U.S. GDP to Show the Value of IP


Joseph Schuman
April 26, 2013
Patent System Research and Development

Intellectual property may finally be getting the economic respect it deserves.

The U.S. Bureau of Economic Analysis plans to start recognizing research-and-development spending as a fixed investment -- and thus a contributor to gross domestic product -- when the initial draft of the current quarter’s economic scorecard comes out in July.

This is a big deal.

The last time the BEA made such a comprehensive revision of its periodic look at total output in the country’s goods and services was 2009. The government chose to make the upcoming changes – which will include better ways of tracking pension-benefit transactions and other improvements – in order to make U.S. GDP more accurately portray how the economy is evolving and more consistently compare with the GDP of other nations.

The difference could be significant. The BEA has already been following intellectual property (IP) contributions in what it calls a satellite account, and says the treatment of R & D as an investment could increase inflation-adjusted GDP by as much as 3 percent a year. (The changes will retrospectively be made to data going back to 1929, so don’t expect July headlines to suddenly show an artificial IP-related bump in economic growth.)

But Patent Truth is happy to point out this World Intellectual Property Day that even more significant is the recognition that when companies risk money, time and labor in R & D they are creating something of value. It is recognition of how much we have become a knowledge-based economy, that an idea can be worth a tremendous amount to its inventor, the people it benefits and the nation where it was spawned. Patented technologies and other ideas are now seen as fixed assets, just as factories and equipment are.

The BEA, following new international guidelines that were heavily influenced by Washington, is defining R & D as “creative work undertaken on a systematic basis to increase the stock of knowledge, and use of this stock of knowledge for the purpose of discovering or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production.”

In other words, the agency added in a recent report, the new iteration of GDP will “allow users to better measure the effects of innovation and intangible assets on the economy.”

This will also help the government track how much the sales and purchases of patents and other R & D assets figure into overall export and import totals. (The BEA currently wraps such transactions into its accounting of cross-border royalties and license fees.)

Though the reclassification isn’t expected to affect overall export and import numbers, the newly highlighted international worth of patents could make clearer how much the U.S. economy is promoted by protection of intellectual property.

The IP industries’ exports bring billions of dollars to the U.S. economy every year. And as Senate Judiciary Committee Chairman Patrick Leahy noted in marking World Intellectual Property Day, even without taking into account BEA’s planned statistical changes, IP-related industries are generating 35 percent of U.S. GDP.

The BEA said it will report in September the results of the revisions.