Silicon Valley continues to hold the title for most patents awarded overall in the U.S., but the rise of AI is forcing the government to design new rules around patent applications.

Why it matters: Use of AI systems like ChatGPT has highlighted existing ambiguity about what qualifies for a patent.

Context: Almost 248 utility patents per 100,000 residents were granted in the San Francisco-Oakland-Fremont metro area in 2022 — up 52% from 2012, according to U.S. Patent and Trademark Office (USPTO) data.

• Utility patents may be granted for inventing or discovering a new and useful process, machine or composition of matter, among other things.
• Computer technology saw the largest share of new utility patents at about 28%.
• Digital communication came in second, followed by digital communication and medical technology.

State of play: Guidance from the USPTO, issued in February, states that a person's use of an AI system does not necessarily preclude them from qualifying as the inventor in a patent application.

• This would be evaluated on a claim-by-claim and case-by-case basis, per the USPTO.
• A federal appeals court ruled in 2022, however, that an inventor must be a "natural person" and not an AI system.

What they're saying: The American Intellectual Property Law Association wrote in a 2023 letter to USPTO that "AI should be regarded as a sophisticated tool assisting human innovation, analogous to any other instrument used in the creative process."

• The association also warned against the potential for inconsistencies caused by adding AI-related queries to patent applications.

Caveat: Getting a patent is one thing; actually creating the proposed product or service is another.

• That said, the number of patents granted is still a useful proxy for measuring something as quantitatively slippery as "innovation."

The big picture: In terms of raw numbers, the San José and San Francisco metros blew the rest of the country out of the water in 2022, with 14,089 and 11,346 patents granted respectively.

• New York took third place, at 6,979.

What to watch: Northwest Arkansas, Louisville, Kentucky, and New Orleans are emerging as America's new innovation hotspots, as measured by the change in utility patents granted over time per 100,000 residents.