Cost Estimates: Small Entity vs. Large Entity
When providing a quote for a patent filing, whether it be a national stage or direct priority or standalone, it is always helpful to know upfront whether the applicant is a small or large entity since USPTO patent filing fees are dictated by the size of the applicant. Filing fees for a small entity are 50% of those for a large entity.
What is a Large Entity?
Large entity status is attributed to an applicant with 500 or more employees. The employee count would include any affiliates under the control of the applicant (see 13 CFR 121.103 on how to determine affiliation). The employees of an affiliate or affiliated company may need to be counted if such an entity falls within the principles of affiliation under Section 121.103 (e.g., when one controls the other or has the power to control the other).
What is a Small Entity?
To qualify for small entity status and thus pay half of the USPTO fees compared to a large entity, the applicant may be:
- a “small business concern” with fewer than 500 employees;
- individual inventor applicants (i.e., “persons”); or
- non-profit organizations regardless of size, including institutions of higher learning (e.g., universities).
The applicant must not have any obligation under contract or law to assign, grant, convey or license any rights in the invention to a large entity.
Case-by-case determination: same applicant can be both small entity and large entity
Entity status is determined on a case-by-case basis with respect to each particular patent application. For an applicant that starts off as a small entity, the question is whether this applicant has assigned, granted, conveyed or licensed the invention to a large entity, or is under an obligation to do so [see MPEP 509].
For example, it is entirely possible for an applicant to be a small entity in a first patent application, and yet be a large entity in a second patent application that is licensed to a large entity.
Is a nonprofit organization automatically a small entity?
No, a US nonprofit organization may qualify as a small entity if it falls under one of the following categories [see 37 CFR 1.27(a)]:
a) a university or other institution of higher education located in any country;
b) a 501(c)(3) corporation;
c) a nonprofit scientific or educational organization qualified under a nonprofit organization statue of a state of the US.
A foreign university or other institution of higher learning would automatically qualify as a small entity. All other foreign entities must qualify as a nonprofit under US federal law as a 501(c)(3) corporation or under US state law as a nonprofit scientific or educational organization.
How to request refund for overpayment of large entity fees
If large entity fees were mistakenly paid for an entity that was in fact a small entity, a request for the refund must be filed within three months of the date of the full fee payment [see 37 CFR 1.28]. This three-month period for requesting a refund is not extendable.
What if a large entity pays small entity fees?
The issue here is whether or not such an error occurred in good faith. If the erroneous payment(s) were in good faith, the patent owner may attempt to cure the prior deficient payments by submitting the balance due.
If the erroneous payments were not made in good faith, the result may be an unenforceable patent due to inequitable conduct. A false declaration of small entity status with strong evidence of a high level of intent to deceive may lead to a finding of inequitable conduct.
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