Appendix E: Entity Size 

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Large entity, small entity or micro-entity status

The US Patent and Trademark Office (USPTO) has a three tiered fee structure. The first tier is referred to as a large entity. By default, an applicant is a large entity and must pay large entity fees. The second tier is referred to as a small entity. The small entity pays a reduced fee of about 50% the fee compared to the large entity. The third tier is referred to as a micro-entity. The micro-entity pays a reduced fee of about 75% the fee compared to the large entity.

Small entity:

A small entity is defined as:

1. An independent inventor;
2. A small business; or
3. A non profit organization (e.g., university, 501(c)(3)).

Also, small entity status is lost if any patent rights are assigned or licensed to an entity that is a large entity. A small business is defined as an entity with 500 or fewer employees within the past year including part time employees. If your company is close to the 500 employee mark, the recommendation would be to pay the large entity fee to be on the safe side. Otherwise, validity of any patent maturing from the patent application may be in jeopardy. Small entity status is lost and large entity fees paid only when the issue fee or maintenance fee are being paid.

Micro-Entity:

A micro-entity is an entity that would qualify as a small entity plus the entity must not:

• have been named as an inventor on more than 4 previously filed patent applications;
• have, in the calendar year preceding the calendar year in which the applicable fee is paid, have a gross income exceeding 3 times the median household income; and
• have assigned, granted or conveyed (and is not under an obligation to do so) 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 paid, had a gross income exceeding 3 times the median household income.

As of 2017, three times the median household income is $169,548/year. If the inventor’s stated income levels is close to this amount, the recommendation would be file as a small entity to be on the safe side. Otherwise, validity of any patent maturing from the patent application may be in jeopardy. When applying the micro-entity definition, applicants are not considered to be named on a previously-filed application if he/she has assigned, or is obligated to assign, ownership rights as a result of previous employment.

The definition includes applicants who are employed by an institute of higher education (as defined in 20 U.S.C. 1001(a)) and have assigned, or are obligated to assign ownership to that institute of higher education.
Also, micro-entity status is lost and small entity fees paid as soon as the above criteria are not met.