Valuable Patents

While the theory of the patent system is premised on the idea that patentswill be used to exclude competitors, only a tiny fraction of patents areever enforced. Legal and economic scholars have theorized as to how toidentify valuable patents based on their individual characteristics. Inthis paper, we present the results of the largest empirical study everconducted of the patent system. We compare the characteristics of litigatedpatents to those of issued patents generally, and we find importantdifferences in a range of dimensions. These data confirm some predictionsin the literature regarding patent value and refute others. New patents aremore likely to be litigated than old patents. Foreign patent owners areless likely to litigate than domestic patent owners. Patents that issue toindividuals or small companies are much more likely to be litigated thanthose that issue to big companies, though many of those patents havechanged hands by the time they are brought to court. Patents that cite moreprior art are more likely to be litigated, and those that are litigatedtend to be cited more elsewhere. Most significantly, there are substantialdifferences between industries in the likelihood of patent litigation.Patents in the mechanical, computer, and medical device industries aresignificantly more likely to be litigated, for example, than patents in thechemical 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 thatstand out from a field of ordinary ones. They are the patents that theirowners spend the most time and money in prosecuting. They are the ones thatcompetitors recognize as most important. They are concentrated in a fewindustries in which patents play a more significant role in encouraginginnovation. And they are patents that issue to individuals or smallcompanies with asymmetric stakes in patent litigation, not to largecompanies. These conclusions in turn have significant implications for thedesign of the patent system, patent reform efforts and patent valuationtheories - implications we consider at the end of the paper.