The Value Gap: Lack of diversity in patent holders means ‘half of the population’ isn’t getting needs met, economist Lisa Cook says

United States

The Value Gap is a MarketWatch Q&A series with business leaders, academics, policymakers and activists on reducing racial and social inequalities.

Innovation holds the promise of economic prosperity for emerging inventors — but for some, seeing their idea come to fruition remains out of reach.

“Throughout history, women and underrepresented minorities have not been able to participate fully in each stage of the innovation process,” Lisa Cook, a professor of economics and international relations at Michigan State University, told MarketWatch. “We have to make sure that people understand that they have creativity, and their ideas will be taken seriously.”

Diversity gaps in the U.S. patent system persist, in part, because of an absence of data on patent applicants. This lack of transparency has meant that patent holders are predominantly white, male and wealthy.

A recent study found that women, especially African-American and Latina women, obtain patents at significantly lower rates than men; people of color get approved for patents less often than white people; and individuals from lower-income families are less likely to acquire a patent than those who grew up in affluent families.

Cook’s expertise on a range of macroeconomic issues earned her roles at the White House Council of Economic Advisers under former President Barack Obama and on President Biden’s transition team.

Asked about reports that she is on a shortlist of economists under consideration for a vacant Fed board seat, Cook said, “I’m honored my name has even been raised in the conversation.” If chosen and confirmed, she’d be the first Black woman to serve in the role. 

But Cook’s scholarship on invention gaps has also shed light on the economic costs of excluding African Americans and women. Including underrepresented groups in the patent-development process would increase U.S. GDP by 2.7% per capita, and by roughly $ 1 trillion annually, according to her research. The economic activity from patents is estimated to be over $ 8 trillion, more than one-third of U.S gross domestic product.

“Every single part of that system, as far as generating ideas, keeps the economy going,” Cook said. “That’s where my analysis begins and ends. The whole world benefits when we accelerate the pace and arrival rate of ideas.”

Also read: Why women of color are less likely to get patents

Cook’s research on how violent acts censored and stifled innovation among some of the nation’s first African-American inventors has found that between 1870 and 1940, “violent acts account for more than 1,100 missing patents compared to 726 actual patents among African-American inventors.” “Valuable patents decline in response to major riots and segregation laws,” she wrote.

Her late cousin Percy Julian, a chemist who pioneered a synthetic cortisone substitute in 1949, had his Oak Park, Ill., home fire-bombed twice. 

Since the Founding Fathers penned the concept in the Constitution, inventorship has been a part of shaping the U.S. as a world leader in innovation. The Patent Act of 1790 laid the foundation for intellectual property, granting authors and inventors exclusive rights to their inventions for up to 20 years. But while the language itself was race-neutral to foster innovation, people of color were not credited for their inventions.

In March, a bipartisan group of senators proposed the Inventor Diversity for Economic Advancement (IDEA) Act of 2021 in an effort to bring more transparency to the patent review and approval process. If passed and signed into law, the bill would require the U.S. Patent and Trademark Office to collect inventor information on gender, race, and military or veteran status. 

MarketWatch spoke with Cook for The Value Gap about the nebulous inner workings of the U.S. patent system, policies that could help advance women and minority inventors, and the urgency of closing the racial wealth gap:

MarketWatch: Some people would classify the 21st century as an innovation renaissance, but what we don’t hear about is the distribution of innovation: who gets to experience it, and who gets to become an innovator. Have the benefits of innovation been equitable?

Cook: At the beginning, it is typically not equitable, and we know this through history. Technology is available to a small share of the population, then it becomes more broadly available. Whether it was the television, car or mobile phones, all of [these] were used by elites before they were provided to the rest of the population. That’s the consumption part. 

When we look at [inventors], for example, the Tiffany lamps company, there were a lot of women on the design team who designed those lamps. The question is, at the time, if those innovations would have been accepted by the public if people had known there was a woman behind them. 

MarketWatch: Is there any linkage between diversity of inventors fostering innovation in other economies?

Cook: It was a woman that was behind creating spy and smart products for Britain’s Intelligence Service. A Black woman developed the GPS system, and it’s everywhere because [most] people have mobile phones. There are spillovers in many different ways into other countries, so we need to have people participating at every single juncture if we want to maximize in a productive capacity — not just in the U.S., but in the world.

‘Different people have different lived experiences. It’s not just the diversity of thought, but it’s diversity of experience — and that’s where innovation is going to come from.’

