Bloomberg Innovation Index is Latest Sign US Innovation Economy is in Dire Straits

By Steve Brachmann
January 25, 2018

Bloomberg Innovation Index is Latest Sign That United States' Innovation Economy is in Dire Straits

On Monday, January 22nd, Bloomberg published an article discussing the results of the 2018 Bloomberg Innovation Index, an annual ranking of innovation economies from across the world which the business news publication has released for six years. For the first time since the inception of the Bloomberg Innovation Index, the United States was ranked outside the top 10 in the list, ranking 11th out of the 50 economies in the index after having placed 9th in the 2017 version of the index. This latest dip in the standing of the United States’ innovation economy is simply the most recent sign that there are significant issues posed by the current intellectual property regime in this country.

The Bloomberg article cited a few areas of weakness which caused the position of the U.S. to decline compared to its ranking on the index last year. Two categories where the country lost significant points include post-secondary, or tertiary, education-efficiency, which is a measure of new science and engineering graduates in the labor force, as well as value-added manufacturing, a measure of the value of manufactured goods when compared against the cost of inputs. According to the report, the United States did see an improvement in its productivity score on the index.

Unfortunately, by most indications, inventors in the United States can continue to expect the innovation environment to continue to slide in the immediate future. The Bloomberg article quotes Robert D. Atkinson, president of the Information Technology and Innovation Foundation, as saying that the downward trend of America’s innovation economy is likely to continue without policies on tax incentives for research and development or better funding for research and commercialization initiatives.

This is not the first time in recent memory that the United States has seen its stature as an innovation economy drop significantly. The 2017 U.S. Chamber of Commerce IP Index was the first time in the five years of that survey that the United States slipped from its vaunted position as the top-ranked country in terms of patent rights. Last year, the U.S. dropped from first-place all the way to tenth to pull even with Hungary, a former Soviet bloc state.

Many expect the next edition of the Chamber of Commerce’s IP Index, which is due out on February 8th, to similarly show that the past year has not been a banner one in terms of governmental efforts toward supporting protections for innovation.

Specific key weaknesses cited by the Chamber’s 2017 study include a patent opposition system adding substantial cost and uncertainty for patent owners as well as a narrow interpretation of the patentability of innovations in the biotech and computer sectors compared to international standards. The U.S. Supreme Court has a great opportunity to address the key weakness regarding the patent opposition system if it rules the Patent Trial and Appeal Board (PTAB) unconstitutional in its upcoming decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, but that decision will come out too late to impact the country’s rank on the 2018 IP index.

Given the factors behind the United States’ dwindling position among the top innovation economies in the world, it’s disappointing to see at least one tech giant actively advocate against any U.S. improvement, at least in terms of the education level of the national labor force.

Google has been the public face of efforts to push further patent reforms that would only continue to weaken the patent system. Recently, however, the Internet services titan has widely publicized the results of several in-house studies showing the company does not value a STEM education among its employees as much as it does soft skills like empathy and emotional intelligence. Google’s position against STEM education comes despite statistics from the U.S. Bureau and Labor Statistics that show that occupations requiring a STEM education paid median wages which were more than twice the median wage earned by all workers. Given that one of the factors bringing down the position of the United States in the recent Bloomberg index was a lack of science and engineering graduates in the workforce, Google’s de-emphasis of STEM education seems to be very short-sighted.

Another trend pointed out by the recent Bloomberg Innovation Index is the slow rise of the innovation economy in China which has shown signs of improving just as the United States continues to be unable to address key IP issues. China climbed two rank positions in the most recent version of the Bloomberg index, up to 19th from 21st the previous year. One of the growing strengths cited as a reason for China’s improved position is a higher proportion of science and engineering graduates in the labor force. An increasing number of patents owned by domestic companies such as smartphone maker Huawei Technologies was another contributor to China’s improved standing this year.

The proportion of STEM graduates entering the workforce is not the only area of innovation policy where China serves as a photo negative to the current IP regime in the U.S. At the same time that Supreme Court case law has restricted the patentability of software and business method patents, China has been relaxing the examination guidelines for such innovations to increase the chances that they can be patent-protected. While this country’s political leadership in Washington has resorted to deriding plaintiffs in patent infringement proceedings, Chinese President Xi Jinping has been stepping up his rhetoric against infringing parties.

The Bloomberg index’s point on the increased patent portfolio owned by Huawei further highlights the stagnation of the innovation economy currently being seen in the United States. Huawei’s patent portfolio has largely been amassed in recent years as the company filed nearly 8,000 patent applications between 2015 and 2016. As a result of its increased patent filing activities, Huawei reports that it holds more than 15 percent of standard essential patents (SEPs) related to 4G Long-Term Evolution (LTE) wireless communications. One recent working paper on global patent royalties in the mobile phone space indicated that Huawei’s patent portfolio may be helping it earn 30 percent of all patent royalties earned by Chinese firms. By contrast, the U.S. tech elite hasn’t altered much in recent years, featuring many of the usual suspects such as Google, Apple, Facebook and other well-entrenched firms who benefit from weakened patent enforcement rights. These companies seek to ensure their market dominance by supporting lobby institutions like the High Tech Inventors Alliance (HTIA) all while paying lip service to improved patent quality. In the context of the Bloomberg Innovation Index, what should be clear is that the patent reform efforts of the past few years have done much to hurt America’s current innovation economy.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 10 Comments comments.

