Large entity, small entity or micro-entity: which one are you?

In May, the USPTO issued a proposed rule that will set fees for patent applicants who qualify as “micro-entities.”   When made final, the new fees can result in significant savings for those who qualify.  So if you are filing a patent application, how do you know which fees apply to you?

When applying for a patent application, certain entities are entitled to reduced USPTO filing fees.  Applicants who qualify for small entity status can reduce many USPTO fees by 50%.  In 2011, the America Invents Act created the new category of micro entities who can reduce certain fees by 75%.  An applicant who is neither a small entity nor a micro-entity is considered to be a large entity and must pay standard fees.

The savings that result from small entity or micro entity status can be substantial.   For example, as of September 1, 2019 the standard combined application, search and examination fee for a new utility patent application is $1,720.  However, a small entity only pays $860, and the equivalent micro entity payment is $430.   To maintain a patent, the owner must pay maintenance fees at the 4, 8, and 12-year anniversaries of the patent’s issuance, and these costs can become significant over time. Small entity or micro entity status can help reduce those costs.

However, the consequences of mis-declaring entity status can be severe.  In cases where courts have found applicants paid the small entity fee without a good faith basis for considering themselves to be small entities, the courts have determined the the affected patent to be invalid.  Luckily, entity status can be easily corrected by paying the increased fee amounts and making appropriate certifications about lack of deceptive intent.  A single enterprise may have different status for different patents or applications, so determining the correct status for each case can be tricky.

How can applicants determine which status applies?  A summary of each status is:

Small entity: an entity that:

  • (i) is a nonprofit organization; OR (ii)  does not, together with all affiliates, have 500 or more employees; AND
  • has not assigned, licensed or otherwise conveyed an interest in the invention to a non-small entity.
NOTE:  Small Business Administration regulations define what is an “employee” and what is an “affiliate.”  If there is any doubt about whether the definition applies to an applicant, the applicant should consider simply filing as a large entity.

Micro entity:  an entity (typically an individual or group of individuals) who:

  • has not been named as an inventor on more than 4 prior patent applications (other than applications assigned to a prior employer);
  • has gross income less than 3 times the amount reported on the U.S. as the median household income for the preceding calendar year (based on 2020 data, this is $235,500, or 3x$78,500);
  • has not assigned, licensed or otherwise granted an interest in the invention to an entity who has gross income more than the amount listed above (unless the entity is an institution of higher education); and
  • also meets the requirement for small entity status.
NOTE:  If the application involves joint applicants, each must qualify for the micro entity status.  Also, an applicant claiming micro entity status will be required to submit a certification of entitlement to the status.

Large entity:  any entity that is neither a small entity nor a micro entity.

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