US Government Report: IP Boon To US Economy, Accounts For 40 Million Jobs

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Intellectual property-intensive industries in the United States support at least 40 million jobs and contribute more than $5 trillion – or 34.8 percent of – US gross domestic product (GDP), according to a report released by the Obama administration Wednesday.

The “Intellectual Property and the U.S. Economy: Industries in Focus,” report [pdf] highlights 75 industries that use patent, copyright, or trademark protections most extensively for their livelihood. These IP-intensive industries are the source – directly or indirectly – of more than a quarter of all the jobs in the US. Those industries include: Computer and peripheral equipment, audio and video equipment manufacturing, newspaper and book publishers, pharmaceutical and medicines, semiconductor and other electronic components, and the medical equipment space. In 2010, 22.6 million jobs were in the 60 trademark-intensive industries, while 3.9 million jobs were in the 26 patent-intensive industries, and 5.1 million jobs in the 13 copyright-intensive sectors.

“This report will guide the work we continue to do throughout the administration to create jobs,” Deputy Commerce Secretary Rebecca Blank told reporters on a conference call announcing the report. “We will offer them [American businesses] smarter tools, streamlined processes, and lower barriers” to market entry.

The report was released just days after the US Labor Department released data showing that the American economy added 120,000 jobs in March, but growth for that month was slower than in the three previous months, when 200,000 jobs were added each month.

During Wednesday’s conference call, Blank and US Patent and Trademark Office (USPTO) Director David Kappos stressed that the report clearly shows that the America Invents Act (AIA) and other moves made by the Obama administration to strengthen the patent process to boost innovation and the economy are, in fact, working. Between 2010 and 2011, there was a 1.6 percent increase in direct employment in IP-intensive industries – faster than the 1 percent growth in other sectors. These efforts “are paying dividends in the growth of jobs and the growth of an economy, frankly, that’s built to last,” Kappos said.

Kappos specifically cited the recent USPTO hiring of nine new patent judges, and the establishment of a Track 1 process under AIA, which offers businesses of all sizes faster patent application decisions – under 12 months – and a 50 percent examining fee discount for small businesses using Track 1. Since the program’s inception, Kappos said, the agency has received 3,000 Track 1 applications and more than 1,000 entrepreneurs have taken advantage of the discount. Patent application examiners have completed 1,200 exams in an average of 42 days, issuing more than 40 patents thus far under the program. Plus, the first action review program encourages patent applicants to meet with examiners early in the process to smooth out potential road blocks.

“To date, literally thousands of innovators have innovated from this direct communication with the USPTO,” he said.

Kappos also credited the Green Technology pilot program, which has issued 890 US patents since the pilot began in December 2009. It’s “helping to meet the president’s goal in making a green collar economy and making our country an exporter of” green tech, Kappos said.

Overseas Trading Partners Moving to More ‘Harmonised Standards’ for IP

On the international front, the Patent Prosecution Highway has processed 10,000 applications, affording patent protection in 22 countries “faster and at lower cost,” Kappos added.

“This kind of international collaboration is especially important in breaking down some legal barriers that exist for smaller companies trying to export their products into the global economy,” he continued.

Merchandise exports of IP-intensive industries totalled US$775 billion in 2010, according to the report, accounting for 60.7 percent of total US merchandise exports; manufacturing industries made up almost 99 percent of those exports, with oil and gas extraction and software publishing making up the rest. Semiconductors and electronic parts were the main export, with basic chemicals, motor vehicles, pharmaceuticals and medicine, and computers and peripherals following suit.

Imports of IP-intensive industries totalled $1.34 billion – or 69.9 percent of total US merchandise imports. From 2000 to 2010, exports of IP-intensive industries increased 52.6 percent, while imports rose 61.6 percent. Manufacturing accounted for 79 percent of total IP-heavy imports, while oil and gas represented 21 percent, software publishing less than 1 percent. The biggest import sectors for manufactured goods were motor vehicles (9.7 percent of all IP-intensive industries), computers and peripheral equipment (6.7 percent), and pharmaceuticals and medicines (6.5 percent). Those imports include those produced made by US-owned entities located overseas and by foreign producers under US licences.

Although data on foreign trade of services is harder to come by, Wednesday’s report noted that exports of IP-intensive service-providing industries totalled about $90 billion in 2007, with exports of software publishers ($22.3 billion) being the largest group of services exports, followed by the motion picture and video industry ($15.3 billion). Financial investment activities accounted for $12.3 billion, scientific research and development $10 billion, depository credit intermediation $6.9 billion, and management and technical consulting $6.3 billion.

Kappos noted, however, that the report stressed the need for the US to redouble efforts with overseas trading partners to ensure “they do a good job of enforcing the intellectual property laws they have on the books but also are moving to more global and harmonised standards for intellectual property laws.”

Industry Acclaim

The reports was hailed by groups such as the US Chamber of Commerce and the AFL-CIO, both of which used the opportunity to impress upon lawmakers the importance of protecting IP and IP-heavy industries, particularly in China.

“Perhaps you’ve heard the phrase ‘innovate or die.’ But too often, our leaders fail to remember the role innovation plays in driving key industry sectors and our entire economy,” said US Chamber of Commerce President Thomas Donohue at the White House Wednesday as the report was released. “Take energy, for example. What has driven the shale gas revolution that is putting hundreds of thousands to work and strengthening our domestic energy supply? An innovative idea – a new way of doing something. Further advances in technology are critical to our energy future.”

Citing a 2011 report from the US International Trade Commission, AFL-CIO President Richard Trumka said that “if China protected intellectual property as the US does, there would be approximately 923,000 new US jobs. And China is only one of many countries that host websites illegally trafficking in US entertainment.” In the US, the entertainment industry – a major proponent of increased IP protection overseas – is heavily unionized; much of the money made in this sector is made “downstream,” or from the repeated use of a TV show or movie, or recorded music.

“US protections for American intellectual property simply do not effectively address foreign rogue websites that steal movies, TV shows and music,” Trumka continued. “While intellectual property is necessary to US jobs, incomes and the economy as a whole, is it not enough by itself to grow good jobs. It is only one part of a larger picture that requires coordinated industrial and trade policies.”

But those on the side of more open access argue that draconian IP enforcement can stifle innovation and stunt economic growth. No legislation exemplified this debate more in the US of late than the Stop Online Piracy Act (SOPA), and its Senate counterpart, the Protect IP Act (PIPA).

In terms of balancing IP protection and open access to, Blank said, “there’s always a balance on this front – you don’t want to protect IP in perpetuity – at some point it goes into the public domain.”

The report was released by the US Commerce Department’s Economics and Statistics Administration and the USPTO.

Liza Porteus Viana may be reached at lizapviana@gmail.com.

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