USPTO Implements Micro-Entity Discount Effective March 2013

The United States Patent and Trademark Office (USPTO) is revising the rules of practice in patent cases to implement the micro entity provision of the Leahy-Smith America Invents Act (AIA). See Changes To Implement Micro Entity Status for Paying Patent Fees 77 FR 75019 (December 19, 2012).  Certain patent fees set or adjusted under the fee setting authority in the AIA will be reduced by seventy-five percent for micro entities. The USPTO is revising the rules of practice to set out the procedures pertaining to claiming micro entity status, paying patent fees as a micro entity, notification of loss of micro entity status, and correction of payments of patent fees paid erroneously in the micro entity amount.

In a separate rulemaking, the Office is in the process of proposing to set or adjust patent fees under the Leahy-Smith America Invents Act, including setting fees for micro entities with a seventy-five percent reduction. The Office has sought to address the concerns of its stakeholders as expressed in the public comment, and plans to seek additional public comment on the micro entity provisions after the Office and the public have gained experience with the micro entity procedures in operation. The Office will pursue further improvements to the micro entity procedures in light of the public comment and its experience with the micro entity procedures.

These new rules become effective March 19, 2013.

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Summary of Major Provisions

The Office is adding a provision to the rules of practice pertaining to micro entity status. The provision sets out the requirements to qualify as a micro entity tracking the statutory requirements for a micro entity set forth in section 10 of the Leahy-Smith America Invents Act.

The provision also sets out procedures relating to micro entity status that largely track the regulatory requirements and procedures in 37 CFR 1.27 for small entity status. These new procedures pertain to claiming micro entity status, paying patent fees as a micro entity, notifying the Office of loss of micro entity status, and correcting payments of patent fees paid erroneously in the micro entity amount. The procedures for claiming micro entity status require the filing of a certification of entitlement to micro entity status.

The Office is developing forms (paper and electronic) for use by members of the public to provide a certification of micro entity status. The procedures for paying fees as a micro entity provide that a micro entity certification need only be filed once in an application or patent, but that a fee may be paid in the micro entity amount only if the applicant or patentee is still entitled to micro entity status on the date the fee is paid. The procedures pertaining to notifying the Office of loss of micro entity status and correcting payments of patent fees paid erroneously in the micro entity amount track the corresponding small entity provisions for notifying the Office of loss of small entity status and correcting payments of patent fees paid erroneously in the small entity amount.

Establishing Micro-Entity Status

To establish micro entity status under the applicant must certify that:

1. The applicant qualifies as a small entity as defined in § 1.27;
2. Neither the applicant nor the inventor nor a joint inventor has been named as the inventor or a joint inventor on more than four previously filed patent applications, other than applications filed in another country, provisional applications under 35 U.S.C. 111(b), or international applications for which the basic national fee under 35 U.S.C. 41(a) was not paid;
3. Neither the applicant nor the inventor nor a joint inventor, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census; and
4. Neither the applicant nor the inventor nor a joint inventor has assigned, granted, or conveyed, nor is under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census.

The above four conditions come from 37 CFR 1.29, but are traced back directly to the AIA and are embodied in 35 U.S.C. 123(a). The requirement that gross income not exceed three times the median household income is specifically in the law enacted by Congress and signed by President Obama. It is not a creation of the USPTO.

The USPTO will indicate the income level that is three times the median household income for the calendar year most recently reported by the Bureau of the Census on its Internet Web site, with its Independent Inventor resource information, and on the Office’s certification of micro entity status (gross income basis) form (Form PTO/SB/15A). The Office will also make available resources to micro entities to help navigate the new micro entity procedures.

For those who may be thinking about asserting micro-entity status where it is not justified, think again. Yes, the AIA did remove the provisions from patent law that require there to be a lack of deceptive intent to fix certain problems. Prior to the AIA many mistakes could be rectified if there was no deceptive intent. The AIA made mistakes fixable even when there was deceptive intent. Notwithstanding, pursuant to Rule 1.29(j), any attempt to fraudulently establish status as a micro entity, or pay fees as a micro entity, shall be considered as a fraud practiced or attempted on the Office.

In responding to a comment asking for more information about what constitutes fraud and how the USPTO would handle close cases, presumably where the applicant qualified for small entity status and was “tempted” to go further and seek lower fees as a micro-entity where it was not justified. See comment 24 in the Federal Register Notice. To this the USPTO responded:

Applicants questioning how to resolve close situations or what penalties may result from a fraudulent certification should consider that: (1) The Federal Circuit has noted that an applicant would be ‘‘foolish’’ to claim small entity status if there is the slightest doubt about an applicant’s entitlement to claim small entity (DH Tech., 154 F.3d at 1343); (2) depending on future developments in the case law, it is possible that a patent could be held unenforceable as a consequence of a fraud or inequitable conduct relating to a micro entity or small entity certification (this was clearly possible for small entity certifications prior to the Federal  Circuit’s decision in Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276 (Fed. Cir. 2011).

The USPTO noted that the Federal Circuit has not yet decided the question of whether a false declaration of small entity status could constitute inequitable conduct under the Therasense standard. Still, it would be quite a risk to erroneously claim micro-entity status. Of course, if micro-entity status were claimed in good faith and there was a mistake or circumstances changed, that would not be fraud. See Rule 1.29(k).

For more please see the Federal Register Notice — Changes To Implement Micro Entity Status for Paying Patent Fees 77 FR 75019 (December 19, 2012).