Patenting Oregon Prosperity

By John Deer of Gresham, Oregon. John is a retired Portland firefighter and senior inspector.

The Brookings Institution, a centrist think tank, published a February 2013 report entitled, “Patenting Prosperity”. The report details the invention activity of a little over 350 Metropolitan Statistical Area’s (MSA’s) from 1980–2010. (An MSA is the region composed of a city of more than 50,000 population and its most important neighbors.)

The report finds that high-patenting MSA’s have important advantages:

• Workers have an average $4,300 more annual income than low patenting areas,

• Higher productivity growth,

• Lower unemployment rates, and

• The creation of more publicly-traded (large) companies.

Patents, according to Patenting Prosperity, are also valuable by themselves:

• The average patent is valued at just over $500,000 and provides important loan collateral.

• Businesses with patents receive 14 times more venture capital money than those without patents.

While Oregon has two high-patenting areas – Corvallis, number 4 nationally and Portland, number 26, what if many more areas could become a magnet to inventors?

Maybe Oregon could offer on a much smaller scale, what we have offered on a much larger scale, for decades, to developers? That is, Tax Increment Financing (TIF). (TIF is a system that essentially uses the taxes created by improved property values of a new development to pay for some of the cost of development.)

Perhaps Oregon could allow an inventor to use all of their personal taxes (property, income, fees, etc.) for funding the creation of their patent(s) and business. I call this concept, Patent Tax Increment Financing or - PTIF. The legislature might create Innovation Zones where PTIF could be used.

It would work something like this:

Let’s say that an inventor has $100,000 of Oregon taxable income, lives in Oregon, and pays $3,500 per year in property taxes and $9,000 in income tax. Total tax, $12,500 per year. If this $12,500 were used to pay off 15-year, 5% state revenue bonds, about $125,000 would be available for developing the patent into a product or service. And hiring Oregon workers, of course. It might be required that Oregon tax revenue would receive a net gain from employee/business taxes.

Alternatively, Oregon might create a reserve fund to backstop larger borrowing. As an example, $125,000 used as a 20% maximum liability reserve would make a $625,000 loan more possible.

In conclusion, let me quote Peter Drucker, perhaps the greatest management thinker of the last century, “Innovations had better be capable of being started small, requiring at first little money, few people and a ... limited market. But ... a successful innovation aims at leadership.”

Maybe Oregon can enhance our innovation leadership with PTIF.

Jan. 21, 2015 Posted in guest column.