IP: Navigating microentity status under the America Invents Act

Which companies qualify, and what your business should consider

President Obama signed the America Invents Act (AIA),commonly referred to as the “patent reform bill,” into law late last year and business owners are still wondering what, if anything, it means to them. One interesting fee-related provision relates to the creation of a microentity designation. Currently, patent applicants are either designated as large entities or small entities with the latter getting a 50 percent decrease on most U.S. Patent and Trademark Office (PTO) patent fees. The microentity designation would mean a 75 percent decrease on most PTO patent fees. This status is generally reserved for institutions of higher education or those small entities with four or fewer previously-filed patent applications and agross income less than three times the median household income for the calendar year most recently reported by the Bureau of the Census. The PTO has published the proposed rules for microentity status and is asking for comments from the public until July 30.

A company can qualify for microentity status if:

For start-ups and small companies, it may be feasible to claim microentity status for the first few patent applications filed as long as the applicant fulfills all the following requirements:

  1. Qualifies as a small entity
  2. Has not been named as an inventor on more than four previously-filed patent applications
  3. Does not meet the income requirements, as stated earlier
  4. Has not assigned, granted or conveyed, and is not 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 is not a microentity.

It is important in these cases to note that an applicant is not considered to meet the second requirement above if the applicant has assigned or is under an obligation to by contract or law to assign all ownership rights in the application as the result of the applicant’s previous employment. Therefore, it is important for inventors who are starting new businesses or are working at businesses considered to be microentities to review, understand and keep copies of previously-signed employment agreements and contracts where intellectual property ownership was documented.

Contributing Author

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Sandra P. Thompson

Sandra P. Thompson, J.D., Ph.D., is a shareholder in the Orange County office of Buchalter Nemer. Her practice focuses on intellectual property, specifically, patents and...

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