Technical Report No. 13

Policy & Patents:

Strategic Economic Development and the Changing Structure of Patent Activity

in West Virginia

Jay D. Gatrell and Frank J. Calzonetti

Since the publication of Michael Porter’s (1990) influential Competitive Advantage of Nations, cluster-based economic development strategies have become a popular framework for developing geographically focused strategic economic development plans (Connecticut Technology Council 1997; Department of Commerce 1997; Roberson 2000; Rowland 1998).   The combined importance of geography and technological specialization has led policymakers to focus attention on defining and benchmarking the economic development performance of key industries (Kaufman et al. 1994; Tornatzky et al. 1998).  In West Virginia, the cluster approach has been adopted by the West Virginia Science and Technology Advisory Council (1998) to identify ‘technology’ clusters, and to unlock the dynamics of high tech economic development (Calzonetti and Gatrell 2000).  This technical report examines the changing structure of patent activity over the past three decades in West Virginia (see Chart 1).

Chart 1

As this research demonstrates, the changing patent activity in West Virginia is steadily shifting away from traditional economic activities, such as energy extraction and petro-chemicals.   In the process, a new geography is emerging that suggests a diminished role for the state’s most prominent knowledge producing region, the Kanawha Valley (Kanawha and Putnam counties) in the future.   For these reasons, the trajectory of patent productivity should be used to inform a cluster-based economic development strategy that enhances West Virginia's economic development.

Patents & Innovation

Patents are the most efficient and reliable data infrastructure available to innovation researchers (Ceh 1997, Calzonetti, Allison, and Gatrell 1999; Calzonetti and Gatrell 1998; Patel and Pavitt 1991).  However, the reliability of patents, as an absolute metric of abstract and concrete innovation, is unclear.  That is, do patents measure "meaningful innovation," "inventiveness," or "technological change"?   In each of these cases, the answer is partially.  What then does the ‘patent’ represent?  In technical terms, a patent confers "the right to exclude others from making, using, offering for sale or selling the invention throughout the United States or importing the invention into the United States under 35 U.S.C. 120, 121 or 365(c)" (United States Patent and Trademark Office 2000).  While patents do document the development of new and useful processes, machines, goods, and material compositions, patent data has several inherent limitations.

Moment in a Wider Process

Patents do not necessarily translate into direct and substantive change within a technological area or specific industry (Feldman 1994; Gatrell 1999).   In fact, many patents do little more than testify to a wider collection of research and development (R&D) efforts within and between firms.  In many cases, they have little chance of being fully integrated into existing production systems as is.  Hence, the innovation process does not begin or end with the awarding of a patent.   Consequently, patents measure only one moment in a wider process that is supported by existing firm and often community-based innovation infrastructures.  Therefore, observed patent activity not only documents change, but also implies the presence or lack thereof, of a wider set of tangibles and intangibles.

Technological Scope of Patentable Technologies

As a metric of innovation, the patent is also limited by the scope of potentially patentable innovations.   That is, not all technological innovations or inventions qualify for patent protection.  In the case of many information-based industries, such as software, technological innovations do not take the form of traditionally patentable "processes" or material "products."  Consequently, many digital technologies are not afforded patent protection. Instead, many high tech firms must seek protection under a less stringent copyright law.   While lawmakers have failed to reform patent law to reflect the changing economy, Congress has endorsed the Digital Millennium Copyright Act (P.L. 105-304) and the Sonny Bono Copyright Term Extension Act (P.L. 105-298). Yet, much of the high tech sector remains unprotected.

Strategic Limitations

While many firms, institutions, and individuals seek patent protection for their inventions - not all do.  Since the patent awards the holder a ‘negative right’ to exclude, organizations may choose not to patent because the legal scope of protection is too limited, international performance is required or the patent can not reasonably be enforced (Levine 1991).   For these and many other reasons (see Levine 1991), non-patent mechanisms for protecting intellectual capital have evolved.

