Small Entity Fees

These are a concession made to impecunious applicants by the US and Canadian Patent Offices.  You declare to them that you are “small”, and in return for that they only charge you half fees.  So, a great deal, then?

No, it’s not.  It is a classic example of a good idea whose implementation means that it can cause great harm.  Go and have a look at the US definition of a small entity.  As you can see, it is relatively complex.  However, there are three broad classes:

  • and individual
  • a business who meets the size standards set forth in 13 CFR 121.801 through 121.805 (what? you don’t know these?)
  • a non-profit organisation such as a charity or university.

So far, so good.  However, there is a proviso to all of these, which is that the applicant must also be one that:

Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify for small entity status as a person, small business concern, or nonprofit organization…

It’s obvious why that is needed – if it were not there, any organisation of any type or size could just set up a small company to own the patent or patent application, and licence the idea back to them.  However, it means that a genuinely small entity who has reached a deal with a large entity is no longer a small entity.

There lies the risk.  You can withdraw a claim to small entity status at any time, which means that most systems will assume that the status remains until instructions are received to withdraw it.  This means that you must tell your patent attorneys the moment you reach a deal with a large entity.  If they pay a fee at the small entity rate, perhaps one that you instructed a few months ago, on a date when you are not entitled to the fee reduction, then that is “fraud on the Patent Office” and you may lose the entire patent.

I have seen this happen in practice; small companies are bought out or agree a lucrative licensing deal.  Then a fee falls due.  A clerk somewhere is not told about the change, and pays the fee at the wrong rate… and the patent is instantly worthless.

That’s quite a downside risk.  Meanwhile, the upside benefit of halving the filing, examination and issue fees on a US application is just over $1,000.  Bear in mind that the official fees are just one outgoing, and that your patent attorney is unlikely to be offering half fees to small entities, and this figure is likely to be lost in the overall cost of patenting a typical idea.  So, plenty of risk, not much benefit.

Or, to put it differently, don’t bother with small entity fees unless you’re desperate.  After all, you do want to be bought out by a rich benefactor, don’t you?

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