Silicon Valley and the San Francisco Bay Area have a worldwide reputation for innovation. But is there any subjective evidence for this? What do the patent statistics say?
According to the USPTO statistics, at https://www.uspto.gov/web/offices/ac/ido/oeip/taf/cls_cbsa/allcbsa_gd.htm, as of 2013, Silicon Valley “classic”, characterized as San Jose, Sunnyvale, and Santa Clara (Metropolitan Statistical Area 141940), led the field in patents with 12,899 patents granted. By contrast, the remainder of the San Francisco Bay Area minus Silicon Valley, characterized as San Francisco, Oakland, and Fremont (Metropolitan Statistical Area 141860) came in a respectable second at 8,721 patents.
Here the San Jose, Sunnyvale, and Santa Clara area includes other cities such as Campbell, Cupertino, Los Altos, Los Gatos, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara, Saratoga, and Sunnyvale.
By contrast, the San Francisco, Oakland, and Fremont area includes other cities such as Belmont, Burlingame, Emeryville, Foster City, Fremont, Menlo Park, Millbrae, Newark, Oakland, Redwood City, San Bruno, San Carlos, San Francisco, San Mateo, South San Francisco, and Union City.
Combining the two, the San Francisco Bay Area as a whole dominates the rest of the country, at an impressive 21,620 patents granted in 2013. By contrast, the next runner-up, the New York-New Jersey area, comes in at 7,886 patents. The Los Angeles area is close behind at 6,271 patents, followed by the Boston area at 5,610 patents. So from a patent perspective, yes the San Francisco Bay area is, in fact, pretty unique.
Why is this area such a hotbed of innovation? One reason is California’s permissive employment laws. California labor code 2870 states that: “Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time…” Unlike other states, that often “lock-in” or constrain an employee’s ability to leave and start new companies under vague “trade secret” theories, California’s policy encourages startup formation, and thus a vibrant economy.