Can You Pay Lower US Patent Office Fees Under Micro-Entity Rules?

The America Invents Act, passed by Congress last year, includes a provision which carves out a new group of inventors who can pay 75% less in government fees when obtaining and maintaining their patents.

But that 75% reduction provision is not yet in effect. And the US Patent Office has not said when it will go into effect. However, we may have now seen the first substantive action toward implementing that provision of the legislation. Namely, last May (2012), the US Patent Office published a proposed set of rules that would, if/when finalized, establish fees for applicants who meet the qualifications set by the legislation, for “micro-entities.”

While micro-entity status will not affect a large number of people, for those who qualify, and when these rules are finally implemented, these new, reduced, fees will provide significant savings in government fees for those few who qualify.

Under the current rules, there are two classes of applicants relative to the fees paid to the US Patent Office.

We start with the standard government fees, which are often referred to as “large entity” fees. Standard fees apply to most patent applicants who are businesses, or who assign their inventions to their businesses/employers.

A second group of entities, typically referred to as “small entities”, are entitled to pay government fees which are reduced by 50% relative to the fees paid by large entities.

The 2011 America Invents Act created a third group of entities, identified as “micro entities”, who will be entitled to pay government fees which are reduced by 75% relative to the fees paid by large entities.

In general, an applicant who is neither a small entity nor a micro-entity is a “large entity” for fee-payment purposes, and must pay the standard government fees.

Those who qualify for small entity status or micro entity status can realize substantial savings. As of today, the standard minimum fee, paid by large entities, when a new utility patent application is filed, is US$1,250.00. For the same application, a small entity pays only US$625.00.

When the micro entity rules finally take effect, a qualifying micro-entity will pay, according to today’s fee schedule, only US$313.50.

To maintain a patent in effect after grant, the patent owner must pay maintenance fees at the 3.5, 7.5, and 11.5-year anniversaries from the date the patent was granted. The total costs of these three government maintenance fees, according to the current fee schedule, are US$8,710.00, for a large entity and US$4,355.00 for a small entity. We expect the total cost for a micro entity to be US$2,177.50.

There are consequences if an entity, patent owner, incorrectly states their entity status relative to these fees. The stated penalties for mis-stating status, and for paying lower fees than should be paid, can be severe. Historically, where applicants paid the small entity fee without a good faith basis for considering themselves to be small entities, and they got caught, the courts have determined that the affected patents were invalid because of such mis-statements of status.

However, according to current law, once the patent owner realizes that small entity status has been claimed incorrectly, the situation can be easily corrected by paying the increased fee amounts, namely paying the additional amounts that should have been paid, and providing documents which attest to the lack of deceptive intent in earlier paying the small entity fees.

While uncommon, a single entity, especially an entity which typically qualifies for small entity status, can have different status for different patents or applications. Thus, one must thoroughly investigate the correct status for each and every case.

The following summarizes the qualifications for each category of fees.

A small entity is
(a) a nonprofit organization; or
(b) an entity which/who does not, together with all affiliates, have 500 or more employees; and
(c) has not assigned, licensed or otherwise conveyed, and is under no obligation to assign, license, or otherwise convey, an interest in the invention to a non-small entity.

A micro-entity, as defined in the legislation, is one who
(d) has not been named as an inventor on more than 4 prior patent applications (other than applications assigned to a prior employer); and
(e) has gross income less than 3 times the amount reported in the U.S. as the median household income for the previous calendar year (currently $149,331, or 3X$49,777); and
(f) has not assigned, licensed or otherwise granted, and is under no obligation to assign, license, or otherwise grant, an interest in the invention to an entity who has gross income more than the amount listed above (unless the entity is an institution of higher education); and
(g) also meets the requirement for small entity status.

If the patent application names more than one inventor or applicant, each inventor or applicant must qualify for the micro entity status. In addition, the legislation also requires that an inventor/applicant claiming micro entity status shall be required to submit a certification stating their entitlement to that status.

A large entity is any entity that does not qualify as a small entity or as a micro entity.

When will these new rules go into affect? When can we start claiming and paying according to the micro-entity rules? We don’t know. We have the first step which was the publication of the proposed rules by the US Patent Office last May. The Patent Office is currently taking comments from the public. In past situations where new rules were being drafted, we note that the Patent Office received the public comments, evaluated those comments and then published its final rules and provided a date when those rules would take effect. While we have nothing official to go on for implementation of these micro-entity rules, based on the writer’s experience, it would appear that these rules will probably go into effect first quarter of 2013.

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