One of the oddest things to an outsider about the United States patent system is that due to continuation practice it is impossible for the U.S. Patent and Trademark Office (PTO) ever to finally reject a patent application. Continuation applications have led to abuse of the patent prosecution process. They serve very little useful purpose, and what benefits they confer may be outweighed by their potential for mischief. In an effort to study the pervasiveness of continuation practice, we compiled an original dataset comprising 2,224,379 patents, every patent issued from 1976 through 2000. We found that while continuations are filed in 23% of all patent applications, patents based on continuation applications represent 52% of all litigated patents. Although continuations are used in a minority of all patents, it is the most important minority because it is the minority most likely to end up in litigation. We examine the efforts undertaken to control the problems associated with continuation patents (changing the patent term, publishing applications, prosecution laches) and find them insufficient. The world would probably be a better place if they were abolished. Recognizing, however, that the abuse of continuation practice is not as pervasive as some might think, we propose a number of means by which Congress and the courts could strengthen existing rules designed to limit their abuse while preserving the practice. At a minimum, the empirical data we present can provide litigants and judges with a baseline for assessing the reasonableness of delay caused by the filing of multiple continuations by the patentee in determining the applicability of equitable remedies such as prosecution laches.

While the theory of the patent system is premised on the idea that patents will be used to exclude competitors, only a tiny fraction of patents are ever enforced. Legal and economic scholars have theorized as to how to identify valuable patents based on their individual characteristics. In this paper, we present the results of the largest empirical study ever conducted of the patent system. We compare the characteristics of litigated patents to those of issued patents generally, and we find important differences in a range of dimensions. These data confirm some predictions in the literature regarding patent value and refute others. New patents are more likely to be litigated than old patents. Foreign patent owners are less likely to litigate than domestic patent owners. Patents that issue to individuals or small companies are much more likely to be litigated than those that issue to big companies, though many of those patents have changed hands by the time they are brought to court. Patents that cite more prior art are more likely to be litigated, and those that are litigated tend to be cited more elsewhere. Most significantly, there are substantial differences between industries in the likelihood of patent litigation. Patents in the mechanical, computer, and medical device industries are significantly more likely to be litigated, for example, than patents in the chemical and semiconductor industries.

In the paper, we explore the implications of these findings in detail. Taken together, the data give a profile of a few valuable patents that stand out from a field of ordinary ones. They are the patents that their owners spend the most time and money in prosecuting. They are the ones that competitors recognize as most important. They are concentrated in a few industries in which patents play a more significant role in encouraging innovation. And they are patents that issue to individuals or small companies with asymmetric stakes in patent litigation, not to large companies. These conclusions in turn have significant implications for the design of the patent system, patent reform efforts and patent valuation theories - implications we consider at the end of the paper.

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