MarketWatch: The U.S. patent system can be pretty convoluted. Why are there such large disparities in innovation rates and patent approvals?

Cook: The gap that would be most important is with respect to applications. I haven’t seen papers or analysis that have systematically shown patent examiners discriminating. I would still argue that blind review can be helpful because a lot can be revealed by your name. If you had a consistent inventor ID, or some other way of masking your name, it could allow less of implicit or explicit bias to come into play. 

MarketWatch: What about patent applications for socioeconomic class, race and gender? Where are these diversity gaps stemming from?

Cook: Most [patent] applications come from the private industry, and within the private industry they come from engineers. If we’re talking in broad strokes, what is it about private industry and engineers that keep underrepresented minorities and women out? … That’s why I [talk a lot about] the workplace climate. 

It may be the reason why we don’t see applications coming forward, because they don’t get the rewards. I can’t tell you how many times I’ve been in public forums and an older woman would say to me they were looking up a [male] colleague because they were on a patent team together, and the male counterpart’s name appears on those patents and her name doesn’t. 

MarketWatch: If the IDEA Act is passed and requires the U.S. Patent and Trademark Office to collect demographic data, do you think this can bring more transparency and potentially be a new frontier for prospective inventors? 

Cook: The IDEA Act is being debated, and it looks pretty promising going forward. I think that greater transparency is always helpful. Another way the system can be more transparent is to tell us who’s participating and to tell us precisely. No one should fear this. 

MarketWatch: What can government officials do at the state and federal level to promote change? Is there a policy solution?

Cook: I’ve talked to congressional staff about this, and we talked about making sure that veterans and [people with disabilities] are included. Often what we find is that men, for the most part, invent for men. We have a paper showing that women invent biomedical products for women. That means that there are some needs that are not being met for half of the population. 

Different people have different lived experiences. It’s not just the diversity of thought, but it’s diversity of experience — and that’s where innovation is going to come from.

MarketWatch: As a macroeconomist, you cover a broad array of economic topics, but you’ve done a fair bit of research on innovation. How would you define the innovation economy, and how important is it to economic growth? 

Cook: Innovation is a fundamental input into economic growth. Growth is supposed to increase living standards for individuals in a country, and in the world. [It’s] a social compact that people have with their government and policymakers. They want to see each generation doing better than the previous generation. In order to accomplish that, standards of living have to be constantly rising. That’s why I think it’s fundamental for all economists to be paying attention.

‘If you had a consistent inventor ID, or some other way of masking your name, it could allow less of implicit or explicit bias to come into play. ‘

MarketWatch: Research has shown that owning patents is linked to helping investors and entrepreneurs start businesses and create jobs. Being that you work in higher ed, what role can universities play in ensuring that underrepresented groups are included and have equal access to the innovation ecosystem? 

Cook: Universities can do better in their fundamental enterprise. The issue related to Nikole Hannah-Jones is something that is pervasive. [Editor’s note: Hannah-Jones, who created the New York Times’ 1619 Project, turned down a belated tenure offer from the University of North Carolina at Chapel Hill’s journalism school last month following a lengthy controversy, announcing she would join Howard University’s faculty instead.] These are systematic issues and need to be addressed with respect to diversity and inclusion on these campuses. 

There are many different problems that are a reflection of broader societal patterns of how women and minorities are treated at universities. How is it that these women are on these innovation teams in graduate school, and their [male] counterpart names are the ones whose names wind up on the patents? Most of them are older women, so maybe practices have changed, but somebody needs to check. You can’t keep denying [women’s and minorities’] contributions.

MarketWatch: Earlier you addressed the importance of innovation for long-term economic development and wealth creation. Right now, America is undergoing the biggest wealth transfer in history. What are your thoughts on the exorbitant wealth gap between Black and white Americans? 

Cook: I really think that there is a lot of serious study that is being done. Sandy Darity’s work is the gold standard, and the most comprehensive work [on the wealth gap]. There has to be real thought about how to close the wealth gap — this can’t stand. 

As I said earlier, the social compact that society has with their policymakers is that each successive generation will do better than previous generations. That has not been the case for every part of [the] wealth and income distribution.

That means policymakers have to redouble their efforts, because this can erode the social fabric and you won’t have a functioning economy. This is one of the most urgent issues of enhancing the productive capacity of the U.S.