Yesterday we got an e-mail from the Motion Picture Association of America trumpeting a new Commerce Department report on the importance of "intellectual property"—patents, copyrights, and trademarks—to the United States economy. "IP-intensive industries, including movies and television, supported the jobs of 40 million American workers, or 27.7 percent of all US jobs," the MPAA wrote.

The report bills itself as an objective empirical project, measuring the impact of copyright, patent, and trademark protection on the US economy. But it isn't shy about touting the importance of these legal regimes to the US economy. "The granting and protection of intellectual property rights is vital to promoting innovation and creativity and is an essential element of our free-enterprise, market-based system," the report claims.

But is that really what the report shows? We decided to dig deeper.

Broad definitions

The report has an extraordinarily broad definition of an "IP-intensive industry." Thanks to the inclusion of industries that rely on trademark protection, the list includes the residential construction, "dairy product manufacturing," paper, and grocery industries. That's right—if you hang sheetrock, bag groceries, or answer phones at a paper mill for a living, you're probably in an "IP-intensive" industry as far as the Obama administration is concerned.

Indeed, the report finds that trademark-intensive industries account for more than twice as many jobs as copyright-intensive and patent-intensive industries combined.

However, the patent figures understate employment in patent-intensive industries because they're based on Patent Office figures that only cover the manufacturing sector. So, for example, software publishers and "computer systems design and related services" are not counted as patent-intensive industries, despite the fact that software and IT firms are among the most prolific patent filers.

Entertainment vs. software

Copyright-intensive industries account for more than five million jobs, which is nothing to sneeze at. But it's important to note where these jobs come from. Hollywood wants you to believe that movie studios are responsible for most of those jobs, but in reality they employ only 415,000 people. The sound recording industry employs a paltry 36,000 people.

This matters because while all copyright-intensive industries rely on copyright to some extent, only a few industries would benefit from draconian copyright enforcement policies like the Stop Online Piracy Act.

On the other hand, the "copyright-intensive" category also includes the "computer systems design and related services" industry, which employs almost 1.6 million people, and software publishers, which employ another 259,000. All told, the IT industry employs more than four times as many people as Hollywood and the recording industry put together—and IT firms overwhelmingly opposed SOPA.

The rest of the copyright-intensive jobs are in industries like advertising, radio and television broadcasting, and "other professional and technical services" that don't have a dog in the file-sharing fight.

Patents

The report suggests that patent-intensive industries employ the fewest people: 3.9 million of them. The Commerce Department seems to suggest that the patent system deserves credit for those jobs, but a closer analysis tells another story.

The report calculates an industry's "patent intensiveness" by dividing the number of patents it received by the number of people it employs. By this metric, the IT industry leads the pack. The top four industries are computer hardware, communications hardware, semiconductors, and "other computer and electronic products." As we've already noted, the software industry seems to have been excluded from the list because it's not considered to be in the manufacturing sector, but it would likely rank highly if it were on the list.

So should the patent system get credit for the growth of patent-intensive IT firms? Empirical research suggests otherwise. For example, in a groundbreaking 2008 book, James Bessen and Michael Meurer estimated the value of patents and the costs of patent litigation in a variety of industries during the 1980s and 1990s. They found that in chemical industries, the value of patents significantly exceeded the costs of patent litigation, suggesting that patents may be having the desired effect of rewarding innovation.

However, in most other industries—and especially in the software industry—the costs of patent litigation began to exceed the value of patents in the middle of the 1990s. By the end of the 1990s, the costs of patent litigation exceeded the value of non-chemical firms' patents by a factor of three. And things have only gotten worse since then—last year Bessen and Meurer updated their work and estimated that patent trolls cost publicly traded defendants half a trillion dollars between 1990 and 2010.

In other words, identifying the industries that participate in the patent system is not the same thing as identifying the industries that benefit from it. Some of the industries the Commerce Department identifies as "patent intensive" are actually being harmed, on net, by the patent system.

Yet aside from a passing nod to the need for a "balanced system of IP rights," this possibility is never mentioned in the report. Even this chart was apparently not enough to inspire second thoughts:

This chart suggests two interesting conclusions. First, despite warnings about the devastating impact of Internet piracy, copyright-intensive industries produced (or failed to produce) jobs at about the same rate as the economy as a whole during the 2000s. Second, employment in patent-intensive industries is declining rapidly.

The report attributes the job losses in patent-intensive industries to "historic losses in manufacturing jobs." And it's probably true that the patent system doesn't deserve much of the blame for the decline of, for example, the auto industry.

But that calls into question the whole premise of the report. Most likely, the effects of patent, copyright, and trademark law on the American economy—positive or negative—are too small to measure with a statistic as crude as aggregate employment figures. But then what's the point of tallying up total employment in "IP-intensive" industries?

Of course, interest groups like the MPAA have a long history of using dubious statistics to bolster their case, and we don't expect them to stop now. But government statisticians ought to know better.