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IP Contributes $5 Trillion and 40 Million Jobs to US Economy

Written by Renee C. Quinn
B.S. Pennsylvania State University
M.B.A. University of Phoenix
Posted: April 11, 2012 @ 6:24 pm
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Commerce Secretary John Bryson announces the release of the USPTO/ESA study on Intellectual Property and jobs at the White House.

Today I attended the an event on Intellectual Property and the US Economy which was held in the Eisenhower Executive Office Building on the White House grounds. The purpose of the event was to unveil a study — Intellectual Property and the U.S. Economy: Industries in Focus— prepared by the Economics and Statistics Administration and the United States Patent and Trademark Office. The study found that intellectual property intensive industries support at least 40 million jobs in the United States and contribute more than $5 trillion dollars to U.S. gross domestic product (GDP).  That is to say that 27.7% of all jobs in the U.S. were either directly or indirectly attributable to IP-intensive industries, and the amount contributed to the U.S. economy represents a staggering  34.8% of GDP.

“This first of its kind report shows that IP- intensive industries have a direct and significant impact on our nation’s economy and the creation of American jobs,” said Commerce Secretary John Bryson. “When Americans know that their ideas will be protected, they have greater incentive to pursue advances and technologies that help keep us competitive, and our businesses have the confidence they need to hire more workers. That is why this Administration’s efforts to protect intellectual property, and modernize the patent and trademark system are so crucial to a 21st century economy that is built to last.”

David Kappos speaking at the White House on release of USPTO/ESA report, April 11, 2012.

“Every job in some way, produces, supplies, consumes, or relies on innovation, creativity, and commercial distinctiveness,” said Under Secretary of Commerce for Intellectual Property and USPTO Director David Kappos. “America needs to continue investing in a high quality and appropriately balanced intellectual property system that will promote innovative, open, and competitive markets while helping to ensure that the U.S. private sector remains America’s innovation engine.”

The White House event was headlined by U.S. Secretary of Commerce John Bryson, and included remarks from Victoria A. Espinel (Intellectual Property Enforcement Coordinator), Dr. Rebecca Blank (U.S. Department of Commerce Deputy Secretary), David Kappos (Under Secretary of Commerce for IP and Director of the U.S. Patent and Trademark Office).  Also present were the odd-couple of Thomas Donohue (President and CEO of the U.S. Chamber of Commerce) and Richard Trumka (President of the American Federation of Labor and Congress of Industrial Organizations).

Business and union leaders do not often see eye-to-eye, but today Donohue and Trumka were both signing the praises of intellectual property and emphatically underscored the critical importance of IP enforcement world-wide.  “As we have been saying all along, IP supports jobs, spurs growth… and we will be glad to champion this in any way we can through our own system and in cooperation with others, Donohue said.

“This report shows the profound importance of intellectual property to America’s living standards, and quite frankly to our future.  Intellectual property protections — copyrights, patents and trademarks — translate into jobs, incomes and benefits,” Trumka said.  “Three-quarters of the revenue for a motion picture come after the initial theatrical release, and more than half of scripted television revenues come after the first run.  These downstream revenues yield the residuals and royalties that sustain entertainment industry professionals between projects… digital theft has cost the U.S. entertainment industry countless jobs.”

Thomas Donohue, President of the U.S. Chamber of Commerce (left) and Richard Trumka, President of the AFL-CIO (right) were in agreement on the importance of IP rights for U.S. jobs at the White House on April 11, 2012.

The panel discussed the report on a broad range of sectors that generate intellectual property, as well as the jobs, exports, and wage premiums those sectors support and the effect that they have on the U.S. Economy. Two Chief Economists, Mark Doms and Dr. Stuart Graham along with the US Intellectual Property Enforcement Coordinator, Victoria Espinel were recognized as significant actors in the gathering and analyzing of the data necessary to prepare the report. After the event was over, and before I was ushered back out to the Northwest gate of the White House, Deputy Commissioner Peggy Focarino of the USPTO introduced me to Dr. Graham, who is the Chief Economist of the U.S. Patent & Trademark Office.  Stuart agreed to sit down with me for a few minutes to discuss the findings in the report.

What follows is my interview with Dr. Graham.

Dr. Stuart Graham, USPTO Chief Economist

Renée Quinn: Would you like to share your views of the findings within the report? Feel free to address whatever you would like.

Stuart Graham: This report covers all three of the primary federally protected intellectual property rights. I think what is fundamentally interesting about this report is that it is the first US government effort to try and quantify the economic impacts related to intellectual property and the intellectual property intensive users in the economy. What we find is that out of the 313 industries that are identified in the National Industrial Classification System, 75 of the most intensive users of intellectual property, and that includes patents, trademarks and copyrights, are responsible for the huge numbers you have heard spoken about in the press conference today. For instance, these industries provide 40 million jobs – as some of the speakers said – and this is a low, conservative estimate. Our estimates, while we took account of the upstream jobs – that is those jobs in the supply chain jobs that serve those industries – we did not take into account the downstream jobs – the jobs in distribution and in services that serve those industries and those employees. So this 40 million is a low estimate. It is a very conservative estimate of the total US employment impact of these IP-intensive industries.

