Patent a Small Entity: Everything You Need to Know
To patent a small entity, patent fees are required but the US government works to help inventors and small businesses afford the process by lowering the fees.3 min read
To patent a small entity, patent fees are required. However, the United States government works to help inventors and small businesses afford the process by lessening their fees, compared to worldwide corporations.
When inventors pay patent fees to the United States Patent and Trademark Office (USPTO) they can choose from three columns. Column A indicates a regular fee. Column B indicates a small entity. Column C indicates a micro-entity.
If you qualify as a small entity, you will receive a 50% discount. If you qualify for micro-entity status, you will receive a 75% discount. This provides a little bit of a break to smaller entities and independent investors, encouraging innovation.
How to Qualify as a Small Entity
If you believe you may qualify as a small entity, you'll need to verify that and sign a declaration when you pay your fees. However, if you are licensing or assigning the patent to a larger entity, you cannot claim small entity status.
Something like this may occur if you were licensing a patent to a large corporation. Anyone who erroneously claims small entity status would be committing an act of inequitable conduct and could lose their patent rights.
To qualify as a small entity, one of the following must be true:
- You're an individual
- You're a small business with 500 employees or less
- You're a university
- You're a 501(c)(3) nonprofit
How to Qualify as a Micro-Entity
If you'd like to apply as a micro-entity, you must be a small entity and meet the following criteria:
- You cannot be cited as the inventor on more than four utility patents, plant patents, or design patents.
Note: This may not include international applications owned by a previous employer.
- Your gross income from the prior year must be less than three times the median household income, as reported by the United States Census Bureau.
- The majority of your income must come from an institution for higher learning or you must be assigning your patent to an institution for higher learning. This includes an accredited nonprofit or public institution that accepts students for two-year programs or more.
These rules apply to every joint investor. Therefore, no investor can be listed as an investor on five applications or more. Also, no investor may have a reported gross income that exceeds three times the median household income from the prior year.
Patent Applications That Qualify As a Small Entity
The USPTO defined four kinds of patent applications that meet small entity standards. They are:
- Individual investors
- Nonprofit organizations
- Small business concerns
The definitions for individual inventors, nonprofit organizations, and universities are all defined in the USPTO patent rules. Interestingly, a wholly-owned subsidiary of a nonprofit or a university may apply for small entity status.
The benefits to filing as a small business concern means you'll pay half the required filing fees and issue fees, as well as any other fees that are billed to the larger entities. This term, however, is not defined in patent regulations.
Jurisdiction Over Small Business Concerns
The Small Business Administration (SBA) holds complete jurisdiction over matters relating to small businesses. The USPTO does not accept petitions pertaining to size determinations. The SBA has defined small business concerns as such:
- A concern that is independently owned and operated
- A concern that is not dominant in its field
- A concern that meets the required materials for an industry where the number of employees 500 or less, or the annual receipts are less than $7 million, or the annual profits are more than $2 million
The definition of a person includes any inventor or another individual who has not assigned, conveyed, granted, or licensed any rights to the invention.
The definition of a nonprofit organization includes any organization that has not assigned, conveyed, granted, or licensed any rights to the invention to any concern, organization, or person which would never qualify as a small business concern, person, or nonprofit organization.
If you would like to license your patent to a federal agency, a license to the government which results from a rights determination under Executive Order 10096 will not constitute a license that prohibits small entity status.
If you need help with a small patent entity, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.