To Be or Not to Be a Micro Entity

When filing a patent application with the United States Patent and Trademark Office (USPTO), certain applicants have the option to designate “small entity status” or “micro entity status.” Claiming either small or micro entity status has some benefits, but can also have drawbacks. When faced with that decision, what should the company do?

Most patent applicants pay regular undiscounted patent fees (referred to as large entity fees). However, certain applicants qualify for reduced fees. A “small entity,” which the USPTO has defined as an individual, a small business concern (i.e., less than 500 employees), a 501(c)(3) nonprofit organization or a university, pays fees that are reduced (for the most part) by 50 percent, as long as the applicant has not assigned, licensed or otherwise conveyed an interest in the invention to a non-small entity. Other applicants may qualify for “micro entity status,” which entitles the applicant to a 75 percent reduction in official patent office fees.

Authorized by the American Invents Act, micro entity status is intended to benefit independent inventors that are just beginning to file for patent protection as well as applicants that work for institutions of higher education. An applicant can qualify for micro entity status as long as they qualify as a small entity and meet additional qualifications (see “Gross Income and Previous Application Basis” or the “U.S. Institution of Higher Education Basis“).

Like with most matters that appear to be too good to be true, micro entity status does have drawbacks, which ultimately can affect the validity of an issued patent. Unlike an application that claims small entity status, micro entity status must be re-evaluated and recertified each and every time a fee is paid to the USPTO. Having to pay a fee to the USPTO, as is the case with many governmental agencies, happens quite frequently during the patent prosecution process. Further, notification of a loss of entitlement to micro entity status, such as if a technology is licensed to a licensee who does not qualify for micro entity status, must be filed in the application or patent prior to paying, or at the time of paying, any fee after the date on which status as a micro entity is no longer appropriate. These burdens are not placed on those claiming small entity status, where small entity status only needs to be determined at the time of filing the application, at the time of payment of an issue fee or at the time of payment of a maintenance fee.

Of importance to emerging companies whose value is often tied closely to a handful of patents and applications, the validity of the patent may be at stake if micro entity status is incorrectly (and intentionally) claimed. If micro entity status was established in good faith but in error, the USPTO will excuse the error upon payment of a fee and completion of other formalities. If micro entity status was established fraudulently, the patent may be held as invalid.

Alas, as with many decisions entrepreneurs and business owners make, the decision to file as a small entity or as a micro entity often requires a cost-benefit analysis of whether the cost savings of micro entity status justifies the additional hurdles and pitfalls during the patent process.

Dr. Kevin Dietz and Dr. Paula Estrada de Martin
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