President Donald Trump, has issued an executive order , pertaining to streamline regulations by eliminating regulations that inhibit job creation, eliminate jobs, or that are inconsistent with government initiative and policies. The frequently asked question is whether patents are important for economic success or whether they are relevant for job creations or high paying jobs. The answer is, yes, the USPTO regulatory reform task force started their work with common sense recommendation that regulation that inhibits the issuance and existence of patents should be repealed.
2012 Report by USPTO
That 2012 report also concluded that IP-intensive industries support a total of 40.0 million jobs, or 27.7 percent of all jobs in the economy, and contributed approximately $5 trillion, or 34.8 percent, to the U.S. gross domestic product (GDP) in 2010.
Focusing specifically on patents, according to the 2012 report patent-intensive industries specifically supported 3.9 million direct jobs and indirectly supported another 3.3 million workers in 2010. Patent-intensive industries also accounted for 5.3 percent of GDP, accounting for some $763 billion.
“Innovation protected by IP rights is key to creating new jobs and growing exports. Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companies—every job in some way, produces, supplies, consumes,or relies on innovation, creativity, and commercial distinctiveness. Protecting our ideas and IP promotes innovative, open, and competitive markets, and helps ensure that the U.S. private sector remains America’s innovation engine.”
2016 Report by the USPTO
In 2016, the USPTO released Intellectual Property and the U.S. Economy 2016 Update, which updated the previously released 2012 report. This updated report begins by stating the obvious: “Innovation and creative endeavors are indispensable elements that drive economic growth and sustain the competitive edge of the U.S. economy.” The Executive Summary goes on to say: “IP-intensive industries continue to be an important and integral part of the U.S. economy and account for more jobs and a larger share of U.S. gross domestic product (GDP) in 2014 compared to what we observed for 2010.”
Focusing specifically on patents, according to the 2016 report patent-intensive industries specifically supported 3.9 million direct jobs and indirectly supported another 3.5 million workers in 2014. Patent-intensive industries also accounted for 5.1 percent of GDP, accounting for some $881 billion. It is perhaps interesting to note that although the percent of GDP decreased relative to patent-intensive industries, the raw dollar total increased by $118 billion as compared to four years earlier.
Importance of VC Funding
Obtaining funding from Venture Capitalists matters greatly. Roughly 600,000 new businesses launch in the United States each year, with about 1,000 new businesses receiving their first venture capital funding each year. See Connecting the Dots. What that means is that .167% of new business receives venture funding. So the deck is enormously stacked against you if you are planning on starting a business and raising venture capital. That being the case, you certainly don’t want to make it more difficult to acquire VC funding.
Venture backed funding can be critically important for a company that wishes to go public. Indeed, VC backed companies have consistently made up a large percentage of those companies that go into an Initial Public Offering (IPO), with the percentage reaching a high of nearly 60% during the dot-com era. See How Much Does Venture Capital Help the U.S. Economy? Given the importance of venture capital, and the strong preference for patents VCs have, it starts to become clear how and why patents play such an enormous role in the U.S. economy. The importance is only further increased when you understand “92% of the job growth for young companies occurs after their initial public offerings.”
So if we want large numbers of those high paying jobs in patent-intensive industries we need to get companies to IPO, which absolutely requires an attractive ecosystem for VC’s to operate. This means we must have a strong, vibrant patent system that will attract investors to engage in the speculative investing necessary to fund those risky, exciting young companies.
If president Trump is serious about making America Great Again and dismantling the regulatory bureaucracy that stands in the way of those individuals and companies that will lead America to the 4 percent growth he wants, he will demand the USPTO once again become a patent friendly agency. It is particularly time for the USPTO to lift the foot off the throat of certain sectors of the biotechnology community and pretty much the entirety of the software industry. It is well past time for the USPTO to stop acting as an arms dealer by selling patents (which takes many years to achieve) and selling patent challenges.
The very existence of the Patent Trial and Appeal Board (PTAB) is for the express purpose of providing a forum to kill patents. Of course, the PTAB itself is a legislative creation, but the decidedly anti-patent manner in which the proceedings are conducted could be changed with Executive action. Furthermore, since the PTAB judges are not independent (i.e., they report to the Director of the USPTO) philosophical and ideological change could be made with relative ease if there is the political will to see it through.