Race and Gender in the USPTO: Schuster’s Hard Data for Hard Issues

[I asked some of my RAs to write guest posts this summer, lightly edited by me.  This one is by Jennifer Black, a 3L at Villanova University Charles Widger School of Law]

Intellectual property rights are just that: rights.

Much like other rights, however, they have been unequally granted to people based on factors outside of their control throughout our country’s history. Intellectual property is a means for upward mobility of individuals who, through their own ingenuity, creativity, or otherwise, contribute something of value to our society. It is this exchange of benefits that the patent system is built upon. However, when certain individuals are less likely to reap the rewards of their inventions, they are both disincentivized from creating as well as from engaging with the patent system. Although the extent of these biases is yet unknown, research regarding the subject has been conducted with the intent of identifying and remedying inequity.

The scope of this inequity is difficult to comprehend except by collecting, analyzing, and comprehending the data. Mike Schuster and his coauthors did just that in his article, An Empirical Study of Patent Grant Rates as a Function of Race and Gender (published version in the American Business Law Journal), which examines the patent granting rates as a function of inventors’ races and genders. As scientists and engineers, patent practitioners and examiners will undoubtedly appreciate the amount and quality of his data.

Racial disparities in healthcare innovation in the time of COVID-19

By Nicholson Price, Rachel Sachs, Jacob S. Sherkow, and Lisa Larrimore Ouellette

In previous posts, we have explored how structural racism contributes to disparities in COVID-19 cases and deaths and in access to COVID-19 treatments and preventatives. Legal institutions have also been complicit in creating a healthcare innovation system in which those receiving scientific and medical education are far from representative of the U.S. public. The resulting disparities by race, gender, and class raise substantial problems for both equity and economic growth—but these inequalities receive too little attention from most health and innovation scholars, ourselves included. This week, we examine how the COVID-19 pandemic has highlighted and exacerbated racial disparities in three slices of the healthcare innovation ecosystem: medical education, medical patenting, and clinical trials.

How can the government improve access to COVID-19 preventatives and treatments for low-income Americans?

By Jacob S. Sherkow, Lisa Larrimore Ouellette, Nicholson Price, and Rachel Sachs

In the United States, one of the most important factors in receiving COVID-19 testing or treatment is access to insurance. But insurance—like other health innovations—is grossly and unevenly distributed. In particular, because of the way income and employment are distributed in the U.S.—and the country’s long-standing connection between income, employment, and insurance—Black Americans and other people of color remain vastly uninsured or underinsured, problems likely to be exacerbated by the COVID-19 pandemic. In this post, we look at how insurance policy—itself, a form of health innovation policy—has a racially disparate effect in the pandemic, with a particular focus on Medicaid.

Structural Racism and COVID-19

By Rachel Sachs, Jacob S. Sherkow, Lisa Larrimore Ouellette, and Nicholson Price

Over the past two weeks, the United States—already hit hard by the COVID-19 pandemic—has reckoned with another public health crisis: police violence against Black Americans. The protests and outrage galvanized by the killing of George Floyd by a Minneapolis police officer have renewed public attention to the pervasiveness of racial inequality throughout the United States. With this backdrop, it is hard to ignore the disproportionate impact COVID-19 has had on Black Americans, who are dying at a rate twice as high as their share of the population.

In this blog post series, we have focused on how innovation and health laws have exacerbated the COVID-19 pandemic thus far, and how they can help spur development of affordable preventatives, diagnostics, and treatments. But we also think it is important to recognize how these laws and other legal institutions have often been complicit in creating the structural framework within which these racial disparities have persisted. In this post, we highlight the work of scholars who have focused on this issue and explain how structural racism contributes to disparities in COVID-19 cases and deaths, access to treatments among those who have been afflicted, and access to the most effective preventative interventions.

Erin McGuire: Can Equity Crowdfunding Close the Gender Gap in Startup Finance?

As I have previously explained, there is growing interest in gender and racial gaps in patenting from both scholars and Congress—which charged the USPTO with studying these gaps. But I don't think it makes sense to study these inequalities in isolation: patent law is embedded in a larger innovation ecosystem, and patents' benefit at providing a strong ex post reward for success comes at the cost of needing to attract funding to cover R&D expenses until patent profits become available. It may be difficult to address the patenting gap without also addressing inequalities in capital markets.

