Why does micro entity status matter?

USPTO patent fees are generally proportionate to the size of the applicant. A large entity with over 500 employees must pay the full rate. A small entity pays 50% of the full rate. A micro entity pays only 25% of the full rate, which is a 75% discount off the full rate, and half the rate paid by a small entity.

What is a micro entity?

A micro entity must meet certain criteria, which includes specific income requirements and limits on patent filings, namely, no more than four previous US patent filings. As of 2021, the Maximum Qualifying Gross Income limit was in the low $200,000’s range.

The cap of 4 prior US patent applications does not include provisional patent applications or any US patent applications where the applicant assigned all ownership rights as a result of the applicant’s previous employment.

Can your status change to a small entity?

Even if an applicant is sure that they qualify as a micro entity upon the initial filing, circumstances can easily bump up its status to a small entity. This can happen in one of two ways.

First, an applicant’s income for a particular may increase and exceed the maximum qualifying gross income. Since incomes fluctuate from year to year, particularly for entrepreneurs working in a startup, certain vigilance is required to ensure that an applicant’s income remains under the cap every year while a patent application is pending or when maintenance fees are due.

Second, an applicant may file additional patent applications. Once the total number of patent applications, excluding provisionals, hits 6 or more, the applicant can no longer be micro.

What are the risks of incorrectly paying USPTO fees?

If an applicant has paid micro entity USPTO fees when in fact the applicant does not qualify for this status, the consequences of such wrong payments will depend upon the good faith of the applicant at the time of the payment(s). If made with an intent to deceive, then such discounted payments may be considered as a fraud practiced or attempted on the USPTO. [see 37 CFR 1.29(j)].

If prior erroneous payments were paid in good faith, then the applicant must promptly file a notification of loss of micro entity status along with itemized requirements of 37 CFR 1.29(k)(1).

What is our firm’s policy on micro entity cases?

Our firm believes the risks of patent invalidity or unenforceability due to wrong micro entity payments outweigh the cost savings of USPTO fees. If a pending application was previously filed as a micro entity, our firm might be willing to take over representation on a case-by-case basis.

For micro entity clients that transfer their pending patent applications to our firm, we may require that all new patent filings be filed under small entity status to err on the side of caution.

Keep in mind our patent team adheres to flat-fee billing for patent prosecution matters as much as reasonably possible. Fixed rates for patent prosecution and other IP matters are made possible by efficient processes that avoid the churning of unnecessary back-and-forth communications with clients.

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Vic Lin

Startup Patent Attorney, Cofounder at Innovation Capital Law Group
We align ourselves with Davids fighting Goliaths. Our registered patent attorneys help innovators get IP that drives funding, growth and sales. Email or call us so we can get to work on your IP: (949) 223-9623 | vlin@icaplaw.com

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