Searching for Prior Art

A question that is often asked by new inventors is:  should I do a prior art search before filing a patent application?  The answer, as in most areas of law and life in general, is that it depends.

For individual inventors and smaller companies including start-ups, in most circumstances, I would suggest that yes you should do a prior art search.  Many larger companies have a number of scientists and technologists who are familiar with the technology and what their competitors are doing.  They can also absorb the potential risks of not doing a prior art search.  Most small entities and start-ups do not and can not.

Many, if not most, new inventors are convinced that they are the only ones that have thought of the idea that they seek to patent.  They believe that they have had a flash of insight that no one else has had.  They may even do a bit of Internet research to convince themselves that they are in the clear and that there is no need to do a prior art search.  They are often surprised by the results when they do have a search conducted.

The risks of not doing a search are several.  First, and most importantly, if you plan to commercialize or market the invention as a product or service, you don’t want to get slapped with an infringement lawsuit right out of the gate.  These suits are extremely expensive even if you don’t get hit with a large damage award.  There is a risk that you will not be able to afford to defend such a suit and that all of your hard work in developing the invention, getting it through the prototype stage, and getting it to market would be wasted.  Usually, there is a significant monetary and time investment involved with these steps.  There is also a risk that a court could issue an injunction that would prohibit you from making, using, selling, or offering the invention for sale.

Second, conducting a prior art search prior to preparing a patent application may make prosecution of the application more efficient and cost-effective.  By knowing the closest prior art, the patent application and the claims may be prepared more strategically to take advantage of areas of patentability.  Claims may be prepared that get close to the prior art without encroaching on it.  It may be possible to develop arguments and strategies for convincing the patent examiner that the invention is non-obvious vis-a-vis the prior art.

You may find that the invention needs to be reconfigured to “design around” patents that are found.  This could add to the value of the invention and potentially give you a competitive advantage.  You may find, however, that someone else has a patent that directly prevents you from patenting your invention.  In such a case, you may determine whether to abandon your endeavor or seek to partner with or secure a license from the patent holder.

The main disadvantages of conducting a prior art search are that it will cost some money and that any material prior art that is uncovered must be disclosed to the Patent Office during prosecution of any patent application that is filed for your invention.  The cost is usually not significant in the overall scheme of bringing a new product or service to market and preparing and prosecuting a patent application.  In fact, a good prior art search can make these endeavors more efficient.  Most patent applicants are looking for strong patent protection in which case it is not a disadvantage to bring prior art to the patent examiner’s attention.  This will permit the patent to be “vetted” over that prior art.

Mechanics

A patent attorney can assist you in having a prior art search performed.  A brief written description and possibly a few drawings or sketches of the invention should be prepared.  This information is provided on a confidential basis to a professional patent search firm that will conduct the patent search.  These firms are usually located in Northern Virginia near the PTO and are staffed with engineers and scientists, at least some of whom may be former patent examiners.  The search firm provides the information to a person with skill in searching the subject matter of the invention who conducts the search.

A good “freedom to operate” and patentability search takes a couple of weeks to complete and usually costs less than $2,000, often less than $1,000.  For a “freedom to operate search,” the searchers will search that claims of US patents that are currently in effect.  For a patentability search, the searchers will also search for older US patents, foreign patents, and non-patent literature that may disclose the invention.

The results will typically include a stack of the closest 20-30 patents and other prior art references.  My practice is to provide these results to the inventor with instructions to review them in detail and to bring any that the inventor believes warrant further review by me to my attention, in any event the closest 3-4.  This saves on attorney time of having to review the entire stack.  The inventor is usually in the best position to determine any differences or similarities between the references and the invention.  At that point, we determine how best to proceed with the matter based on the search results.

One might reasonably ask why the inventor or the attorney cannot themselves conduct the prior art search on Google, the PTO website, or another search engine.  One answer is that it is far more efficient for these experts to perform the search than for the attorney to do so.  Their hourly rates are typically much less.  Second, I am always amazed that the professional searchers find prior art that I or the inventors have not been able to find.

In sum, I almost always advise a new inventor, small company, or start-up to have a prior art search done prior to marketing the invention or preparing a patent application.  In my opinion, the advantages of such a search far outweigh the risks or costs of doing so.

