Do I qualify for Micro-Entity-Status at the Patent Office?

By Dennis Crouch

As per their usual, the folks at Brown & Michaels have provided a concise write-up to help inventors and small companies understand whether they qualify for Micro-Entity-Status and the resulting fee reduction. http://www.bpmlegal.com/howsmall.html

The basic questions are:

  1. Does the applicant qualify as a small entity? (If no, then no micro-entity)
  2. Has the applicant or any joint inventor filed more than four US non-provisional patent applications? (If yes, then no micro-entity, unless those applications were from a prior employment and assigned to the prior employer)
  3. Did the applicant or any listed inventor have an income for the past year that was greater than $150,000? (If yes, then no micro-entity). This number will change annually based upon median US household income.
  4. Have rights in the application been promised or licensed to a non-micro-entity? (If yes, then no micro-entity)

In addition to the Brown & Michaels site above, the next stop for further reading is the USPTO’s final rules published in the Federal Register at 77 Fed. Reg. 75019.

The big deal here is that micro-entities receive a 75% reduction in USPTO fees.

26 thoughts on “Do I qualify for Micro-Entity-Status at the Patent Office?

  1. How so? Other than the part about fraudulently estabslishing small entity status, I do not know of anything else dealing with the issue of granting a license to a university to obtain micro entity status. Not something I would ever do or advise a client to do, however. Are you, perhaps, thinking of this commentary in the final rules?:

    “Thus, permitting an applicant who does not qualify as a small entity to take advantage of the benefits of micro entity status via 35 U.S.C. 123(d) would be inconsistent with the purposes of micro entity
    provisions of 35 U.S.C. 123. The statute and its legislative history do not, for example, contemplate a for-profit, large entity applicant becoming a ‘‘micro entity’’ (and thus obtaining a 75 percent discount) merely by licensing or assigning some interest (even merely a nominal or miniscule interest) to an institution of higher education.

    Accordingly, the Office has determined that equiring all micro entities to qualify as small entities is reasonably necessary and appropriate to ensure that applicants who do not qualify as a small entity do not inappropriately attempt to take advantage of micro entity status.”

    The problem with the above commentary is that it seems to allow a SMALL ENTITY to get micro entity status “merely by licensing or assigning some interest (even merely a nominal or miniscule interest) to an institution of higher education.” In addition, the commentary also included this:

    The Office plans to closely monitor the percentage of applicants claiming small entity
    status under 35 U.S.C. 123(d) and will propose additional limits under the authority provided in 35 U.S.C. 123(e) if it appears that a substantial number of applicants are engaging in sham transactions with institutions of higher education to obtain micro entity status.

  2. I hope this is an okay place to post this. I am working on building a free micro entity calculator. The goals being:
    (1) provide a consistent and easy to use method to for applicants to determine their micro entity status.
    (2) provide a means for them to certify (s-signature) their status.
    (3) provide both the applicant and their practitioner with signed pdf certifications which can be filed in the USPTO.
    (4) give practitioners a third party tool to show the USPTO they made a good faith effort to determine their client’s micro entity status before paying fees as a micro entity.

    Again this is meant to be a free tool and we are in very early beta testing. Would love your feedback: link to microentitycalculator.com

  3. Another way for someone to “game” the micro-entity status is to grant a license to a university. As long as a large entity has no right in the invention, a simple license to a university gets you the micro-entity status. Conceivably, you wouldn’t even need to inform the university that you gave them a license, and there are no apparent restrictions on the nature of the license (e.g., a non-exclusive license with a 30% royalty, limited to the field of treating erectile disfunction in duckbilled platyplusses with your new ED drug).

  4. “Not sure what happens if the university agrees to assign the application back to the inventor at some point down the road”

    Nothing happens as long as the employee-inventor is the named applicant, and still obtains the majority of their income from a university (and assuming there is no license to a large entity). The two ways of getting micro-entity status for university inventors are not mutually exclusive. If all of the inventors obtain the majority of their income from a university, and no large entity has any rights in the invention, then there is micro-entity status no matter who owns the patent/application.

  5. “If on the other hand, if the University is called “the applicant”, which under the new rules they can, they don’t get that discount…. Why?”

    Not trying to be a smarta%%, but it’s simply a result of how the law was written. It does not make any sense. Then again, in the majority of instances I’m not sure why it would be beneficial to name the university as the applicant. If the inventors are cooperative and are under an obligation to assign their rights to the university, there is no reason to name the university as the applicant. Or, am I missing some other benefit of naming the university as the applicant?

  6. I agree with your intrepretation, but it is not something I would advise a client to do. Also, the law permits the Patent Office to impose just about any other limits it wants. I am sure that if the PTO finds out a lot of people are doing what you described they will try to put an end to it. From AIA:
    “In addition to the limits imposed by this section, the Director may, in the Director’s discretion, impose income limits, annual filing limits, or other limits on who may qualify as a micro entity pursuant to this section if the Director determines that such additional limits are reasonably necessary to avoid an undue impact on other patent pplicants or owners or are otherwise reasonably ecessary and appropriate.”

  7. I’m talking about this:

    or (2) 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 the application is assigned to the university, the inventor/applicant has no reason to pay the PTO fees. Those are going to be paid by the assignee, the university. Under this rule, the university gets to pay micro-entity fees.

