What are Small Entity and Micro Entity Status?

Key Facts

• Small entity discount: 60% off most fees, under 35 U.S.C. § 41(h) and 37 C.F.R. § 1.27
• Micro entity discount: 80% off most fees, under 35 U.S.C. § 123 and 37 C.F.R. § 1.29
• Small entity test: Independent inventor, nonprofit organization, or business with 500 or fewer employees including affiliates, with no rights assigned or licensed to an entity that would not qualify
• Micro entity test: Small entity, plus no inventor named on more than 4 previous non-provisional applications, gross income under 3 times the US median household income, and no obligation to assign to an entity over that income limit; or an institution of higher education
• When checked: At filing, at payment of the issue fee, and at each maintenance fee
• Fees not discounted: A handful, including some petition and service fees

Small Entity Status

The 500-employee count includes affiliates, meaning any entity that controls, is controlled by, or is under common control with the applicant. A startup that is majority owned by a large corporation does not qualify. Nor does a small company that has granted an exclusive license to a large one, because the rule disqualifies any applicant that has assigned, granted, conveyed, or licensed rights to a non-qualifying entity, or is under an obligation to do so.

Status is asserted simply by paying the small entity fee amount. No form is required, though one is available. The assertion applies until the applicant notifies the USPTO of a change.

Micro Entity Status

Micro entity status must be certified on a specific form each time it is relied upon. The four-application limit counts every prior US non-provisional application on which the inventor was named, excluding provisionals, PCT applications that did not enter the US national phase, and applications assigned as a result of prior employment. The income limit is recomputed annually by the USPTO from census data and applies to each inventor and to any assignee.

Universities qualify through a separate route: an applicant whose employer is an institution of higher education, or that has assigned or is obligated to assign to one, may claim micro entity status regardless of income.

When Status Changes

Status is determined at the time each fee is paid. Growth past 500 employees, acquisition by a larger company, and licensing to a large partner all end small entity eligibility for future payments; fees already paid correctly do not need to be corrected. The USPTO must be notified of loss of entitlement before or with the next fee.

The Risk of Getting It Wrong

Paying a small or micro entity fee without entitlement is treated as a fee deficiency. If it was done in good faith, the applicant pays the difference and the patent is unaffected. If it was done with intent to deceive, the patent can be held unenforceable. Because an exclusive license to a large company is the most commonly overlooked disqualifier, portfolio management systems should record licensing status on each asset and flag entity status for review before each fee payment.