Federal Circuit Allows PTO to Overrule Court Decision Again

The Federal Circuit has again permitted the PTO to overrule a decision by a district court, affirmed on appeal by the Federal Circuit.  As in Fresenius USA, Inc. v. Baxter Int’l, Inc., Judge O’Malley has issued a vigorous dissent.  ePlus, Inc. v. Lawson Software, Inc.

In ePlus, the district court had found a number of asserted claims to not be invalid and a jury had found them to be infringed.  The court had issued an injunction against further infringement.  On appeal, the Federal Circuit reversed on a number of the issues, but affirmed that one of the asserted claims was not invalid and was infringed.  The court remanded the case to the district court to make necessary modifications to the injunction.

On remand, the district court modified the injunction and found the defendant to be in contempt for violating the injunction.  You can probably tell where this is going.  In a reexamination, the PTO ruled that the infringed claim was invalid, the finding of which was affirmed in a separate opinion by the Federal Circuit, while the present appeal was pending.

In the present appeal, due to the PTO overruling the court’s invalidity determination, the divided panel vacated the injunction and the contempt order.

The majority, per Chief Judge Prost, argue that the injunction was not final when the case was remanded to the district court.  Therefore, the injunction and the civil contempt citation based on violation thereof must be vacated.  This result is dictated by Fresenius.

Judge O’Malley agrees with the majority that the ongoing injunction must be set aside once the patent claim upon which it was based is no longer in effect.  Where she differs with the majority is that she doesn’t believe that all penalties for violating the injunction that was in effect for four years should also be erased.

She seeks to distinguish Fresenius on a number of grounds.  First, she notes that the judgment of validity and infringement of the claim at issue was final as between ePlus and Lawson.  The Federal Circuit had affirmed the judgment of the district court on this issue.  

Second, the injunction was in effect.  The remand instructions were different from Fresenius where the court had instructed the district court to “revise or reconsider” the injunction, which was vacated.  In this case, the Federal Circuit did not vacate the injunction, but had merely instructed the district court to “consider” necessary changes to the injunction.  Those changes were made by the district court and are now the subject of the present appeal.  Finally, when challenging a contempt ruling, the challenger cannot challenge the underlying reasons for the injunction; it can only challenge whether it actually violated the injunction.

Next, Judge O’Malley reiterates her view that Fresenius was wrongly decided.  What incentive do district courts have to decide patent cases?  They should simply wait until all matters related to such cases are decided by the PTO.  In this case, as in Fresenius, the district court and Federal CIrcuit’s earlier work (not to mention the jury) seems to have been largely wasted time.

Judge O’Malley further argues that parties have begun reading Fresenius rather broadly and are seeking to reopen what would seem to be final judgments in litigation if the PTO makes a later ruling favorable to infringers.  She seems to be trying to garner support for Supreme Court review by arguing that the Federal Circuit’s view of finality is contrary to the view of the DC Circuit.

Protecting Inventions Outside the US

A patent permits its owner to exclude others from making, using, selling, offering for sale, or importing the patented invention without his permission.  A patent is, however, unique to the country where it is granted.  Thus, if a patent owner does business in more than one country, it would be necessary to obtain a patent in each country to protect the invention.

Some countries have restrictions on what can be patented.  For example, some countries do not permit patenting software, business methods, drugs, or methods of treatment for humans.

PCT Applications

One way to obtain patent protection in multiple countries is to file an application under the Patent Cooperation Treaty (PCT).  A PCT application is an international application that is filed through the World Intellectual Property Office (WIPO), where an applicant can designate a large number of countries in which he desires to file his patent application.  Currently, 148 countries are members of the PCT.

A PCT application does not give the applicant an “international patent”, as all patents are national in nature (although certain organizations like the European Patent Office (EPO) issue a “European Patent” that must be registered in each member country where the applicant desires the patent to be in effect).  Instead, the PCT provides a mechanism that gives the applicant 30 or 31 months from the earliest filing date (the first filed patent application) to determine whether to file the patent application in various individual countries.  A PCT application can either be the first filed application for an invention or it must be filed within 12 months of the first filed application.

