Guest Post: What We Said (and Didn’t Say) in the Berkeley Patent Study

Guest Post by Robert Merges, Pam Samuelson, and Ted Sichelman

In 2008, along with Stuart Graham (now Chief Economist at the USPTO) and Robert Barr (Executive Director of the Berkeley Center for Law &Technology), we conducted the most comprehensive survey to date on startup companies and patenting in the United States. Funded by the Ewing Marion Kauffman Foundation, our survey reported results on the drivers of patenting, the role of patenting in startup financing and the innovation process, and a number of other important areas. We have described initial results from the survey (here) and in a follow-up article (here). We also posted a three-part series on Patently-O on the survey (here, here, and here).

Since the publication of our articles, a number of commentators have drawn bold—and somewhat contradictory—inferences from our results. Former Chief Judge of the Federal Circuit, Paul Michel, and CEO of Tessera, Hank Nothhaft, stated in a New York Times op-ed that, "[A]ccording to our analysis of the data in the Berkeley Patent Survey, each issued patent is associated with 3 to 10 new jobs." Yet, Harold Wegner, a patent lawyer at Foley & Lardner who authors a popular e-mail distribution, contends that the USPTO's position that "prompt patent grants will stimulate innovation" and thus "create American jobs" is "in direct conflict" with the Berkeley Patent Study. According to Mr. Wegner, "the Berkeley Study questions showed that for many high technology areas patent grants played no role or a minimal role in stimulating innovation." From this inference, he concludes, that "A fortiori, prompt patent grants would be irrelevant" to stimulating innovation and, hence, creating American jobs. And, finally, Ronald Katznelson, an independent inventor active in the patent reform debates, states bluntly: "The Berkeley study is typical of other flawed 'scholarship' on patents by academics. They ask the wrong questions of the wrong people and draw wrong and counterfactual inferences. … The question that startup CEOs should have been asked is 'who are your investors and can we interview them for their reasons to invest in your startup?'"

We're writing this post because, as authors of the study, we feel obligated to dispel these and similar misunderstandings with four basic observations:

1. Our results solely concern U.S. startups. The vast majority of patents are filed and owned by established companies. More than half of all patents are awarded to foreign companies. Because U.S. startups use and are affected by the patent system in ways quite different from established and foreign entities, it is impossible solely from our data to draw conclusions about the general role of patents on innovation or jobs.
2. Even limiting the issue of jobs to those of U.S. startups, there is no principled way to determine from our data whether or not additional patents lead to additional jobs, much less the number of jobs created by each patent. Granted, we reported the average number of employees, including the percentage of engineers, at our respondent companies. But to reason that these positions were the direct result of the respondents' patent portfolios would be to ignore a host of other potential factors (e.g., first-mover advantage, other IP protection, management team quality, etc.) leading to those jobs. And there is no sound way using our data to remove these other potential effects so as to calculate the impact of patents on jobs.
3. It is misguided to conclude from our results that "for many high technology areas [executives reported that] patent grants played no role or a minimal role in stimulating innovation," that "prompt patent grants would be irrelevant" to stimulating innovation. First, as we said earlier, our study only applies to U.S. startup companies. Second, many executives—particularly those in the biotechnology and medical device industries—reported that patents provide strong or moderate incentives to innovate. In the very least, prompt patent grants for these companies would not be "irrelevant" to stimulating innovation. Last, our responses on the role of patents in the innovation process relates to the patent system as it is currently constituted. It could very well be the case that faster patent grants would significantly increase the role patents play in promoting innovation.
4. Ron Katznelson's contention that our study is typical of "flawed" academic scholarship—namely, because we failed to ask "who are your investors and can we interview them for their reasons to invest in your startup?"—overlooks several critical aspects of the study. First, before drafting the survey questions, we interviewed a number of investors informally and asked them "for their reasons to invest" in startups. (Unfortunately, our limited funding for this study did not allow us to conduct a large-scale survey of investors, but we hope to do so in the future.) Second, our survey specifically asked executives at startups to indicate whether their potential investors considered patents important to their investments. In this regard, our advisory board for the study included prominent venture capital firm partners, who worked closely with us in formulating the survey questions. As we explained at length in one of our articles (here), startups in all sectors we surveyed reported that patents were considered important by a sizable percentage of venture capital firms and other types of investors with whom they negotiated.

In the vein of our last observation, we hope that others will indeed read our articles (here and here, plus for background on the survey, see here) in detail and only report and rely upon the conclusions we draw in those publications. To make further inferences, especially without access to the underlying data in the study—which we cannot make publicly available due to confidentiality restrictions—will almost invariably lead to conclusions that are simply not supported by our data set.

In sum, we are grateful for the extended discussion and use of our study results—but, as the researchers who conducted the study—we hope that our results will not be stretched to unsupportable ends.

Robert Merges is the Wilson Sonsini Goodrich & Rosati Professor of Law at the University of California, Berkeley, School of Law. Pamela Samuelson is the Richard M. Sherman Distinguished Professor of Law at the University of California, Berkeley, School of Law. Ted Sichelman is an Associate Professor at the University of San Diego School of Law. Neither Stuart Graham nor Robert Barr played any role in the drafting this post.