Do I Qualify for Small Entity Fees at the USPTO?

The USPTO has three fee categories: large entity, small entity, and micro entity. Previously I wrote about micro entities that usually get a 75 percent reduction from the large entity fees. If you don’t qualify as a micro entity, you might qualify as an entity, which usually gets you a 50 percent fee reduction.

USPTO rule 37 C.F.R. 1.27 defines which persons, small businesses, and nonprofit organizations qualify as a small entity. An owner of a patent application or a patent is entitled to small entity status only if, the owner is:

  • A person … meaning any inventor or other individual ( e.g., an individual to whom an inventor has transferred some rights in the invention) who has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention. An inventor or other individual who has transferred some rights in the invention to one or more parties, or is under an obligation to transfer some rights in the invention to one or more parties, can also qualify for small entity status if all the parties who have had rights in the invention transferred to them also qualify for small entity status either as a person, small business concern, or nonprofit organization under this section.
  • A small business concern . . . meaning any business concern that:
    • (i) Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify for small entity status as a person, small business concern, or nonprofit organization; and
    • (ii) Meets the size standards set forth in 13 CFR 121.801 through 121.805 to be eligible for reduced patent fees.
      • Section 13 CFR 121.802 provides that a small entity small business concern is an entity that has 500 or less employees, including affiliates and,
      • has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under this section.
      • The definition of who counts as an employee and an affiliate for the purpose of determining the 500 employee limit is defined by several Small Business Association regulations. See, e.g. 13 C.F.R. 121.103, 121.106. If your business, including employees of any affiliate, subsidiary, or parent company, has near 500 employees, it is best to pay the large entity fee.
  • A nonprofit organization … meaning any nonprofit organization that:
    • (i) Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify as a person, small business concern, or a nonprofit organization; and
    • (ii) Is either:
      • (A) A university or other institution of higher education located in any country;
      • (B) An organization of the type described in section 501(c)(3) of the Internal Revenue Code of 19 86 (26 U.S.C. 501(c)(3)) and exempt from taxation under section 501(a) of the Internal Revenue Code (26 U.S.C. 501(a));
      • (C) Any nonprofit scientific or educational organization qualified under a nonprofit organization statute of a state of this country ( 35 U.S.C. 201(i)); or
      • (D) Any nonprofit organization located in a foreign country which would qualify as a nonprofit organization under paragraphs (a)(3)(ii)(B) of this section or (a)(3)(ii)(C) of this section if it were located in this country.

Federal Government
If a person or small business concern licenses rights in an invention to the federal government/agency, then depending on the circumstances that person or small business concern may or may not qualify as a small entity. Generally the federal government or agencies of the federal government are not considered small entities. MPEP 509.02. Therefore, licensing to the federal government might prohibit you from claiming small entity status.

However, there are some exceptions for certain licenses. For example, a “person” under the above definition that licenses rights to a federal agency under Executive Order 10096 may still qualify as a small entity. Further a small business concern or non-profit may still qualify as a small entity if they license to a Federal agency resulting from a funding agreement with that agency pursuant to 35 U.S.C. 202 (c)(4).

Loss of status
Once small entity status is claimed it will continue in an application until an issue fee is due or maintenance fee is due. 37 C.F.R. 1.27(g)(1). Therefore, a new determination of small entity status needs to be made at the time issue fee is due or maintenance fee is due. A notice of loss of small entity status must be filed, if such status is lost, when paying an issue fee or maintenance fee. The paying of the large entity fee alone is not sufficient. Id. at 1.27(g)(2). A new assertion of small entity status is required in any continuation or divisional application. MPEP 201.06(c)(VIII).

Erroneous Claims
Claiming small entity status when an applicant or patent owner is not entitled to it could be considered fraud on the patent office and could negatively impact the owner’s patent rights. 37 C.F.R. 1.27(h). Therefore it is important to ensure that a claim for small entity status is made only when the owner qualifies.

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