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The U.S. Patent Office is Forgiving about Small Entity Status

Small entity status gives individuals and companies substantial discounts on many government fees associated with patent filings.

In the mid-1990s, there were district court decisions in which a patentee faced negative legal consequences for erroneously or improperly claiming small entity status. See (1) Haden Schweitzer Corp. v. Arthur B. Myr Industries, Inc., 901 F. Supp. 1235, 36 U.S.P.Q.2d 1020 (E.D. Mich. 1995) (failure to pay maintenance fee in the correct amount results in intervening rights under 35 U.S.C. 41(c) 2)); and (2) DH Technology, Inc. v. Synergstex International, Inc., 937 F. Supp. 902, 40 U.S.P.Q.2d 1754 (N.D. Cal. 1996) (failure to timely pay issue fee in the correct amount results in patent lapse under 35 U.S.C. 151).

In light of the uncertainty that existed in the mid-1990s concerning the consequences of erroneously claiming small entity status, the Office advised applicants and patentees at that time that they could avoid this uncertainty by not claiming small entity status unless it was absolutely certain that the applicant or patentee is entitled to small entity status (i.e., resolving any doubt, uncertainty, or lack of information in favor of payment of the full fee). See Changes to Patent Practice and Procedure, 62 FR 53131, 53135 (Oct. 10, 1997).

However, in 1998, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) reversed the district court’s decision in DH Technology and held that an applicant may correct an erroneous payment of patent fees in the small entity amount under 37 CFR 1.28 without penalty, such as patent lapse, as long as small entity status was established in good faith and the small entity fees were paid in good faith. See DH Tech. v. Synergystex Int’l, 154 F.3d 1333, 1343, 47 U.S.P.Q.2d 1865, 1872 (Fed. Cir. 1998). Thus, subsequent to 1998 and the Federal Circuit’s decision, the only patent applicants or patentees who face negative legal consequences from erroneously claiming small entity status are those applicants who have no basis for making a good faith claim to small entity status.

37 C.F.R. 1.317 provides the following, “If the issue fee paid is the amount specified in the notice of allowance, but a higher amount is required at the time the issue fee is paid, any remaining balance of the issue fee is to be paid within three months from the date of notice thereof.”

37 C.F.R. 1.28(c) states: “[i]f status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by Sec. 1.27(g)(2), the error will be excused upon compliance with the [requirements of 37 CFR 1.28(c)].”

Accordingly, the U.S. Patent Office is pretty forgiving as to procedures and at least as to paying fees once a patent has issued. The policy behind the leniency is to allow patent owners to focus on the substance of their patents, and not on the procedures to keep patents viable. If you have questions about the requirements for small entity status, please see a patent attorney.