The PCT also provides an International Search Report and an examination, if desired, so that the applicant can get an early search performed to see if the invention is patentable.  The delay also permits the applicant to determine whether the invention is commercially valuable and whether it is worth spending the money to obtain a patent in each country.  While applicants may designate all 148 countries at the time of the PCT filing, they can decide later in which individual countries they would like to pursue patent protection.

A PCT application can also save money on translation costs early in the process.  While most individual countries require patent applications to be filed in the native language of that country, PCT applications permit applicants to delay the cost of translating the application into the various languages.

Once the 30 or 31 month period from the first filing date elapses, a PCT applicant must “enter the national stage” in each country where a patent is desired.  Otherwise, the application is abandoned and patent protection cannot be obtained.  It is at this stage where translations must be obtained and filing costs for the various countries must be paid.

Each country usually requires that the applicant work through an attorney or patent agent who is registered to practice before that country’s patent office.  Thus, to obtain a patent in Brazil, the applicant must work with a Brazilian patent attorney or agent.  These attorneys and agents charge fees for their services, further adding to the costs of obtaining patent protection in various countries.

If the PCT procedure is not utilized, applicants must file in each individual country within a year of the filing date of the first filed application.  The translation, filing, and agent costs are due at that time.  A primary advantage of the PCT is the 18 to 19 month delay for these costs.

While 148 countries are currently members of the PCT, there are several significant countries that are not members; these include Argentina, Paraguay, Uruguay, Venezuela, Taiwan, and the Middle East.  To obtain patents in these countries, a patent application must be filed in each within 12 months of the first filed application.

Patent Prosecution Highway

The United States PTO has entered into an agreement with a number of other patent offices called the Patent Prosecution Highway.  Under this program, once a patent claim is found to be allowable by the patent office where the application was first filed, the applicant may request that other patent offices fast track examination of the application.  This is a type of work-sharing program intended to cut reduce redundancy in examination.

PTO Guidance After Alice

Last week, the USPTO provided the patent examining corps with Preliminary Examination Instructions in light of the Supreme Court’s opinion in Alice Corp.  The memo indicates that the Supreme Court has extended the framework set forth in Prometheus to all claims directed to laws of nature, natural phenomena, and abstract ideas.  Previously, the PTO had only applied Prometheus to laws of nature.

The instructions advocate a two part analysis with respect to abstract ideas.  First, determine whether the claim is directed to an abstract idea.  The instructions do not provide any guidance on how to determine whether the claim is directed to an abstract idea.  This is not surprising because the Supreme Court’s opinions have not provided such guidance either.  I guess you’re supposed to know it when you see it.

If the claim is directed to an abstract idea, the analysis should proceed to step two.

If an abstract idea is present in the claim, determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. In other words, are there other limitations in the claim that show a patent-eligible application of the abstract idea, e.g., more than a mere instruction to apply the abstract idea? Consider the claim as a whole by considering all claim elements, both individually and in combination.

The instructions then refer to certain types of limitations that may qualify the claims as including “significantly more” than the mere abstract idea.  The examples include improvements to another technology or technological field, improvements to the functioning of the computer itself, or meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

The instructions also refer to the example of the claims in Alice Corp. as claims that did not include the required “significantly more” limitations to an abstract idea, such as the programming of a general computer to perform the abstract idea.

The Supreme Court’s “you’ll know it when you see it” type of analysis makes it very difficult for inventors, patent applicants, and patent attorneys to have any type of certainty as to whether an invention or the claims to an invention will pass the Supreme Court’s muster.

The attack on patents continues . . .

Supreme Court on Patentable Subject Matter

The Supreme Court issued its opinion in Alice Corp. v. CLS Bank Int’l.  Unfortunately, the Court did not heed Chief Judge Rader’s admonition to “consult the statute” in holding that all claims are invalid as not directed to patentable subject matter.

Justice Thomas, writing for a unanimous Court, wrote that the claims of the patent “are drawn to the abstract idea of an intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”  The Court returned to the Bilski concept of “pre-emption” of an entire field of application.

