Prosecuting and maintaining a patent can get expensive on government fees alone. Luckily, some applicants can qualify for discounts on patent prosecution expenses. Prior to the America Invents Act (AIA), the largest reduction of fees an applicant can have is 50%, and this only happens if the applicant qualifies as a “small entity” as defined in 37 C.F.R. § 1.27. On March 19, 2013, the AIA introduced the category of “micro entity” for applicants (37 C.F.R. § 1.29), and these applicants receive typically a 75% reduction of fees. Small entity and micro entity applicants receive discounts for most patent-related fees, though some of the exceptions are the processing fee for provisional applications and fees for statutory disclaimer (including terminal disclaimer).
An applicant may qualify for small entity status through three ways: (1) person, (2) small business concern, and (3) nonprofit organization. For all of these categories, the requirement is that the person (whether the inventor(s), assignee, obligated assignee, or representative of an insane or legally incapacitated inventor), the small business concern, or nonprofit organization, has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to an entity that is not a small entity or micro entity. A license to the US government or a license to a Federal agency resulting from a funding agreement does not disqualify the applicant from being a small entity.
The requirements to qualify for small entity as a small business concern or nonprofit organization contains additional requirements. For the small business concern, the additional requirement is that its number of employees, including affiliates, does not exceed 500 persons. For a nonprofit organization, any organization designated as a nonprofit organization according to the Internal Revenue Code or state statute will qualify. In addition, any foreign organization that would qualify as nonprofit by the Internal Revenue Code if it were located in the US would also qualify. Thirdly, a university or other institution of higher education located in any country also qualifies for small entity status as a nonprofit organization.
If you believe you are a small entity or have questions about what entity status you would be qualified for in paying your patent fees, please contact us and let us help you make sure you pay the right fees. Payment of the wrong fees can result in expiration or invalidation of your patent rights.