Most patent applicants are aware that there is a multi-tiered system for determining the government fees relating to patents and patent applications. All applicants are considered by default to be a "large entity" at the U.S. Patent Office, subject to the highest tier government fee schedule, unless they meet stringent qualifications for "small entity" or "micro-entity" status which qualifies them for a lower fee schedule. The qualifications are set forth in 37 CFR §1.27(a), a patent rule categorizing small entities into three groups: persons, small business concerns, and non-profit organizations.

          A "person" means an inventor or individual owner retaining complete ownership rights in the invention. A "non-profit" organization includes certain tax-exempt organizations, and universities or other higher education institutions. A qualifying "business concern" is a US for-profit business entity fulfilling the Small Business Administration (SBA) requirements. These requirements include: 1. the business concern including its affiliates, has five hundred or less employees; and 2. the business concern has not assigned, granted, conveyed or transferred invention rights to a large entity and is not obligated to do so. The employee count includes full and part-time employees. An affiliate is an entity having a substantial degree of control over the business concern or is under the control of the business concern.

          Applicants who qualify for micro-entity or small-entity status at the beginning of patent prosecution should understand their status may change any time during prosecution and after. For example, if a small entity obtains a patent and then licenses that patent to a large entity, maintenance fees for that patent must be paid at the large entity rate. Likewise, a new affiliation with another company may cause the total employee count to exceed 500, disqualifying the applicant for small entity status.

          Thus each time a government patent fee is due for payment, patent applicants or owners should evaluate all related licenses, transactions and affiliations before claiming other than large entity status. Patent rule 37 CFR § 1.28(c) requires that prior erroneous claims for fee reductions must have been unintentional, and the deficiency corrected at current rates, for patents to be enforceable. Consult an attorney if there is any doubt. Accumulated errors of this sort can be expensive to repair!

          Please feel free to refer this article or our firm to someone you know that needs patent protection and may or may not qualify for reduced government fees at the patent office.

          This article was prepared by Emily Thompson and reviewed by Vern Maine. Copyright 2012, Maine Cernota & Rardin.