Micro Entity Early Stats

For many years, the US Patent Office has provided a 50% fee discount to qualified “small entities.” That option was expanded as part of the AIA to now also include “micro entities” who receive a 75% fee discount. The result is a potential savings of thousands of dollars during the life of a patent. Small entities can be fairly large – business concerns having up to 500 employees. Universities and 501(c)(3) nonprofit organizations also qualify. However, a patent that is licensed (or obligated to license or assign) to a larger entity does not qualify for the fee reduction. For micro entity status, the applicant must qualify as a small entity and then either meet the income/experience limitation (~<$150,000 in household income) or else be assigned (or obligated to be assigned) to a university or qualifying institute of higher learning. Although this fee reduction is important for small business interests, attorney fees still tend to constitute the majority of patenting costs (especially prior to issuance).

The chart below shows the percentage of recent patent applications filed by each entity type.

16 thoughts on “Micro Entity Early Stats

  1. 5

    To emphasize a point that has come up with married small and independent inventors, although the threshold amount may be referenced to household income, the statute is clear that it’s only the applicant’s gross income that matters. 35 USC § 123 states that to be eligible “an applicant . . . did not, in the calendar year preceding the calendar year in which the applicable fee is being paid, have a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding 3 times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census.”

    The USPTO’s AIA FAQ page (link to uspto.gov) also has the following: “Regardless whether an applicant, inventor, or joint inventor filed a joint tax return rather than a separate tax return in the preceding calendar year, the “gross income” limit applies to the amount of income the person would have reported as gross income if that person filed a separate tax return, which includes, for example, properly accounting for that person’s portion of interest, dividends, and capital gains from joint bank or brokerage accounts.”

    P.S. Nice new look on the website.

  2. 3


    Look at 35 USC 123(d). It doesn’t actually cover universities and 501(c)(3) nonprofit organizations. It only covers applicants who are employed by one or who have assigned or have to assign to one. It doesn’t cover where universities are the applicant themselves by the text. This is a huge hole, which I imagine was not on purpose. It’s like the drafters forgot the other provisions in the AIA changed the law to no longer require the applicants to be the inventors.

      1. 3.1.1

        I am not certain whether d) fully escapes the kerfuffle under equal treatment of TRIPS as the reference docs called out (I believe) that the institution of higher learning must be a US institution.

        Section e) is also interesting – what exactly might be the ‘adverse affects’ on other filers that may generate the Director (if ever again we have one) ability to otherwise limit micro entity filings?

  3. 2

    Put your IBM patent counsel hat on for a moment. You file 4000 US applications a year, are a large entity, and license the planet. How do you save money?

    1. Do not require your employees to assign anything to anybody — just disclose.
    3. Create an LLC with 3 or 4 employees. The LLC does not license IBM.
    4. Prior to filing an application, have the employee execute an assignment to this LLC.
    5. File and prosecute as a small entity.
    6. Once the patent issues, reassign the patent to IBM or to another LLC specifically for licensing.

    Legal, but is this ethical?

    1. 2.2


      Your choice of IBM as the perpetrator in your scheme is quizzical, as that entity is known for wanting to inflate (rather than hide) its patent count (as a marketing expense).

      Why per chance choose that entity?

    2. 2.3

      Ned, your comment must be understood for what it is, an intellectually interesting hypothesis. And for the amusing stimulation it provided, thanks.

      In the real world, however, I doubt that any corporate counsel who values his job would want to risk the validity of his company’s patents and the reputation of his corporation on a clever two-step to save relative peanuts in fees. Least of all a lawyer who works in house for IBM (I have not, by the way).

      1. 2.3.1

        Tour and (anon) I simply picked IBM because it files a very large number of patents per year, and comes out number 1 every year on the number of patents issuing. It’s patent fees have to be large.

        Now as you know, corporate middle-management types are judged on getting the job higher management gives them for the lest expense. Thus, the scheme I proposed would save such a manager millions, and it appears to be entirely legal.

        Dennis speaks to rules that might plug the loopholes here exposed. But rules are NOT LAW. The PTO can and should challenge whether the IBM LLC is entitled to an small entity fee, but the ultimate answer is a legal one. The example seems legal, which illustrates a problem with the law as it currently is worded.

        Now I have been part of large corporations where contracts were carefully analyzed for loopholes. Thus if a loophole were found, it was exploited. The “intent” of the drafters is not law and never has been. That is why corporate lawyers are careful in drafting contracts. They need to be.

        Ditto the drafters of legislation.


          Ned, note that the law give the Director some huge carte blanche (section e – my post at 3.1.1)

          Of course, both of us recognize that “the Director” is currently a gamed and empty vessel, but should (can?) Congress give away such unrestrained power to an executive…?

          As for care in drafting legislation – you are far too late to ring that bell for the AIA.


            anon, you are quite right that the definitions are from the rules and the rules would prevent the scenario I suggested.

  4. 1

    The chart below shows the percentage of recent patent applications filed by each entity type.

    Looks like 3% of those are micro-entity filers?

    I’m curious: what percent of those “micro-entities” are “micro-entities” under the “income/experience limitation”, as opposed to qualifying under the so-called “institute of higher learning” plan? Maybe we can get a rough idea from a small sample …?

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