Next, the Court unfortunately returned to the “framework” that it set forth in Prometheus where it conflated the concepts of patent eligibility with novelty and non-obviousness.  The Court referred to this framework as a two step approach.  First, it is necessary to determine whether the claims are directed to a patent ineligible concept (this seems to assume the answer), and then to determine whether the claims include “something more”, an inventive concept.  This is, of course, where the Court refers to the prior art to determine subject matter eligibility.

In Alice Corp., the Court determined that the claims are directed to the patent ineligible concept, the abstract idea, of an intermediated settlement.  The claims are merely directed to the use of a third party to mitigate settlement risk.  The Court held this to be akin to the hedging found to be abstract in Bilski.

Turning to the second step of Prometheus “framework”, the Court concluded that the method claims at issue merely require generic computer implementation, which fails to transform the abstract idea into a patentable invention.  Next, the Court refers to each of the claimed steps of the method and refers to them as merely “conventional.”  This is, again, code for “not novel or obvious.”  It seems that a prior art examination would have better resolved this question that subject matter eligibility.

Finally, the Court turned to the question of the patent eligibility of the computer system and computer-readable medium claims.  These were the claims that the Federal Circuit had the most difficulty with.  That court could not reach consensus on the system claims, as 5 judges found them eligible and 5 ineligible.  The Supreme Court did not find a meaningful distinction between the method and system claims, holding

the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea.

Justice Sotomayor wrote a separate concurrence that was joined by Justices Ginsburg and Breyer.  She has taken Justice Stevens’ mantle from Bilski and would hold that a method of doing business do not qualify as a “process” under § 101.

Unfortunately, it seems that we’ve now come much too far to heed the admonition to “consult the statute.”

Judge Rader to Retire From the Federal Circuit

In a rather bizarre series of events, Randall Rader has gone from chief judge of the Federal Circuit to former judge of the Federal Circuit in just a few weeks.

Prior to his appointment to the bench, Judge Rader served as counsel to the Senate Judiciary Committee, including the Subcommittee on the Constitution and the Subcommittee on Patents, Trademarks, and Copyrights.  In 1988, he became a judge on the US Court of Federal Claims, the court that hears monetary claims against the US government.  In 1990, President Bush elevated Judge Rader to the Federal Circuit.

Judge Rader served on the court with distinction, and also taught patent law and other advanced intellectual property law classes at various law schools in Washington, DC, Virginia, and others.  He is also a co-author of a widely used patent law casebook.  In 2010, he succeeded Judge Paul Michel as the sixth chief judge of the Federal Circuit.

Last month, news emerged that Chief Judge Rader sent an e-mail praising attorney Edward Reines, a partner at Weil, Gotshal & Manges, who argues regularly before the Federal Circuit.  The e-mail heaped praise on Reines and urged him to show the e-mail to others.

Shortly after the e-mail became public, Chief Judge Rader recused himself from a number of cases where he had heard arguments involving Reines.  He also publicly released a letter that he sent to his colleagues where he explained his recusals and apologized for “a breach of the ethical obligation not to lend the prestige of the judicial office to advance the private interests of others.”  He also realized that the e-mail could cause others to think that this attorney could unduly influence the Chief Judge in his judicial duties.

At nearly the same time, Judge Rader announced that he was stepping down as chief judge of the court, although his term was scheduled to run until 2017.  He would remain an active judge, but wished to spend more time teaching, lecturing, and traveling.

A few weeks later, Judge Rader has now announced his retirement from the court, effective June 30.  Although no reference to the e-mail was made in either Judge Rader’s stepping down as chief judge or in his retirement from the bench, one has to assume based on the timing that they are linked.  Judge Rader leaves behind a 24 year legacy of service on the court, including 4 years as chief judge.  That legacy appears somewhat tarnished in light of the ethical breach.

Chief Judge Prost

Judge Sharon Prost succeeded Judge Rader as the seventh chief judge of the Federal Circuit on June 1.  Chief Judge Prost, 63, was appointed to the court by President Bush in 2001 after also serving for 8 years as an attorney for the Senate Judiciary Committee.

Other Members of the Court

The retirement of Judge Rader will present another open seat on the Federal Circuit that has seen a great deal of turn over in recent years.  Several of the other 11 active members of the court are also eligible for retirement or senior status, should they so choose.

Chief Judge Prost, 63, joined the court in 2001 and is eligible for senior status in 2016.

