How Can I Get Reduced Patent Filing Fees? Episode 26

(This episode first aired in 2018, some details may have changed)

Documents Needed for Special Programs

In past episodes and in upcoming ones, I’m going through the documents you need for filing your application.

When filling out some of these forms, you’ll be asked whether you qualify as a small entity or micro entity. But what do those terms mean? The U.S. Patent and Trademark Office (USPTO) charges different fees depending on the type of applicant. It doesn’t want to charge an independent inventor working out of her garage the same fees that it charges a corporation like Apple. To address this, the USPTO groups applicants into three categories: large entity, small entity, and micro entity. For almost all fees, a small entity pays half of what a large entity pays, and a micro entity pays about one-quarter of the large entity fee.

For example, there’s a fee if your patent issues. For a large entity, the issue fee is $1,000. If you qualify as a small entity, it’s $500, and if you qualify as a micro entity, it’s $250. Keep in mind, these are just USPTO fees; they do not include attorney’s fees. Attorneys generally do not adjust their fees based on an applicant’s entity status—they charge for the time and effort required for the project they’re handling.

Determining Small Entity Status

Let’s figure out if you qualify for reduced fees. We’ll start with small entity status because if you don’t qualify as a small entity, then you’re automatically a large entity. Only after establishing that you qualify as a small entity can we determine whether you also qualify for micro entity status.

So, what is a small entity? Generally, you qualify as a small entity if you are:

• A non-profit organization,

• An educational institution, or

• A company with fewer than 500 employees.

However, you should be careful with the 500-employee rule. It’s not just the number of employees in the company itself, but also any affiliated entities that must be counted.

For example, a company may be small, but if it’s a subsidiary of a larger company, you might have to count the employees of the controlling company and its affiliates. Similarly, if you have investors that control your company, and those investors are part of a large investment firm, you may need to count the employees of the investment firm as well.

Even if you’re an individual inventor, but you are obligated to assign your invention to a large company, you must count the employees of that company. If you’re unsure whether you qualify as a small entity, you should consult an attorney before making a final determination.

Determining Micro Entity Status

Once you’ve established that you’re a small entity, you can determine whether you qualify for even lower fees as a micro entity. There are two ways to qualify:

1. Income-based qualification, or

2. Association with a U.S. institution of higher education.

Under the higher education basis, you only need to be an employee of a university—the university itself cannot be the applicant. This is a special fee reduction that applies only to individual employees of U.S. institutions of higher education, regardless of their income.

For most inventors, however, micro entity qualification will depend on income. The USPTO adjusts the income threshold annually, but as of April 2018, the limit was $177,117. If your personal income is below this threshold, you may qualify as a micro entity. Note that only your personal income counts—not your spouse’s, even if you file a joint tax return.

Additionally, you cannot have been named as an inventor on more than four prior patent applications. Some applications don’t count toward this limit, such as provisional applications and certain international filings. If you have questions about whether a previous filing affects your micro entity status, consult an attorney.

Important Considerations for Micro Entity Status

There are two important caveats for micro entity status under the income-based qualification:

1. If you have joint inventors, each inventor must qualify individually. If even one inventor does not qualify, then the entire application must be filed as a small entity instead.

2. Even if your income is below the threshold, you cannot qualify as a micro entity if you have assigned, licensed, or are obligated to assign or license your invention to an entity that does not qualify as a micro entity.

Unlike small entity status—where you simply check a box on the Application Data Sheet—you must file a one-page certification form to claim micro entity status. The form can be found by searching online for USPTO forms PTO/SB/15A (for income-based qualification) or PTO/SB/15B (for higher-education-based qualification).

The form is straightforward. You need to provide:

• The application or patent number (if available),

• The name of the first inventor,

• The title of the invention,

• A certification that you qualify,

• Your signature and contact information.

If you are qualifying under the higher education basis, you must also check whether you qualify as a university employee or because you have assigned/licensed the invention to a university.

The Risk of Incorrect Entity Status

When determining whether you are a small entity or micro entity, consider whether saving a few hundred or a few thousand dollars is worth the risk of incorrectly classifying yourself.

If you mistakenly claim small entity or micro entity status, you can correct the mistake by paying the difference in fees. However, if you intentionally misrepresent your status, it could be considered inequitable conduct, rendering your entire patent unenforceable.

You are required to inform the USPTO of your entity status only three times:

1. When you file the patent application,

2. When you pay the issue fee, and

3. When you pay any maintenance fees.

If you qualified as a micro entity when you filed the application but later exceed the income threshold, you must update your status when you pay the issue fee or maintenance fees. Until that point, you can continue paying micro entity fees.

Conclusion

In summary, you likely qualify as a micro entity if:

• You are an independent inventor making $177,117 or less annually, and

• You have not been named on more than four prior patent applications.

If you don’t qualify as a micro entity, you may still qualify as a small entity, which lets you pay half of the USPTO fees, provided your business has fewer than 500 employees.

If you don’t fit into either of these categories, you are considered a large entity and must pay the full USPTO fees.

That’s all for today’s episode on how you might qualify for reduced patent filing fees. I’m Adam Diament, and until next time, keep on inventing!