Entity Status
When filing an application, the applicant (usually the patent owner such as an assignee or the inventor if he has not assigned the rights) must determine its entity status: large, small, or micro. Claiming “small entity status” entitles the applicant to pay reduced Patent and Trademark Office (PTO) fees (generally 50%) as compared to applicants claiming large entity status. Claiming “micro entity status” entitles the applicant to pay reduced PTO fees (generally 25%) as compared to applicants claiming large entity status. Put another way, for a $1000 PTO fee, a small entity might be able to pay $500 and a micro entity might be able to pay $250.
Incorrectly paying small and micro entity fees (if the owner is not entitled to do so) could result in the loss of patent rights. Ultimately, therefore, paying reduced PTO fees by claiming small or micro entity status may not be worth the risks if there is any question as to the accuracy of the entity status.
For a small entity, entity status should be evaluated at filing, issuance, and when maintenance fees are due. For a micro entity, entity status should be evaluated every time it changes during the patent process, and at least at any time fees are due in the PTO (e.g. filing, responses in which fees are paid, issuance, and maintenance fees). This added burden may reduce the value of claiming micro entity status.
Large Entity: If any rights in the invention have been assigned, granted, conveyed, or licensed to any party that could be considered to be a large entity, fees must be paid as a large entity. If there is any obligation under contract or law to assign, grant, convey, or license any rights in the invention to any party that could be considered to be a large entity, fees must be paid as a large entity. Case law can be very conservatively interpreted to mean that a small entity loses its status by licensing to use (such as software licenses) or by an indirect affiliation (through other parties) with a large entity. If there is any question as to an entity’s status, fees should be paid as a large entity.
Small Entity: The PTO has defined four categories of concerns that qualify as “small entity”:
- An individual inventor;
- A small business concern – a term not defined by the PTO, but by the Small Business Administration (SBA) (see 13 CFR 121.801-121.805) - is any concern (including its affiliates - which should be construed broadly to encompass almost any situation where an otherwise small company may be interacting with a large business concern) that does not exceed 500 employees and has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to ... any concern which would not qualify as a non-profit organization or a small business concern as defined by the SBA (see https://www.sba.gov/federal-contracting/contracting-guide/size-standards AND/OR use the SBA’s “Size Standards Tool” at https://www.sba.gov/size-standards/):
- A university - a wholly owned subsidiary of a university is considered a part of the university and may claim small-entity status; and
- A nonprofit organization - a wholly owned subsidiary of a nonprofit organization is considered a part of the nonprofit organization and may claim small-entity status.
Micro Entity: The PTO now offers additional discounts to micro entities. Because of the difficulty in determining this status, the frequency at which this status must be reevaluated, and the risks involved in determining it incorrectly (patent invalidation), selection of this status is highly discouraged.