ECONOMIC REPORT OF THE PRESIDENT

Figure 5-10
Percent of Patent Applications by First Time
U.S. Patenters, 1976–2003
Percent of All Patents
Thousands of Patents
14
210
12
10
2003
180
150
8
First Time Patent
Applications (left axis)
120
6
4
New Patents Granted
(right axis)
90
60
2
30
0
1975 1980 1985 1990 1995 2000
Source: NBER Patent Database; U.S. Patent and Trademark Office; CEA calculations.
0
that patent are responsible for creating more jobs and shedding fewer jobs
than non-patenting firms (Graham et al. 2015). Given evidence of slowing
business dynamism and lower rates of entry by new firms discussed in the
previous section, these new findings would then suggest that the share of
patents by new firms is slowing over time. Figure 5-10 (left axis) graphs
the percent of patents by first-time patent applicants (many of which are
young or startup firms) from 1976 to 2003. While patenting has increased
over time, the percent of patents by first-time applicants has been declining
since the late 1980s, implying at the very least that the majority of the recent
increase in the overall number of patents in the U.S. economy is likely not
driven by first-timers.
The reasons behind the falling share of first-time patent applicants are
not well understood. It may be that there are economies to scale in patenting,
and so larger firms are patenting at a higher rate than startups. It may be
that younger firms are starting to rely on trade secrets rather than patents;
indeed, Png (2015) provides evidence that trade secrets may substitute for
patents in some industries. It may be that costs associated with litigation
disproportionately affect young firms (see Box 5-4 on Patent Litigation).
Strong institutions that protect property rights are an important
ingredient for fostering economic activity and entrepreneurial success
(Acemoglu, Johnson, and Robinson 2005; North and Weingast 1989). But
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