How much innovation is embodied in a new patent

The FRED Blog has discussed how patents for new processes, machines, products, designs, and even plants grant intellectual property rights to their inventors. They also generate income to the patent holders and reflect the scope of international innovation efforts. Today, we examine a related question: How much innovation is embodied in a new patent?

The FRED graph above shows the annual number of patents granted by the U.S. Patent and Trademark Office between 1992 and 2020. There are four types:

1. Utility patents (blue area): invention, discovery, or any new and useful improvement of a process, machine, manufactured article, or substance.
2. Design patents (red area): invention of a new, original ornamental design for an article of manufacture.
3. Plant patents (green area): invention or discovery and asexually reproduction of any distinct and new variety of plant.
4. Reissue patents (purple area): replacement of an original patent that was defective and couldn't be corrected.

The graph plots those numbers as stacked areas to compare how frequently each type of patent is issued and to show their growth over time. Utility and design patents are the most frequently issued types of patents and make the numbers of plant and reissue patents very difficult to see.

Recent research by Aakash Kalyani at the St. Louis Fed examines the potential relationship between the number of patents issued and overall economic productivity gains in the US between 1930 and 2010. His analysis shows that the number of newly issued patents grew rapidly after 1980, but productivity did not grow rapidly. An earlier post highlighted this slowdown in recorded productivity growth.

Further analysis of patent information suggests that most patents did not embody the kind of substantial innovation that could boost productivity growth. In other words, the number of patents by itself does not tell the full story of innovation and its economic benefits.

For more about this and other research, visit the website of the Research Division of the Federal Reserve Bank of St Louis, which offers an array of economic analysis and expertise provided by our staff.

How this graph wase created: Search FRED for and select "U.S. Granted Patents: Utility Patents Originating in the United States." In the "Edit Graph" panel, use the "Add Line" tab to search for and add "U.S. Granted Patents: Design Patents Originating in the United States." Repeat this last step to add two more series: "U.S. Granted Patents: Plant Patents Originating in the United States" and "U.S. Granted Patents: Reissue Patents Originating in the United States." Last, use the "Format" tab to select "Graph type: Area" and "Stacking: Normal."

Suggested by Diego Mendez-Carbajo.

Suggested by Diego Mendez-Carbajo.