Principally, and I know Gene will be interested in this, we specifically looked at the patent intensive industries. The fundamental thing that we see about these industries is that they pay a wage premium, on average over the non-IP intensive industries, of about 75% higher. So these are great jobs. These are the jobs that America needs to support. And indeed the administration is supporting these efforts by protecting intellectual property and insuring that the USPTO has the resources it needs to do a high quality, timely examination of these property rights. So we are investing in great jobs.

In addition what has really been interesting to us – and what we found in the recent job growth that we have seen in the economy – is that the patent intensive industries are contributing more to job growth than the other non-IP-intensive sectors in the economy. So while producing great jobs, these patent intensive industries are also contributing disproportionately highly to the job growth that we have seen in the economy over these last quarters. So it has really been an eye-opening experience to conduct this study.

The other thing that I will say that Gene may also be interested in is the contribution of the trademark industries. No one has really looked at the trademark industries and the way in which industries in the US are using trademarks. I think there is a lot of work to do here, because our report really is just a first view into this issue. But we show the trademark intensive industries are both directly and indirectly supporting 25% of US employment. That’s huge! And these are just the most intensive users of trademarks.

Renée Quinn: Again, conservatively low?

Stuart Graham: Right, conservatively low. So intellectual property is having a huge impact and the users of intellectual property are contributing mightily to the economy. They are contributing 61% of merchandise exports, as the Secretary of Commerce said in his comments. So these industries are creating great jobs and they are contributors to the economy. If there is a lesson coming out of this report, it is that these are the industries and these are the jobs America needs to be investing in. So when America invests in, for instance, the US Patent and Trademark Office, insuring that we have the resources necessary for us to do a high quality job for all of the users, we are investing in America and we are investing in America’s future.

Renée Quinn: Absolutely. I was actually talking with Peggy Focarino and Debra Cohen about this and I think that the biggest misconception from people that are not in the IP industry, that do not know how things work at the USPTO, is that the USPTO is taking taxpayer money from other areas of government. People do not realize just how self-sustaining the USPTO is and that you are just looking to keep the finances that you bring in through user fees.

Stuart Graham: That is absolutely right. We are budget neutral. Not a taxpayer dollar goes into the US Patent and Trademark Office. It is a fully fee funded agency. We are self sustaining and we contribute enormously to the American economy. But the real contribution is not us. It is the innovators that are better able to use our office because we offer them better services. We are there to serve the innovation community. And if there is one that thing about this report that needs to be said is that this is a report about American innovators. About how successful American innovators have been and continue to be. They are the ones that the USPTO and the government are there to serve and need to be there to serve because they are the ones who are going to grow us out of the recession, are growing us out of the recession and are indeed the platform through which we are going to win the future.

Renée Quinn: And I think one thing that is also important to note is that so many small businesses that are out there today, depend solely on their intellectual property rights and they are the ones that do most of the hiring. So it is amazing to me how many people just do not support that.

Stuart Graham: Yes. Actually, and Gene will know this, we pointed this out very pointedly in the Small Business International Patenting Report that went to Congress in January. The contribution of new businesses, small businesses to job creation is enormous. And there are some studies out there from the Kaufman foundation that find that small businesses may be the only net contributors to job creation. In an economy like ours, we need policies that support this entrepreneurship, whether those are more general policies offering support for entrepreneurship, supporting capital investment, or through the investments that we are making in the US Patent and Trademark Office.

About the Author

Renee C. Quinn acquired a Masters of Business Administration with her course work focusing on e-Commerce and e-Business, with an emphasis on marketing via the World Wide Web. Her particular career focus to date has been on business-to-business and business-to-consumer marketing. She writes on various business and social media topics for IPWatchdog.com. You can follow Renee on Twitter at IPWatchdog_Too. Renee is available to consult with individuals and businesses on how to set up and effectively use social media and social networking tools to establish a successful marketing campaign. You can contact Renee via e-mail.

11 comments
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  1. Boy; an even higher contribution percentage to the American economy than I would have imagined.

    This report is a keeper; and something that should be given to anyone and everyone who (still) doubts the critical importance of patents, copyrights, and trademarks; and other intellectual property; to our nation.

    Don’t think we’d have many doubters left were they (maybe with help from the media; whose own IP is critical to their survival and success) to stop to carefully consider what part IP plays in the existence of their and their colleagues, family, and friends’ jobs.

    Thanks for the important article and interview Renee and Stuart.

  2. Rene,

    Thanks for the great post. This is not really that surprising, Robert Solow won the Nobel Prize in Economics because of his work on the causes of economic growth. His model suggests that fourth fifths of the economic growth of the U.S. is the result of technological progress. Subsequent work has shown that essentially all real per capita growth is the result of technological progress – which depend on strong property rights or Patents.

