Innovating Through the Years
From 1790 to 1853, the rate of invention was very low, as the U.S. economy was dominated by agriculture. Yet, patenting exploded in the Industrial Revolution starting in the mid 19th Century and lasting through the 1920s—a period characterized as the "golden age" of invention. With the onset of the Great Depression, the rate of invention plummeted from the 1930s to 1955, but there was a noticeable post-war rebound after major research breakthroughs in modern information technology were first made. The decade from 1974 to 1984 saw a precipitous decline in patenting, but since then, a post-industrial era of invention has begun and patent rates have steadily increased and remained near historic highs. Growth in patenting slowed immediately after the two most recent recessions but recovered thereafter; 2010 and 2011 saw large increases in both applications and grants.
Patents and Innovation
A patent prevents an inventor's valuable idea from being commercially implemented by a business rival without penalty. While individual patents vary greatly in their value, a typical technology firm may have patents worth more than half a million dollars each. Patents, as legal records of novel and useful ideas, help drive regional innovation and economic growth. GDP per worker (a measure of productivity) was $16,000 higher in metropolitan areas that developed more patents between 2007 and 2011—such as San Jose; Houston; Los Angeles; Rochester, New York; Raleigh, North Carolina; and Austin, Texas—than the average metropolitan area, compared to places with few patents—like El Paso, Texas; Youngstown, Ohio; Charleston, South Carolina; and Fresno, California. The differences are smaller but still significant after adjusting for other factors that affect productivity. High-patenting metropolitan areas also launch more publicly traded tech companies and generate more valuable from initial public offerings. This study finds that a low-patenting metro area would add $4,300 per worker to its economy each decade if it became a high-patenting metro area—adjusting for other factors that affect productivity growth.
What drives patenting?
During the industrial revolution most patent inventors were blue collar workers, but as technologies have become more complex, the importance of formal training in STEM (science, technology, engineering, and math) fields has increased. Consequently, metropolitan areas with a high share of STEM-educated workers—such as Corvallis, Oregon; Boulder, Colorado; San Francisco; and Ann Arbor, Michigan--develop patents at very high rates. Likewise, metropolitan areas with leading university research programs in STEM fields—like San Jose; Boston; Durham-Chapel Hill, North Carolina; and San Diego—also patent more frequently. Researchers in these programs not only train future inventors but also create companies based on their own inventions and collaborate with private companies. In fact, the more collaboration among metropolitan area inventors—measured by the number of inventors per patent—the more patents it produces. Finally, metropolitan area workers are more likely to patent if employed in the tech-sector rather than low-patenting industries like finance and health care, which helps explain why Manchester-Nashua, New Hampshire; Burlington, Vermont; and Rochester, Minnesota patent at such high rates compared to metro areas like Cleveland and Grand Rapids, Michigan.
An examination of patent ownership records reveals that International Business Machines (IBM) owned far more patents (41,560) granted by the USPTO from 2007 to March of 2012 than any other company. Since 1976, and possibly earlier, IBM has been one of the largest owners of patents granted each year by the USPTO. In 1993, it surpassed General Electric (GE). The next three top firms were also in information-technology sector: Microsoft, with 16,006, Intel, with 11,328, and Hewlett-Packard, with 10,573. GE was fifth, with most of its patents in power systems technology. Together, the top 5 accounted for 11 percent of all patents invented in the United States over the period that were assigned to owners. Communications was the most common patent technology for five of the top 25 companies, including Cisco, AT&T, Broadcom, Honeywell, and Qualcomm. Two automobile companies—GM and Ford—were in the top 20, along with the aerospace company Boeing. Other non-IT firms in the top 25 included Applied Materials, Procter & Gamble, Xerox, 3M, Du Pont, and Boston Scientific. The University of California system was the only non-profit organization to make it into the top 25, with 2,896 patents—56 percent of which were funded by the federal government.