Sometimes It's Good to Be Small…And Even Better to Be Micro! – Micro Entity Status Under The America Invents Act

Bigger is not always better, especially when it comes to paying many of the United States Patent and Trademark Office ("USPTO") required patent and patent application fees.  On March 19, 2013, the USPTO implemented a provision of the America Invents Act ("AIA") establishing micro entity status and providing a 75% discount to qualifying applicants for many of the USPTO patent and patent application fees.   

What is a Micro Entity? 

Prior to March 19, 2013, the USPTO had two entity status categories for applicants:  large entity and small entity.  Applicants who qualified as a small entity were provided a 50% reduction in most USPTO fees, whereas large entity applicants were required to pay the full, undiscounted amount of those fees.  Since March 19, 2013, the USPTO has three entity status categories: 

  • Large entity (undiscounted);
  • Small entity (50% fee discount); and,
  • The new micro entity that provides a qualifying applicant a reduction of 75% in most USPTO fees. 

The micro entity 75% reduction is applied to USPTO fees associated with filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.  The present basic fees (filing, searching, and examination fees) due when filing a U.S. patent application as a large entity total $1600.  With the micro entity discount applied, those initial basic fees are reduced to $400.

Do I Qualify?

There are two ways in which you as an inventor and/or applicant can qualify and establish micro entity status.  Under the first method, referred to as the "Gross Income Basis," you can establish micro entity status by satisfying the following requirements:

  • You and any joint inventors must first qualify as a small entity;
  • You or any joint inventor must not have been named as the inventor or a joint inventor on more than four previously-filed U.S. patent applications, excluding provisional applications; PCT applications (where the U.S. national fee was not paid); and patent applications where you assigned, or were under an obligation by contract or law to assign, all ownership rights in the application as the result of your or any joint inventor's previous employment (note that this does not apply to your current employment);
  • You or any joint inventor must not have had a gross income in the calendar year preceding the calendar year in which the fee is paid (as defined in section 61(a) of the Internal Revenue Code of 1986) exceeding three times the median household income as most recently reported by the Bureau of the Census (maximum gross income is currently $150,162); and,
  • You or any joint inventor must not have assigned, granted, or conveyed, or be under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the relevant application to an entity that does not meet the gross income requirement noted above.

Under the second method, referred to as the "Institution of Higher Education Basis," you can establish micro entity status by satisfying the following requirements: 

  • You must qualify as a small entity; and,
  • Your employer, from whom you obtain the majority of your income, must be an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965); or you must have assigned, granted, or conveyed, or be 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.

You qualify as a small entity, as required above, if you have not assigned, granted, conveyed, or licensed (and are under no contractual obligation to do so) any of the patent rights to a large entity, and you are one of the following:  a person (any inventor or other individual who owns the patent rights individually or jointly; a small business concern (500 or less employees); or a nonprofit organization (the organization can be foreign and can include universities).

Claiming Micro Entity Status

To claim micro entity status, you must submit a certification to the USPTO certifying that you have satisfied all of the requirements for micro entity status under either the Gross Income Basis or the Institution of Higher Education Basis.  Your certification must be signed by either a patent attorney or patent agent who is either of record or is acting in a representative capacity; the inventor if named as applicant; or all joint inventors if they are named as applicants.  Your certification must be filed with or before any payment of fees at the micro entity rate. 

Your certification need only be filed once in each application and you are not required to provide a certification of micro entity status with each fee payment.  However, you must make a determination as to whether the requirements for micro entity status exist at the time each fee payment is made.  If any requirement for micro entity status is no longer met, then you must notify the USPTO of loss of micro entity status and pay the required fee in the small or large entity amount, as appropriate.

Additional Points to Keep in Mind

  • If you are an entity assignee, none of your officers can sign the certification of micro entity status; rather, it must be signed by a patent attorney or patent agent who is either of record or is acting in a representative capacity.
  • If you fail to timely file your certification (that is, with or before any payment of fees), the USPTO will not issue a refund of fees based on a later filed certification.
  • If you no longer qualify as a micro entity, merely paying the fee at the small or large entity rate, as applicable, is not sufficient; you must also notify the USPTO of loss of status.
  • You must file a new certification with each new or related application, including continuation, divisional, continuation-in-part, or reissue applications.
  • Under the Institution of Higher Education Basis, an institution such as a nonprofit research foundation, technology transfer organization, or federal government research laboratory does not qualify as an "institution of higher education."
  • A university generally will be unable to make the micro entity certifications under the Institution of Higher Education Basis because a university is not its own "employee" and, while the university may be the assignee, it can't be the assignor to itself.  Therefore, listing the university as the applicant, rather than listing the inventor, would preclude eligibility for the micro entity discount under the Institution of Higher Education Basis.  To qualify for the micro entity discount, the university should file the application with the inventor identified as the applicant and the university as the assignee.
  • If you have any co-applicants, each of you must qualify for micro entity status, individually, under either the Gross Income Basis or the Institution of Higher Education Basis to be able to pay fees in the micro entity amount.
  • Under the Gross Income Basis, if you as the inventor or any joint inventors assign your or their ownership rights, then you, any joint inventors, and the assignee must certify as meeting the gross income limit and, if the assignee is a natural person, the assignee must additionally certify that he/she meets the application filing limit.  Under the Institution of Higher Education Basis, both you as the inventor, any joint inventors, and the assignee, if a natural person assignee, must certify as satisfying the requirements under the Institution of Higher Education Basis and, if the assignee is a juristic entity (such as a corporation or other entity), then it must certify that it qualifies as a small entity.  If a juristic entity assignee is the applicant (for example, instead of the inventor), it is unlikely it will qualify for micro entity status under the Institution of Higher Education Basis. 

Conclusion

Creation of the micro entity status is clearly meant to help reduce some of the cost barriers of entry for new and independent inventors who do not have the resources of other more prolific experienced inventors or larger companies.  However, as you can see from the above, determining if you qualify as a micro entity can be complex and confusing.  Such a determination is largely dependent on your particular situation, not only at the time of filing a patent application, but also at the time each USPTO fee associated with the patent application is paid.  In addition to determining whether or not you qualify as a micro entity, there are various nuances to the AIA that need to be understood and considered when claiming micro entity status.  In any event, when properly reviewed and considered, it may be a qualification you can use to achieve significant savings for at least your initial patent application filings.

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© 2017 Ward and Smith, P.A.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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