TAKEAWAY: Practitioners should take care to determine the proper entity status of an application or patent and keep the USPTO apprised of any changes in status.
The U.S. Patent and Trademark Office (USPTO) permits applicants and patentees who meet the criteria for small or micro entity status to pay reduced fees. Most USPTO fees are reduced by 50 percent and 75 percent for small and micro entity status, respectively, relative to undiscounted status (see current fee schedule). Applicants and patentees have a duty to perform a thorough investigation before claiming small or micro entity status. Guidance is set forth in M.P.E.P. §§ 509.02-509.04.
Small entity status is available to a person, small business concern, or nonprofit organization provided they meet the prescribed criteria. Size standards for small business concerns are set forth in 13 C.F.R. §§ 121.801-121.805, currently set at 500 employees or fewer. Small entity status requires that the applicant or patentee has not transferred any rights (including licenses, partial assignments, and obligations to assign rights) to a party that would not qualify for small entity status. Micro entity status has additional requirements, including limitations on gross income and the number of applications an applicant/inventor has filed.
Applicants and patentees must notify the USPTO of a change in status at the appropriate junction. Once small entity status has been established, fees may be paid without regard to change in status until the issue fee or any maintenance fee is due. On the other hand, applicants and patentees must file a notification of a loss of entitlement to micro entity status before or when paying fees after the micro entity status is no longer appropriate. If an applicant or patentee establishes small or micro entity status erroneously and reduced fees were paid in good faith, the error may be excused by itemizing the deficient payment and paying the amount owed. This is typically the difference between the current amount due and previous erroneous payment.
In some cases, applicants and patentees may choose to pay undiscounted fees even if they could qualify for reduced fees. For example, conducting a thorough investigation on eligibility may be viewed as time consuming, especially with respect to parties that share rights or are entitled to some rights. Similarly, companies involved in business partnerships also may elect to stay at undiscounted status to avoid questions about status and hassles in regularly examining the proper status.