One such approach is publication.  By publishing data and inventions in a public (albeit often obscure) forum, organizations prevent competitors from ‘excluding’ access to and profiting from their invention (Bryant 1997). Other firms may elect to keep trade secrets (Keller 1997; Bryant 1997).   While trade secrets are often considered little more than folklore, it is a very real and effective device.  Today, the trade secret is becoming a prominent tool used by firms whose products may fall beyond the scope of a patent (Jones 2000).  In addition to overcoming the legal limitations of a patent, trade secrets enable IT firms to compete effectively in spite of unevenly enforced domestic and internal copyright law.   Whether a firms publishes, keeps trade secrets, patents, or does not take any of these approaches, the exact calculus used to come to the decision to patent or not to patent varies between firms.

Given the limitations outlined above, patent data should be interpreted carefully.  Yet, patent data does provide a singular snapshot of a region's economy.  However, understanding the historical and contemporary context of an economy is essential to interpreting patent data.   For example, patents are more likely to reflect the realities of industrial research and development productivity in a state, such as West Virginia, that has had a continued dependence on ‘heavier’ industry.   In contrast, high tech states, such as New Hampshire, might interpret patent data with additional care.

Individual v. Corporate Patents

The patent activity of firms is much different from that of individual inventors.  Whereas firms must account for the merit, in terms of commercial viability, the motivation of an independent inventor is somewhat different. Indeed, the motivation is not always profitability (perhaps speculation or vanity).

Lacking a uniform rationale, real world application of individual-based technologies is unlikely.  In most cases, individual inventors lack the venture capital to market their technology to related industries and are unable to afford the cost of and navigate the many complexities of maintaining domestic and international patents.   Besides these serious concerns, inventors, particularly in small states, encounter additional structural concerns.  In small states, technological innovations are less likely to be successfully integrated into existing production or knowledge systems because necessary resources are absent (skilled labor, dominant core technology, specialized services, and an entrepreneurial ethos) (Gatrell 1999; Feldman 1994).  Even in "innovation rich" environments, industrial research and development experts assert that the independent inventors face numerous challenges because their research—unlike formal industrial or academic programs—lack a clear linkage between an inventor and industry (Keller 1997; Bryant 1997).

Despite these challenges, individual inventors are essential to the innovation process and account for a great deal of annual patent productivity.   Because of their large numbers and significant contributions, the United States Patent and Trademark Office has initiated a series of new programs to serve as an information clearinghouse for independent inventors.  In addition to providing easier access to information, the newly established Office of Independent Inventor Program's helps develop necessary entrepreneurial skills (United States Patent and Trademark Office 2000).  In West Virginia, the concerns of the individual inventor are exceedingly important for the development of future technologies and infrastructures.   Unlike the nation, individual inventors account for a significant amount of all West Virginia patent activity (see Charts 2 & 3).   However, the concerns facing the individual inventor are made much more acute in small states, such as West Virginia.   In addition to limited resources, the areas of patented technology do not necessarily reflect the local, regional, or state’s overall innovation infrastructure.  In WV, these areas of patented technologies often do not coincide with designated technology areas target for development by the State of West Virginia (WV STAC 1997).

Chart 2

Chart 3

Changing Rank of Organizations

Based on a review of patent assignees, the types of organizational patent assignees have changed since the 1970s.  While petro-chemicals and metals remain prominent corporate assignees, recent patent data underscores a shift away from metals and petro-chemicals (see Tables 1 & 2).  Nevertheless, the "Core Areas of Technology," as designated by the United States Patent and Trademark Office, continue to be chemical in nature (see Table 3).   However, higher order chemical technologies (associated with valued-added and downstream industries, such as polymers and resins and drugs) are more prevalent.  In addition to the changing nature of the petro-chemical industry, the tables demonstrate a significant shift away from primary and specialized metals.   While INCO and Weirton Steel are major technology producers, their relative importance statewide and patent productivity, in real and relative terms, has decreased.

Table 1

Table 2

Table 3

Spatial Shift?

