National Minority Enterprise Development Conference

Remarks As Prepared

2010 National Minority Enterprise Development Week Conference

Under Secretary Kappos

Thursday, August 26, 2010

Omni Shoreham Hotel-Washington DC

Thank you David [Hinson] for the kind introduction and thank you to the entire MED week team for inviting me to speak. Good morning ladies and gentlemen, and thank you for joining us this morning.

Throughout our history, American research and development, and the innovation that accompanies it, has paved the way for the creation of new technologies, products and services, and even brand new industries.

In fact, technological innovation is linked to three quarters of our Nation's post-WWII growth rate. And between 1990 and 2007, compensation for jobs in innovation-intensive sectors increased by two and a half times the national average.

It is clear that the future focus of our economy must fix squarely on innovation. In fact, President Obama has committed to devote 3 percent of GDP to Research and Development. This commitment represents the largest investment in scientific research and innovation in American history.

Today, I'd like to discuss the role of minority business and inventors in the innovation process, and highlight the importance of Intellectual Property to innovation and growth for minority-owned businesses.

Minority inventors and innovators have always held a special place in the history of our country. They revolutionized the transportation industry-making critical contributions to automotive technology and even patenting the first traffic light. Recently, America's immigrant and minority innovators have led a revolution in creating the bio-medical industry. And

indeed it was an African American inventor-Mark Dean-who invented the Industry Standard Architecture bus, a critical development for the information technology and digital communication revolution that has brought unprecedented commerce, economic growth, and prosperity to our nation.

The economic security of this country and its minority communities continues to depend on its ability to innovate. But, the key to economic success lies not only in innovative product and service development, but in Intellectual Property protection, which allows innovators to capture value from their creativity.

I'd like to focus for a moment on why Intellectual Property matters so much to our nation. Let's start by dispelling a major misconception: IP is not about legal complexities or techno-speak-IP is about business strategy.

Intellectual Property protects good will and brand equity-just think of Coca-Cola, GE, and Microsoft. IP also protects creative works that are the life blood of the entertainment industry-think of your favorite song, blockbuster film, or best-selling book.

And patents, the focus of today's discussion, allow businesses-small and large-to protect their investments in research and development. Patents enable individuals and companies to secure investment on the strength of their ideas, and allow businesses to reach new markets without fear that their innovative products and services will be misappropriated by others.

Patents are fundamental to successfully launching start-ups and growing small businesses which create two out of every three American jobs.

A few months ago I had the opportunity to award the 600,000th Design Patent. It represented a wonderful invention-the "go-be solar charger."

Mr. Robert Workman had the idea for the "go-be solar charger" while doing aid work in the developing world; the constant power outages frustrated his teams' productivity. His solution is quite elegant-it is a briefcase-sized solar panel that produces electricity for use in charging a wide range of devices.

And because he used the IP system to protect his idea and grow his business, Mr. Workman's company is now responsible for 900 jobs right here in the United States.

Let's take another example. The California company Xencor creates cutting-edge biotherapeutics to treat cancer, inflammation, and autoimmune disease. Xencor uses patents to protect its proprietary design automation technology.

Xencor CEO Dr. Bassil Dahiyat put it simply: "without patents, you cannot get funding, and without funding, you cannot grow and create jobs."

And I'd like to highlight a third example. Charles Spencer, a professional musician and sound engineer founded his company, Thinklive! Inc., on the strength of his IP. Charles is a successful innovator - and he is African American.

While we commonly think of IP in the entertainment business as copyrights in songs or trademarks on labels, Charles is using a patenting strategy to help Thinklive! prosper.

Charles is using his patent to secure seed funding and has partnered with students in Georgia Tech's electrical engineering program to develop a proto-type for his new "Pro-Mix" technology.

These examples demonstrate how IP fuels innovation in the modern knowledge economy: from idea, to funding, to development, to the marketplace. Patents play a role at each step along the way.

But, recent preliminary data indicates that Minority Businesses are less likely to use the patent system than their non-minority counterparts.

The importance of this revelation cannot be overstated. In it-it's worth noting at the outset-we see evidence that the historical disparity in science and engineering education has translated into a real world gap in innovation.

A recent study by the National Science Foundation suggests the magnitude of the educational divide. While African-Americans and Hispanic-Americans account for about 23% of the population between ages 18-24, they earned only about 16% of science and engineering degrees in 2006.

Just over 1 in 10 of the nearly 19 million scientists and engineers employed in the US are underrepresented minorities-this includes African-Americans, Hispanic-Americans, Alaska Natives, and Native Americans.

