State of Innovation

Patents and Innovation Economics

Innovation and the Obama Administration

The Obama administration has released a white paper outlining a strategy to encourage innovation and thereby stimulate the economy, entitled “A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs. ”  According to President Obama, “The United States led the world’s economies in the 20th century because we led the world in innovation.”  The first step in solving a problem is identifying the cause and the Obama administration has nailed it on the head.

While I do not agree with all the suggestions in the paper, it is a good start – please read the full report.  I am going to highlight some of the most important points.  The Obama administration, unlike the Bush administration, has recognized the importance of the patent system, particularly the Patent and Trademark Office’s role in encouraging innovation.  The report states:

Protect intellectual property rights. Intellectual property is to the digital age what physical goods were to the industrial age. We must ensure that intellectual property is protected in foreign markets and promote greater cooperation on international standards that allow our technologies to compete everywhere. The Administration is committed to ensuring that the United States Patent and Trademark Office has the resources, authority, and flexibility to administer the patent system effectively and issue high-quality patents on innovative intellectual property, while rejecting claims that do not merit patent protection.

This is encouraging, however other parts of the report appear to support the present patent reform proposals which will emasculate patent holder’s rights.

The paper points to a number of indications that US innovation has been stagnant.  One example I find particularly interesting is, “The United States once led the world in broadband deployment, but now that leadership is in question.  Wireless networks in many countries abroad are faster and more advanced than our own.”  Another interesting example in the report is, “Over the last four decades, Federal funding for the physical, mathematical, and engineering sciences has declined by half as a percent of GDP (from 0.25 percent to 0.13 percent) while other countries have substantially increased their research budgets.”

The report explains that:

Innovation is essential for creating new jobs in both high-tech and traditional sectors. In recent years, innovation has led to new jobs in high-tech and advanced manufacturing sectors as diverse as aerospace, nanotechnology, life sciences, and alternative energy. At the same time, innovations ripple through the economy, creating jobs for workers installing broadband networks, manufacturing biopharmaceuticals, and building advanced infrastructure.

As an example of the importance of innovation, the paper discusses the semiconductor industry in the 1980s.  It states:

In the 1980s, the U.S. semiconductor industry lost its market share to Japanese competitors. But then it innovated its way back, replacing the old jobs in the dynamic random-access-memory (DRAM) business with jobs producing microprocessors, digital signal processors, microcontrollers, and automotive semiconductors. Companies like Intel, Texas Instruments, and Motorola invested and succeeded, creating better jobs for hundreds of thousands of Americans. Throughout this shift to higher-value-added jobs, the total number of U.S. jobs in the industry held constant.

Having identified the problem, lack of innovation, the report deals with the question of what government’s role should be in encouraging innovation.  It states, “historical experience in this country and others clearly indicates that governments who try to pick winners and drive growth too often end up wasting resources and stifling rather than promoting innovation.”  The administration suggests, “The true choice in innovation is not between government and no government, but about the right type of government involvement in support of innovation.”  I agree with the assessment.  Clearly, anarchy does not result in innovation.  Government policies that protect innovators’ rights to their physical and intellectual labor are critical to encouraging innovation.

The report suggests that, “It is imperative to create a national environment ripe for entrepreneurship and risk taking that allows U.S. companies to be internationally competitive in a global exchange of ideas and innovation.”  The paper advocates increasing R&D.  In order to increase private R&D they want to make the research and experimentation tax credit permanent.

Another major issue to many high tech companies is increasing the number of H-1B visas.  This suggestion has been included in the report.  This shows that the administration has been listening to the high technology community.

While I do not agree with all the suggestions in the white paper, it is encouraging to see that the federal government has recognized that innovation is critical to the US economy.  The paper is clearly a political document and includes suggestions that promote President Obama’s agenda despite the fact that they have nothing to add to the innovation of the US.  Despite this the report is an excellent start. The last administration never seemed to understand the importance of innovation and actively worked against it.  We can only hope that the people behind this report will have increasing influence on President Obama.

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September 23, 2009 - Posted by | -Economics, Innovation, Patents, Uncategorized | , , , , ,

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