Determining Entity Status Before the United States and Patent Trademark Office: Large, Small, or Micro?

At the time of filing any patent application with the United States and Patent Trademark Office (USPTO), patent applicants must designate their entity status.  Selecting the correct entity status can significantly reduce costs, so it is important to determine the correct entity status and update the status as needed throughout a patent’s and patent application’s life.  There are three types of entity statuses: large, small, or micro, with small and micro entities being entitled to reduced USPTO fees.  More specifically, patent applicants or patentees who qualify as a small entity can see a reduction in certain USPTO fees by 50%, whereas these fees are reduced by 75% for micro entities.  A patent applicant or patentee who is neither a small entity nor a micro entity is considered to be a large entity and must pay standard USPTO fees.  Below is a discussion on how a patent applicant or patentee can determine their entity status and change their entity status after an initial designation, if appropriate.  The following discussion is with respect to rules under the American Invents Act (AIA).

Status Requirements and Election Process

Small Entity: The specific conditions are set forth in 37 C.F.R. § 1.27.  Generally, to qualify for small entity status, a patent applicant or patentee must not have assigned, granted, or licensed any of the patent rights to a large entity and must fall within one of the following categories:

• Person.  Any inventor or other individual that owns the patent rights individually or jointly.
• Small Business Concern.  Meets the size standards set forth in 13 C.F.R § 121.801 through § 121.805, which generally relate to the Small Business Administration (SBA).
• Nonprofit Organization. 
  • Any university or other institution of higher education located in any country;
  • Any organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1986 (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));
  • 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
  • Any nonprofit organization located in a foreign country which would qualify as a nonprofit organization if it were located in this country.

If you qualify as a small entity for patent fee purposes, no special form is required to claim your entitlement to reduced fees.  For example, a patent applicant can check a special box on the new application transmittal form or on the application data sheet. However, a patent applicant should only pay small entity rates after ensuring that they qualify for the small entity status.  As such, if there is any doubt about whether an applicant qualifies for small entity status, the applicant should consider simply filing as a large entity.

Micro Entity:  The specific conditions are set forth in 37 C.F.R. § 1.29. The USPTO has a helpful micro entity status page.  Generally, to qualify for micro entity status, a patent applicant must fall under one of the following two categories:

1. Gross Income Basis: The patent applicant must certify all the following:
   1. The patent applicant qualifies as a small entity as defined in 37 C.F.R § 1.27;
   2. Neither the applicant nor the inventor nor a joint inventor has been named as the inventor or a joint inventor on more than four previously filed patent applications;
   3. Neither the applicant nor the inventor nor a joint inventor, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. § 61(a)), exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census; and
   4. Neither the applicant nor the inventor nor a joint inventor has assigned, granted, or conveyed, nor is under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census.
2. Institution of Higher Education Basis
   1. The patent applicant qualifies as a small entity as defined in 37 C.F.R § 1.27;
   2. The applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. § 1001(a)); or
   3. The applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular application to such an institution of higher education.

If you qualify as a micro entity for patent fee purposes, a special form is required to claim your entitlement to reduced fees.  More specifically, PTO/SB/15A is the special form currently needed to certify micro entity status based on gross income, and PTO/SB/15B is the special form currently needed to certify micro entity status based on institution of higher education.

Large Entity: A patent applicant or patentee that does not qualify as a small entity or a micro entity.

Change in Entity Status

For small entities, in accordance with 37 C.F.R §1.27(g)(1), once a small entity status is established in an application or patent, an applicant or patentee can pay the associated reduced fees until the issue fee is due or any maintenance fee is due. In other words, even if there was a change in small entity status, the applicant or patentee is not obligated to notify the USPTO of such change until at the time of paying the earliest of the issue fee or any maintenance fee due after the date on which status as a small or micro entity is no longer applicable. For micro-entities, however, in accordance with 37 C.F.R. §1.29(i), once a micro entity status is established in an application or patent, loss of entity status must be filed prior to paying any fee. That is, for micro entities, entity status should be reviewed every time a fee is to be paid. Thus, at the very least, the patent applicant or patentee should verify entity status prior to payment of the issue fee and each maintenance fee to ensure that the appropriate fee is being paid. Other fees during patent prosecution can be less for small and micro entities, so evaluating and updating entity status as appropriate during prosecution can help reduce costs and avoid improper fee payments.

Further, per 37 C.F.R §1.27(g)(2), the patent applicant or patentee must submit a specific written to notify the USPTO of the loss of entitlement.  For example, at the time of paying the issue fee, the patent applicant should (1) check the appropriate box on Part B of the PTOL-85 issue fee form to indicate that there has been a change in entity status (and file a micro entity form if the change is to micro entity status), and (2) pay the fee amount for a current correct entity.  Simply paying a different entity fee will not by itself change the entity status. 

Conclusion

While the above discussion provides a general overview of entity status and how to change it, patent applicants and patentees are encouraged to consider every application’s particular circumstances and to verify status entity requirements according to the current rules and regulations of the USPTO.

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