Patently-O has some great analysis of the initial rejection rates of patent applications that ultimately issued as a patent (click for link). This is great analysis and puts some real data behind what most of us have experienced in the field many times over. No matter how great an application is, it is very likely going to be initially rejected.
For the Patent Office's technology centers that correspond to many of the fields that I work in (e.g., 3620 - E-Commerce, 2160 - GUI and Database, 2150 - Networks) the rejection rates are greater than 80%. Note that these numbers are for patent applications that ultimately issued as patents, meaning that these numbers do not include those applications that were abandoned at some point in the process.
For patent filers, this highlights three key points. First, your application needs to be well written by an attorney that is an expert in your field. There are numerous things that a competent patent attorney knows to include in the application to provide support for multiple directions that the application may take in the Patent Office. The application should support not only the key concepts of the invention, but other subtle nuances that may take center stage as potential narrowing amendments based on prior art raised by the examiner.
Second, you should expect that no matter how well your application is written, it is very likely going to be initially rejected. Though I mention this to every new client in our first conversation, it always hits like a ton of bricks when they receive that first rejection from the Patent Office. In most cases an initial rejection is not the end of the line and the application will mature into a patent with a proper response to the examiner's concerns and some patience.
Third, after filing you should work with an attorney that is experienced at working with the Patent Office and plan for the cost of this stage of your application. The application process is not done when the application is filed, rather it is just getting started. Efforts after the application is filed are typically equal in scope and cost to the filing of the application. A skilled patent attorney knows how to work with the patent examiner to get to the root of the examiner's rejections and to get the application in condition for allowance as quickly and cost-effectivevly as possible. Unfortunately I have seen too many firms use this as an opportunity to run up costs by providing incomplete responses to Office Action after Office Action, further delaying the application's issuance. I have found that a proactive approach up front works well, and I often fly to the Patent Office (the U.S. only has one in Alexandria, Virginia) to meet with the examiner in person as early as possible for each application.
Despite the high rejection rates, with the right approach an initial rejection can be a sign of progress rather than the end of the line for your patent application.