intensive industries by about 60 percent.
It should be hard for policymakers to ignore the roles that trademark-intensive industries, and the broader group of IP-intensive industries, play in the economic recovery and economic growth. IP industry jobs contribute disproportionately to the U.S. economy. How the government acts on these findings remains to be seen. But beyond government policy, the findings from the OCE study also have useful implications for trademark counsel, marketing departments and other business areas within trademark-intensive companies.
Nearly all company departments — and nearly all outside IP counsel — face significant cost pressures in relation to IP budgets and expenditures, partly, though not only, because of the current state of the economy. Understanding the connection between a company’s trademark expenditures, “trademark intensity” and the ultimate economic payoff from trademarks can help inform wise choices and avoid regrets in short-term decision-making. Moreover, companies that look to other industries’ metrics when deciding on their own company’s budget should consider whether the comparison industry is as trademark-intense as their own industry.
The creation of the OCE at the PTO was a giant first step toward measuring how trademark protection correlates with our economy, on an industry-specific basis. It would be interesting to see whether further study can refine this analysis and perhaps even rank the order of trademark-intensive industries.
This sort of data might prove especially useful to trademark owners who struggle to refine and justify their IP protection budgets, and also in understanding the limitations of comparing trademark value “metrics” across different industries.
Finally, investors might see value in a more forward-looking analysis, which counts new trademark applications on an industry-specific basis. Since some new trademark applications are filed on an “intent-to-use basis,” statistics around those sorts of filings might also be useful in predicting evolving market strengths. For example, an industry category such as alternative energy might well have a different trademark intensity from more traditional energy companies.
Robert W. Zelnick is a partner in the Washington office of McDermott Will & Emery, where he maintains a full-service trademark practice. From 2001 to 2010, he headed McDermott’s firmwide trademark practice group.