The observed importance of Parkersburg’s value added chemistry represents a spatial shift away from the traditional center of West Virginia reserach and developemnt — the Kanawha Valley.   While Union Carbide remians the state’s single most prominent research and development provider and patent assignee, new regions especially those in and near Parkersburg (Polymers & Resins) and North Central West Virginia (West Virginia University, Federal Bureau of Investigation, Department of Energy, and the National Aeronautics and Space Administration), and to a lesser extent Huntington (Materials and Marshall University) as well as Wheeling (National Technology Transfer Center and Wheeling Jesuit University) are also emerging as specialized statewide technology centers. 

For the past twenty years, the share of patents (and by implication technology) production within the state’s once overwhelmingly dominant Kanawha Valley region is diminishing.  Between 1990-1994, the mean patent productivity of the Charleston metropolitan area (Putnam and Kanawha counties) was 61, with a high of 78 in 1993 and low of 43 in 1994.  In contrast, the mean productivity between 1995-1999 was 41.6, with a high of 55 in 1998 and a low of 28 in 1996.  While the patenting process is by no means linear, the overall trend observed in the Charleston metropolitan area should be considered within the context of the entire state.  Indeed, the observed decrease in absolute terms can also be observed in relative terms.  In addition to the observed downward trend, other factors, including an uncertain future for the Union Carbide Tech Center, suggests the Kanawha Valley’s significance will continue to decline (see Chart 4).

Chart 4

As a result, the growth and re-positioning of new regional technologies outside of the valley are increasingly driving (and must in the future lead) the state’s high tech economy.  In Parkersburg's case, the recent activity suggests a sustainable level of technology production with a slight upward trend overall in absolute terms.  Similarly, North Central West Virginia has become an increasingly important patent producing region and accounts for nearly 13.8 percent of all patents between 1987-1997 and 15.6 percent during the last five years of that period.  Of additional note, twelve of the thirteen patents assigned to West Virginia University or the West Virginia University Research Foundation have occurred between 1986-1997 and suggests the upward trend and commitment to leverage the University’s intellectual resources (see Table 4).

Table 4

Besides West Virginia University's efforts, North Central West Virginia has also seen an impressive amount of high technology growth along the I-79 corridor associated with the relocation of the Federal Bureau of Investigation Fingerprint Center, the opening of the National Aeronautics and Space Administration IV&V facility, and the creation of the West Virginia High Technology Consortium Foundation.  In order to capitalize on and expand West Virginia’s current patent productivity, targeted Science and Technology planning can effectively diversify and expand the technological base of local, regional, and state economies (Coburn and Berglund 1997; Feller 1997, 1990).  Based on this research, several potential policy trajectories can be sketched:

• New programs should be implemented and existing programs expanded, such as the PROMISE Program, to explicitly link individual inventors with firms and other knowledge producing organizations around the state;

• Continue and expand public-private initiatives, such as Parkersburg’s The Polymers Alliance Zone, Inc., of West Virginia or the Identification Technologies initiative focused along the North Central West Virginia I-79 corridor, to target and link new and emerging industrial R&D with existing state and academic resources;

• Further investments in the academic research enterprise to capitalize on the knowledge economy;

• Create new and re-invigorate existing initiatives, such as BIDCO’s Technology Advisory Committee, to maintain and expand the capacity and capabilities of the important Kanawha Valley;

• Increase the visibility of current knowledge production and expand current funding commitments to expanding the state’s innovation infrastructure;

• Identify and target any additional "growth areas" around the state for future development;

• Leverage potential Small Business Innovation Research (SBIR) dollars to grow new and small businesses around the state; and

• Encourage individual inventors to collaborate with business incubators to develop and identify new key technologies.

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Acknowledgments
This research was partially funded by two grants from the West Virginia Governor’s Office of Technology (GOT2000B & GOT2001A).  

Additional support was provided by the West Virginia Experimental Program to Stimulate Competitive Research.

About the Authors

Jay D. Gatrell is an Assistant Professor of Geography in the Department Geography, Geology, and Anthropology at Indiana State University.  He can be reached at: gejdg@scifac.indstate.edu.

Frank J. Calzonetti is the Vice-Provost for Research at The University of Toledo.