    If on the other hand, if the University is called “the applicant”, which under the new rules they can, they don’t get that discount…. Why?

  8. If I said it down below, then you should have responded to it down below. Its hard enough trying to figure out what you are going on about….

  9. That has nothing to do with difference or lack thereof between giving the inventor/applicant that assigns an application over to a university small entity status, even though the university is the one paying the fees

    Who said the university was paying the fees? My point is that a non-significant difference (from both the university’s perspective and the inventor/applicant’s perspective) is that the inventor is paying the micro-entity prosecution fee up front, not the university. If there’s no patent, the university pays nothing. It’s a no-risk situation for the university. It also promotes the filing of applications that wouldn’t otherwise take place … isn’t this result exactly what the “every patent is a job” pro-patentista types dream about?

  10. I didn’t say there was anything wrong with it. I said those ways to be a micro-entity were left of the list in the blog post.

    Down below you had written “With what are they trying to get away?” which implied that there was some chicanery or unfairness. That is what I was responding to.

  11. That has nothing to do with difference or lack thereof between giving the inventor/applicant that assigns an application over to a university small entity status, even though the university is the one paying the fees and the university filing the same application AS the applicant. Why should they get the discount in the first case, but not the second.

    Moreover, why is the university (or a corporation) now able to apply for a patent?

  12. I didn’t say there was anything wrong with it. I said those ways to be a micro-entity were left of the list in the blog post.

    Of course, there is plenty wrong with it. Why should someone that ears a million a year get micro-entity status simply because they work as Dean of a university… but… lets not digress…

  13. The significance may have to do with the way in which patent applications are “green-lighted” by universities. A lot of inventions (including stuff that’s actually reduced to practice) are not pursued by universities simply because the university does not have a licensee ready and waiting.

    In cases where the university is unwilling to pay for the cost of prosecuting a patent application directed to an employee’s invention, the employee may apply for the application herself and get the micro-entity discount. Note that in this circumstance, the invention is invariably going to be assigned to the university. Not sure what happens if the university agrees to assign the application back to the inventor at some point down the road …

  14. I don’t see why there is anything wrong with giving public or non-profit higher education insitutions a discount on fees. What’s the problem exactly? Is there something suspect about such institutions? Too many communists or something?

    What is a bit odd is this:

    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))

    So a professor without a job on the side and who earns, say, $200+ annually gets a discount simply because he is employed by such a university? That seems strange.

    The focus solely on “income” is also a bit odd. Some guy sitting on $5,000,000 bucks gets micro-entity status just because he’s not employed?

  15. In order to always take advantage of micro-entity level fees, could one not simply set-up a shell company that is small entity and has no income? Then, file all patent applications naming people inventors but with the shell company as the assignee-applicant. There would be no obligation for the shell company to assign the patent rights to a real company or an individual, but (perhaps) sometime in the future, after all fees have been paid, the shell company may/or may not assign the patents somewhere else. In such a situation, wouldn’t all the shell company’s patent applications be entitled to micro-entity fee levels?

    The only requirement that appears close to stopping this is the following:

    “(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,”

    But the bolded portion will never be true for an applicant-assignee because the inventors on the previous applications are always people never the shell company itself.

  16. what is the significant difference between those two situations?

    Fascinating. Suddenly Les is capable of appreciating “significant differences”! So tell us, Les, what is the “significant difference” between the two claims:

    1. A method comprising thinking [new thought].

    and

    1. A method comprising [old step] and thinking [new thought].

    Answer the question from the viewpoint of someone who is freely practicing [old step].

    Thanks! It’s great to see that you’ve learned a new trick.

  17. No, but it allows an employee of the University or someone that has assigned the application to a university to be the applicant and claim micro-entity status by virtue thereof.

    The significance of the difference is lost on me. If anyone can explain why the university as applicant can’t claim micro-entity status, but the assignor to a university as applicant can, please do.

    By why I mean, why did the powers that be write the law that way. With what are they trying to get away? Or what is the significant difference between those two situations?

  18. From the Fed Reg, link provided in the post above:

    35 U.S.C. 123(d) provides that a micro
    entity shall also include an applicant
    who certifies that: (1) 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 (2) 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
    .
    See id.
    As explained earlier, 35 U.S.C. 123(a)
    provides one basis under which an
    applicant may establish micro entity
    status, and 35 U.S.C. 123(d) provides
    another basis under which an applicant
    may establish micro entity status.

  19. Hi Mike:

    Thank you for all of those practice guides. It’s almost a service worth paying for to those of us in the trenches.

  20. > Shouldn’t there be a 5. Is the applicant a University? (If yes then the applicant is a micro-entity)

    No, that’s dealt with in the notes for (4) on our web page – while all of the preliminary publicity said that universities would be entitled to Micro Entity status, as the final rules came out they aren’t, and the USPTO FAQ explicitly says so.

    And thanks for the compliment, Dennis!

  21. I think that checklist is incomplete isn’t it? Shouldn’t there be a 5. Is the applicant a University? (If yes then the applicant is a micro-entity)…I could be wrong… but thats what I recall…

Comments are closed.