In particular, there is a large and well-documented gender gap in the market for early-stage capital. For example, this Harvard Business Review article notes that women receive 2% of venture funding despite owning 38% of U.S. businesses, and that even as the percentage of female venture capitalists has crept up from 3% in 2014 to 7% in 2017, the funding gap only widened. Part of the explanation—explored in the fascinating study summarized in the HRB piece—may be that both male and female VCs ask different kinds of questions to male and female entrepreneurs: in actual Q&A sessions, VCs tended to ask men questions about the potential for gains and women about the potential for loses, with significant impacts on funding decisions.

Economist Erin McGuire, currently an NBER postdoc, has an interesting working paper on one partial solution to this problem: Can Equity Crowdfunding Close the Gender Gap in Startup Finance? Non-equity crowdfunding through sites like KickStarter and Indiegogo have grown in popularity in the past two decades; equity crowdfunding differs in that funders receive shares in the company in exchange for their investments. The average equity crowdfunding investment is $810—over ten times the average investment on Kickstarter. Equity crowdfunding was illegal in the United States before the JOBS Act of 2012, which allowed equity crowdfunding by accredited investors in September 2013. McGuire hypothesized that the introduction of this financing channel—with a more gender-diverse pool of potential investors—as an alternative to professional network connections would have a greater benefit for female entrepreneurs.

How will the USPTO study gaps in patenting by women, minorities, and veterans under the new SUCCESS Act?

On Wednesday, President Trump signed H.R. 6758, the Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018 (SUCCESS Act). It states that the "sense of Congress" is that the United States should "close the gap in the number of patents applied for and obtained by women and minorities to harness the maximum innovative potential and continue to promote United States leadership in the global economy."

The USPTO has been charged with conducting a study that "(1) identifies publicly available data on the number of patents annually applied for and obtained by, and the benefits of increasing the number of patents applied for and obtained by women, minorities, and veterans and small businesses owned by women, minorities, and veterans; and (2) provides legislative recommendations for how to— (A) promote the participation of women, minorities, and veterans in entrepreneurship activities; and (B) increase the number of women, minorities, and veterans who apply for and obtain patents." Congress wants to receive a report on the study results within a year.

There is already great empirical work on gender and racial gaps in patenting, including the "lost Einsteins" work by Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen and Colleen Chien's Inequality, Innovation, and Patents. The USPTO could expand on this work, including by adding to its excellent collection of research datasets. Accurately quantifying the net benefits of increasing patenting by certain groups will be more difficult—especially if the agency follows Jonathan Masur's suggestions for improving its economic analysis—though the second half of the study doesn't depend on getting this number right.

The second half of the study—recommending how to promote entrepreneurship and patenting by women, minorities, and veterans—will require the USPTO to master a different strand of the empirical literature. I've spent some time digging into this work for my upcoming discussion group on Innovation and Inequality, and suffice it to say that there is robust debate about why certain groups are underrepresented in science, engineering, entrepreneurship, and patenting. (Though I haven't seen anything focused on veterans.) There's also increasing academic interest in these issues. For example, at the new Cardozo-Google Project for Patent Diversity, the goal is "to increase the number of U.S. patents issued to women and minorities," mostly by matching resource-constrained inventors with pro bono patent attorneys.

The USPTO is well positioned to bring new evidence to this debate, and I hope it will take this study as an opportunity to test some proposals in rigorous ways through actual field experiments. The agency has shown a wonderful willingness to experiment with pilot programs, but it could learn far more by, for example, randomly selecting only a subset of those opting in to the pilot and comparing their outcomes to those who opted in but weren't selected. (For a review of the literature on learning through policy randomization and some potential applications in patent law, see Part II of my Patent Experimentalism.) Such experimentation could be useful even for small questions, such as whether acceleration certificates (like those used as Patents for Humanity prizes) are useful at increasing pro bono volunteer work among the patent bar.

The SUCCESS Act seems like an exciting chance for the USPTO, and potentially for academics the agency collaborates with, so I look forward to seeing how they use this opportunity.