And beyond the classroom, we see this gap manifested in Intellectual Property participation.

2009 data from a Kauffman Foundation survey of new businesses shows that, by the fifth year after founding, minority-owned technology companies hold fewer patents and copyrights than comparable non-minority businesses. In fact, the Kauffman data shows that minority-owned firms that hold patents hold only 2 on average-that number compares to the 8 held by their non-minority counterparts.

These findings are consistent with work we've done inside the United States Patent and Trademark Office-looking at the youngest of firms.

By the second year after founding, we start to see significant differences in the use of IP between categories of minority-owned firms, and in relation to their non-minority counterparts.

Companies identifying themselves as being owned by Asian-Americans are patenting at rates almost three times higher than non-minority owned businesses, but all other minority owned businesses are seeking patents at rates almost ten times lower than their non-minority counterparts.

We see a similar pattern when we look at trademarks: While businesses owned by Asian-Americans are holding trademarks at rates comparable to non-minority owned businesses, all other minority-owned businesses are about four times less likely to seek trademarks.

Now, some of the differences we see appear to be driven by things other than race - such as the part of the country the companies come from, or the specific industry in which they're operating.

However, the data are cause for concern-they flag that some minority groups are not as likely to participate in the U.S. innovation system.

And this is not a situation where we have an issue for some underrepresented minority groups but not others; it's not a situation where we have an issue for some industry sectors but not others, it's an issue for all underrepresented minority groups and all industry sectors.

And I can promise you it is an issue for us at the USPTO.

I know that the people in this room-and the companies represented here-come from diverse backgrounds and have a wide range of experience. I know you are incredibly creative, and incredibly innovative.

And I know one other thing to be true: that a great idea is a great idea regardless of its origin-and that innovation, inventiveness, and progress come from every segment of American life.

It is thus our responsibility-as business, community, and government leaders-to ensure that minority businesses dramatically increase their use of Intellectual Property as they innovate and grow their businesses.

The USPTO is committed to help. We are creating a new senior position on our Patents team, reporting to the Commissioner of Patents, and this new position will include responsibilities focused on encouraging participation of minority businesses in the IP system. I will be directing this new Associate Commissioner for Innovation to make increasing the role of minority businesses in the IP system, specifically, a critical focus.

We're also committed to continuing and strengthening our partnership with David Hinson and MBDA toward formulating a better understanding of how minority businesses use, and can better utilize, IP.

Ladies and gentlemen, a critical component in changing the IP dynamic, and bringing minority-owned businesses into the IP system, is education-and I'm not just talking about education in science and engineering, but education in leveraging IP to grow businesses.

Let me return for a moment to the first invention I described, Robert Workman's solar charger. You may be surprised to learn that the patent Mr. Workman received was not for the technology in the solar charger-it was for the stylized design of the charger-Robert patented his briefcase-like encapsulation of existing solar technology. But few Americans are aware that they can patent useful styles-that is designs. Indeed, if Mr. Workman had not known he could patent his design, the 900 jobs his company created may well not exist.

So, it is incumbent upon us to educate our communities-that's all of our communities-on the building blocks of innovation-Intellectual Property.

And to do so, we need your help. Our businesses, entrepreneurs, and community leaders-that's all of you in this room-must play an active role in spreading the word and leading by example. We need you to create opportunities to educate.

Through Intellectual Property education, let's make it our shared goal and vision to enable minority businesses to participate in IP at a rate consistent with non-minority businesses.

Increased minority participation in the IP system will lead to the creation and success of more innovative companies like Thinklive! Inc. And it will ensure that minority communities can leverage IP to safeguard economic well-being and create strong businesses.

And we all know, strong businesses stand as a beacon for students' aspirations of what they may become and what they may do with their lives.

Strong businesses anchor jobs and increase our standard of living.

Strong businesses create healthy communities.

Look at what the rise of the bio-tech industry has done to transform San Diego into a thriving technology and R & D city; look at the IP reliant businesses in Pittsburgh that have led that city from steel to semiconductors, into the 21st century.

It is Intellectual Property that allows people and communities to secure the competitive advantage needed to establish and anchor new businesses. If we do this right, we're going to create more healthy communities. Our kids are going to think about math and science, and they're going to know a successful scientist, engineer, and entrepreneur. They're going to look up to innovator role models and they're going to think to themselves, "yes, I can be that too."

I want to thank you all for coming out to listen today and for inviting me to join you. It's my goal that this is just the beginning of our dialogue.

Thank you.