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Robert J. Sadowski |

Senior Economic Analyst

Robert J. Sadowski

Bob Sadowski is a senior economic analyst in the Research Department of the Federal Reserve Bank of Cleveland. His work focuses on monetary policy and regional economics.

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03.14.08

Economic Trends

Patent Trends in the Fourth District

Robert J. Sadowski

Education and innovation contributed more to income growth at the state level than other potential factors, according to research conducted at the Federal Reserve Bank of Cleveland. Educational attainment, for example, increased a state’s average per capita personal incomes relative to other states by 8 percent, but innovation—measured by patents per capita—boosts personal income nearly 20 percent. Given the importance of innovation to economic performance, we investigate patenting activity in the Fourth District and compare District trends with those across the nation. 

Until the mid-1990s, patenting in the Fourth District exceeded that in the U.S. on a per capita basis.  However, in the late 1990s, patenting rates began to accelerate across the nation and within the District, but the acceleration at the national level was greater.  One industry—electronics—is primarily responsible for the surge. Because electronics is so highly concentrated in a few geographic areas—primarily California, Texas, and the Boston to New York corridor—the gap in patents per capita between the nation and the Fourth District has widened over time.  If patents in the electronics industry are excluded from the comparison, the Fourth District actually has more patents per capita than the United States as a whole from 1975 through 2003. (The curiously steep decline in patents during the late 1970s was brought about by budget constraints at the United States Patent and Trade Office (USPTO). These constraints had caused a three-month patent printing backlog by the end of 1979.) 

Electronic patents began trending upward in 1984.  Nationally, the number of electronic patents issued from 1975 through 1983 was relatively flat, averaging 9,900 per year.  This average increased to 18,400 between 1984 and 1997 and climbed even further to 48,000 from 1998 through 2003.  Growth was nonuniform across different subgroups of the industry. The share of patents in computer hardware and peripheral equipment increased from 15 percent between 1975 and 1983 to 30 percent between 1998 and 2003, while at the same time patents for instrumentation declined from 43 percent to 28 percent.  The share of patents in communications equipment and electronic components held steady at about 38 percent between 1975 and 2003.  

From 1984 to 2003, the nation’s average annual per capita growth in electronic patents exceeded that of the Fourth District by two percentage points.  Further, 36 percent of all patents issued nationally were in electronics compared to 20 percent in the District.  California led the nation in electronic patents, having garnered 25 percent of those issued between 1975 and 2003.  Other leading states include New York, Texas, Massachusetts, and New Jersey.  Among companies, IBM was assigned the highest number of electronic patents with almost six percent of the total.  Other high-patenting companies include Motorola, Eastman Kodak, Xerox, and AT&T.  Within the Fourth District, inventors living in the southwestern area—from Dayton south through Lexington—were awarded the highest number of electronic patents.  The Cleveland-Akron area received the second-highest number, followed by the Pittsburgh metro area.  Leading District organizations for electronic patents include Westinghouse, General Electric, Lexmark, Proctor & Gamble, and the U.S. Air Force.

Electronic patents are highly concentrated in 18 counties across the United States.  These counties—call them the high-tech counties—are found primarily in the five states cited earlier.  Inventors living in the high-tech counties were awarded 39 percent of all electronic patents issued between 1975 and 2003, while inventors residing in the 168 counties of the Fourth District received 3.6 percent.  On a per capita basis, electronic patenting in the high-tech counties stood at 81 per 10,000 residents compared to 14 in the District and 17 in the remainder of the United States. 

Fourth District patenting activity remains vigorous.  As mentioned earlier, the District has a higher per capita patent rate than the nation across the entire 1975–2003 period when electronics industry patents are excluded from the comparison.  Although the District lags the U.S. average in electronics patents, it nonetheless remains highly competitive in innovation across most broad-based industry groups, especially chemicals and machinery.