  1. Joachim Martillo January 26, 2018 3:35 am

    It is no exaggeration to assert that the anti-patent mafia is tearing the heart out of the US political economic system.

    The Significance of Patents in US Economic Development

  2. Anonymous January 26, 2018 6:27 am

    It seems to me that deficiencies in IP law are only one small part of the equation. I have observed from the R&D laboratory of our company (and confirmed to me by its head) that most Americans don’t want to do science and technology, because there’s no money in it. Americans would much rather be investment bankers, hedge fund managers, doctors, dentists, etc. Just look at the names of your USPTO Examiners! As a result, our laboratory has something like 23 different nationalities. It works very well.

    Now this is good to some extent, because it means that people come into science and technology because this is what they really want to do, not as a route to a bigger paycheck. However, it means that US education is falling down on the job of encouraging interest in science and properly educating scientists and technologists. The anti-science bias of the current Administration cannot be helpful. We badly need a change of direction. At the moment, I cannot see us getting it.

  3. angry dude January 26, 2018 10:22 am

    Anonymous@3

    So Maria is bitching about the importance of science and lack of young people with advanced scientific and technical knowledge… blah blah blah

    What she forgets to mention is how many young people literally ruined their careers and lives by coming to study for PhD in hard sciences at top American universities (including Johns Hopkins where she once was a professor before her own career skyrocketed to MIT..)
    Not everyone is as lucky as her

    And she never even mentioned independent inventors, small “garage” startups and US Patent System as (used to be) foundation for american economic and technological lead

    Tells you something – she is in stratosphere, she couldn’t care less about the rest of us, peons (with PhDs)

  4. Anonymous January 26, 2018 10:27 am

    Could this be interpreted to just mean that the U.S. no longer considers certain innovations as innovative or valuable enough to justify patent rights, whereas some countries continue to do so?

    A comparataive analysis of the economic value of the denied patent rights in the U.S. and elsewhere could shed light on whether the U.S. approach makes economic sense globally.

  5. angry dude January 26, 2018 10:31 am

    Anonymous@2

    “Dude, do you know what PHD stands for ?

    Piled Higher and Deeper”

    That’s what one of (Maria’s own or someone else’s – don’t remember at this point) senior PhD students or postdocs told me when I just came young and green to study hard sciences in USA

  6. Night Writer January 28, 2018 9:43 pm

    An awful lot of patent attorneys are failed Ph.D. students in engineering or a science. For myself, I think there needs to be massive reform in graduate programs. What they try to get you to do is spend time working on their research grant. Very few people are encouraged to follow their own ideas and develop their own work.

  7. Anon January 29, 2018 7:55 am

    Night Writer,

    I would agree with you (regarding massive reform), but for a different reason: academia has become a cesspool of “reflect back” what the established academics want to hear.

    The idea of “challenging authority” that one may THINK would apply in the sphere of learning is not accepted if the authority being challenged is the authority of the established academia itself. Established academia have a captive audience far too prone to indoctrination and far too little critical thinking is actually being taught.

    Having considered a career in academia – and rejecting that notion because of what I saw – I returned years later (for another degree) and saw more of the same.

    As you have written about publications of the academics being no more than “vanity press,” I am sure that you understand this point only too well.

    I would hazard a view that in the sciences, this tendency (while perhaps less “in your face”), exists as it does in the “softer” realms.

  8. angry dude January 29, 2018 12:52 pm

    Night Writer@7

    “failed Ph.D. students” needs a little clarification for general lame public

    In this particular context “failed” means someone who finished PhD degree but could not find any job in his/her field requiring PhD degree which often means no job at all cause those folks are automatically presumed to be overqualified for most positions

    this happens much more often than students dropping out of PhD program before graduation

    Considering the fact that those “failed” PhD students spend 4 to 6 best years of their lives to obtain that worthless PhD degree in hard sciences it just adds insult to injury…

  9. John Swieter January 29, 2018 11:54 pm

    I see plenty of innovation. Especially here in Texas. We are surrounded by it. Sadly, the disconnect with finding capital to assist in innovation is stuck in the traditional hubs of Silicon Valley, Boston and beyond. Even Austin is way over rated. The elitist attitudes and difficulty in getting great ideas and innovation in front of funding sources and resources to help opportunities thrive is vastly misaligned. There needs to be a realignment and focus away from the so called “centers of innovation” towards other major markets. I’m so “over” seeing lame ideas getting traction and funding from the power brokers. It takes too much time and creative capital to navigate through the quagmire of innovation channels only to see great ideas die or never see the light of day.