Intellectual Property and the U.S. Economy: Industries in Focus

Innovation – the process through which new ideas are generated and successfully introduced in the marketplace – is a primary driver of U.S. economic growth and national competitiveness. 1 Likewise, U.S. companies’ use of trademarks to distinguish their goods and services from those of competitors represents an additional support for innovation, enabling firms to capture market share, which contributes to growth in our economy. The granting and protection of intellectual property rights is vital to promoting innovation and creativity and is an essential element of our free-enterprise, market-based system. Patents, trademarks, and copyrights are the principal means used to establish ownership of inventions and creative ideas in their various forms, providing a legal foundation to generate tangible benefits from innovation for companies, workers, and consumers. Without this framework, the creators of intellectual property would tend to lose the economic fruits of their own work, thereby undermining the incentives to undertake the investments necessary to develop the IP in the first place. 2 Moreover, without IP protection, the inventor who had invested time and money in developing the new product or service (sunk costs) would always be at a disadvantage to the new firm that could just copy and market the product without having to recoup any sunk costs or pay the higher salaries required by those with the creative talents and skills. As a result, the benefits associated with American ingenuity would tend to more easily flow outside of the United States.

IP is used everywhere in the economy, and IP rights support innovation and creativity in virtually every U.S. industry. While IP rights play a large role in generating economic growth, little attention has been given to identifying which industries produce or use significant amounts of IP and rely most intensively on these rights. This report begins such an investigation by developing several industry-level metrics on IP use and employing these measures to identify a set of the most IP-intensive industries in the U.S. economy. To develop the industry-level metrics discussed, several databases were used, some of which (for the patent and trademark analyses) are publicly available. 3 In the future, more user-friendly sets of these patent and trademark data will be made available on the U.S. Patent and Trademark Office (USPTO) website.

This report employs USPTO administrative data to identify the industries that most intensively use the protection offered by patents and trademarks. For copyrights, the report identifies the set of industries primarily responsible for both the creation and production of copyrighted materials. The report then uses standard statistical methods to identify which American industries are the most patent-, trademark- and copyright-intensive, and defines this subset of industries as “IP-intensive.” Using data collected from sources across the U.S. government, the report examines both the important trends and economic characteristics of these highly IP intensive industries and their meaningful contributions to the U.S. economy. There are several important findings contained in the report. According to the analysis in this report, the direct and indirect employment in these industries is substantial: Direct employment in the subset of most IP-intensive industries identified in this report amounted to 27.1 million jobs in 2010, while indirect activities associated with these industries provided an additional 12.9 million jobs throughout the economy in 2010, for a total of 40.0 million jobs, or 27.7 percent of all jobs in the economy.

Because all U.S. industries rely on IP to some degree, the statistics reported here for the sectors that use IP most intensively may tend to under-represent the broad impact of IP in the American economy. Moreover, the statistics reported here may not fully reflect the long-run economic benefits and costs of IP in promoting innovation and productivity growth. For example, while this report shows that employment in trademark-intensive industries is almost six times as great as employment in patent-intensive industries, it may be that the kinds of innovation protected by patents play a larger role in driving the long-run growth of productivity throughout the economy. This report does not contain policy recommendations and is not intended to directly advance particular policy issues. By developing new quantitative measures of IP-intensity by industry, the report aims to promote a better understanding of the industries where IP plays a particularly important role. Although policy issues are not discussed in this report, as a general matter, we note the importance of achieving a balanced system of IP rights that protects inventors and creators from unlawful use of their work while encouraging innovation, competition, and the markets for technology in which IP is transacted. Importantly, using IP rights to support innovation and creativity means recognizing the public domain and limits, such as fair use, which balances the public’s right to use content legally with IP owners’ interests.

• The entire U.S. economy relies on some form of IP because virtually every industry either produces or uses it.
• By focusing on relevant data and various statistical measures, this report identified 75 industries (from among 313 total) as IP-intensive. These IP-intensive industries directly accounted for 27.1 million American jobs, or 18.8 percent of all employment in the economy, in 2010. 4 A substantial share of IP-intensive employment in the United States was in the 60 trademark-intensive industries, with 22.6 million jobs in 2010. The 26 patent-intensive industries accounted for 3.9 million jobs in 2010, while the 13 copyright-intensive industries provided 5.1 million jobs. 5
• IP-intensive industries accounted for about $5.06 trillion in value added, or 34.8 percent of U.S. gross domestic product (GDP), in 2010.
• While IP-intensive industries directly supported 27.1 million jobs either on their payrolls or under employment contracts, these sectors also indirectly supported 12.9 million more supply chain jobs throughout the economy. In other words, every two jobs in IP-intensive industries support an additional one job elsewhere in the economy. In total, 40.0 million jobs, or 27.7 percent of all jobs, were directly or indirectly attributable to the most IP-intensive industries.
• Due primarily to historic losses in manufacturing jobs, overall employment in IP-intensive industries has lagged other industries during the last two decades. While employment in non-IP-intensive industries was 21.7 percent higher in 2011 than in 1990, overall IP-intensive industry employment grew 2.3 percent over this same period. Because patent-intensive industries are all in the manufacturing sector, they experienced relatively more employment losses over this period, especially during the past decade. While trademark-intensive industry employment had edged down 2.3 percent by the end of this period, copyright-intensive industries provided a sizeable employment boost, growing by 46.3 percent between 1990 and 2011.
• Between 2010 and 2011, the economic recovery led to a 1.6 percent increase in direct employment in IP-intensive industries, faster than the 1.0 percent growth in non-IP-intensive industries. Growth in copyright-intensive industries (2.4 percent), patent-intensive industries (2.3 percent), and trademark-intensive industries (1.1 percent) all outpaced gains in non-IP-intensive industries.
• Jobs in IP-intensive industries pay well compared to other jobs. Average weekly wages for IP-intensive industries were $1,156 in 2010 or 42 percent higher than the $815 average weekly wages in other (non-IP-intensive) private industries. This wage premium nearly doubled from 22 percent in 1990 to 42 percent by 2010. Patent- and copyright-intensive industries have seen particularly fast wage growth in recent years, with the wage premium in patent-intensive industries increasing from 66 percent in 2005 to 73 percent in 2010, and the premium in copyright-intensive industries rising from 65 percent to 77 percent.
• The comparatively high wages in IP-intensive industries correspond to, on average, the completion of more years of schooling by these workers. More than 42 percent of workers aged 25 and over in these industries in 2010 were college educated, compared with 34 percent on average in non-IP-intensive industries.
• Merchandise exports of IP-intensive industries totaled $775 billion in 2010, accounting for 60.7 percent of total U.S. merchandise exports.
• Data on foreign trade of IP-intensive service-providing industries is limited; however, this report does find that exports of IP-intensive service-providing industries accounted for approximately 19 percent of total U.S. private services exports in 2007.

1 National Economic Council et al. 2011, 7.

4 Using data provided by the Bureau of Labor Statistics’ Industry Productivity program, employment covers the sum of payroll jobs, self-employed persons, and unpaid family workers, and totaled 144.2 million jobs in 2010. Because the unit of measure is jobs (as opposed to persons) and because about 5 percent of all workers have more than one job, the total number of jobs is greater than the 139.1 million employed persons in 2010, as estimated from the Current Population Survey (www.bls.gov/cps).

5 Because several industries were found to intensively use both patents and trademarks or copyrights and trademarks, total IP-intensive industry employment is less than the sum of patent-, trademark- and copyright-intensive industry employment.