  3. According to the recent report prepared by the Economics and Statistics Administration and the United States Patent and Trademark Office, U.S. Commerce Secretary, John Bryson, points out that almost every US Company depends on intellectual property (IP) i.e. copyrights, patents and trademarks to run their business. The protection and dissemination of creative works, which depend heavily upon IP, support about 28% of the workforce. Thus companies must protect their IP rights which are their life blood or their competitive advantage. The inability to protect IP is a leading cause of failure for many companies. Intellectual property rights may be needlessly at risk if companies become engaged in costly IP litigation, which can easily reach millions of dollars in expenses, not to mention any assessed damages.

    Obtaining insurance specific to this exposure leaves working capital to be used to grow, capture market share and maintain profitability. Then if a company finds itself in court, as a plaintiff or a defendant, the funds are available to thoroughly and vigorously litigate. Needless to say, the lack of obtaining insurance to protect a company’s intellectual property could lead to the loss of its IP rights, incurring burdensome royalty payments under licensing agreements, being forced to settle or going out of business.

    There are many advantages to companies being informed about the existence of IP insurance, such as enabling them to ensure that their most valuable asset is protected. Companies can demonstrate that they can fight to the end of an IP case on the merits, and not run the risk of going out of business or being forced to drain their working capital to pay legal fees to enforce IP rights or defend their current operations.

    Surprisingly, despite the established value and availability of the policies, many companies from start-ups to Fortune 500s are still unaware that IP insurance exists. Equally surprising is the number of companies who mistakenly assume they are covered for IP risk under their general liability policies. Intellectual property insurance ensures that companies have the money available to maximize their chances of winning on the merits of the case. More importantly, companies will have the ability to flourish and grow thus creating more jobs and a stronger economy.

  4. Steve M.,

    Thank you for reading IPWatchdog and for taking the time to comment. I agree, I knew the numbers would be high but they are staggeringly so. And remember, these numbers are lower, more conservative estimates. They do not include all of those who are employed because they are able to supply services to the innovators making such an impact on our economy!

    -Renée
    http://www.facebook.com/TheSocialMediaDiva
    LinkedIn Group Social Media Made Easy
    Follow me on Twitter @ IPWatchdog_Too

  5. Dale B.,

    Thank you for reading IPWatchdog and for taking the time to post your comment. It is not surprising at all that technological progress affects the economy. But the numbers of innovators who utilize the protection rights of intellectual property who are not in the big fortune 500 or pharmaceutical companies is staggering. It is the small business owner, many whose business models depend solely on their IP protection who are creating the most jobs.

    Thanks again!

    -Renée
    http://www.facebook.com/TheSocialMediaDiva
    LinkedIn Group Social Media Made Easy
    Follow me on Twitter @ IPWatchdog_Too

  6. Robert,

    Thank you for reading IPWatchdog and for taking the time to post your comment.

    I appreciate your analysis of the report data. But more importantly I appreciate your discussing IP Insurance. So many people loose the battle because they dod not have the funds to fight the good fight. And that is why so many mom and pops fall to big chain companies. Having the insurance to protect their IP rights could mean the life or death of a small business. Thanks again.

    -Renée
    http://www.facebook.com/TheSocialMediaDiva
    LinkedIn Group Social Media Made Easy
    Follow me on Twitter @ IPWatchdog_Too

  7. The report underscores the importance of protecting intellectual property rights for American countries overseas, and why continued improvements in the U.S. patent system are necessary. America needs to continue investing in a high quality and appropriately balanced intellectual property system that will promote innovative, open and competitive markets while helping to ensure that the U.S. private sector remains America’s innovation engine. Strong intellectual property protections encourage businesses to pursue the next great idea, which is vital to maintaining America’s competitive edge and driving our overall prosperity.

  8. Certainly, you can’t deny — although some in the anti-patent crowd still do — that the potential for profit serves, and will always serve, as a major incentive for innovation. The patent industry is now such a significant engine of U.S. economic growth that it’s about as American as apple pie.
    http://www.aminn.org/patent-legislation

  9. [...] in economic value in the United States each year, which represents nearly 30% of GDP.  See IP Contributes $5 Trillion and 40 Million Jobs to US Economy.  Companies like Coca-Cola have their value dominated by trademarks, but in the high-tech world we [...]

  10. [...] States and contribute more than $5 trillion dollars to U.S. gross domestic product (GDP). See IP Contributes $5 Trillion and 40 Million Jobs to US Economy. Frankly, even if there are broader political motives at play, it is about time that IP take on a [...]

  11. [...] better defined in the report, also account for $5.06 trillion or 34.8% of the U.S. GDP. See also IP Contributes $5 Trillion and 40 Million Jobs to US Economy. Therefore, it is clear to see the importance of intellectual property within the economy of the [...]

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