Judge Pauline Newman, 86, joined the court in 1984 and is eligible for senior status.

Judge Alan Lourie, 79, joined the court in 1990 and is eligible for senior status.

Judge Timothy Dyk, 77, joined the court in 2000 and is eligible for senior status.

Judge Kimberly Moore, 46, joined the court in 2006.

Judge Kathleen O’Malley, 58, joined the court in 2010 after serving 16 years as a district court judge.

Judge Jimmie Reyna, 61, joined the court in 2011.

Judge Evan Wallach, 64, joined the court in 2011 after serving 16 years as a judge on the Court of International Trade.  He is eligible for senior status in November.

Judge Richard Taranto, 57, joined the court in 2013.

Judge Raymond Chen, 45, joined the court in 2013.

Judge Todd Hughes, 47, joined the court in 2013.

In addition, Judges H. Robert Mayer, 73, S. Jay Plager, 83, Raymond Clevenger, 76, Alvin Schall, 70, William Bryson, 68, and Richard Linn, 70, continue to serve on the court while in senior status.

Interviews with Patent Examiners

Oral communication is often more effective than written communication.

Once I’ve been through a round of written responses with a patent examiner, if I feel that the examiner is not being receptive to my position, I will conduct an interview with the examiner.  Often, the examiner will indicate that he or she had not fully grasped the position before and now better understands the distinctions between the claimed invention and the prior art.  Even in cases where I don’t get the examiner to agree with me, we usually understand each other’s position better which enables me to better advise my client on how to proceed with the case.

It is often easy for an examiner to cut-and-paste language from previous office actions when responding to an applicant’s amendment.  Sometimes this is because the examiner doesn’t fully appreciate the applicant’s position, sometimes this is because the applicant and examiner are talking past each other.  An interview can often resolve these issues as the examiner must listen and consider the applicant’s position without resorting to cut-and-paste.

This isn’t to say that all interviews are successful.  Many examiners are not used to oral communication and will be non-committal.  This is especially true for junior examiners.  Junior examiners do not have authority to allow claims without review by a senior examiner or supervisor.  Thus, examiner interviews with junior examiners require a senior examiner with such authority to also be present.  The problem is that the senior examiner has his or her own docket and often is not familiar with the application and issues or is not prepared for the interview.  Such interviews can be frustrating and maybe even unhelpful.  And, many junior examiners are very reluctant to allow patents.

In any event, even if the interview does not result in allowance of the claims, I have more information about the application and the examiner’s position than I did prior to the interview.  I can advise my client that the examiner will not be persuaded.  Perhaps we are more likely to get a positive result through appeal rather than another round of responses.

Interviews are not a way to avoid making comments on the record that become part of the prosecution file.  If there is an outstanding office action, most examiners will require the applicant to send in a proposed amendment or set of arguments that will become a part of the record.  This can sometimes be avoided if the interview is conducted after a response has been filed.  After the interview, a written summary is prepared by both the examiner and the applicant that becomes part of the file.

Nonetheless, if I determine during an interview that a particular argument is clearly not going to persuade the examiner, and I don’t think the argument is vital to the case, I may omit it from my next response, thereby keeping it out of the record.

Federal Circuit is Reversed, Twice

The Supreme Court has issued two opinions in patent cases today, in both cases reversing the Federal Circuit.

Nautilus, Inc. v. Biosig Instruments, Inc.

In the first opinion, the Court was reviewing the Federal Circuit’s standard for indefiniteness.  As noted previously,  patent applicants must particularly point out and distinctly claim their invention.  The Federal Circuit used a legal standard for proving that a claim was indefinite that was very difficult to meet, erring on the side of the patent owner.  Justice Ginsburg delivered the opinion for a unanimous Supreme Court, which reversed the Federal Circuit standard.

We conclude that the Federal Circuit’s formulation, which tolerates some ambiguous claims but not others, does not satisfy the statute’s definiteness requirement. In place of the “insolubly ambiguous” standard, we hold that a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecu­tion history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.

The Supreme Court has thus overruled the Federal Circuit’s “insolubly ambiguous” standard in favor of a “reasonable certainty” standard when the claims are read in light of the specification and prosecution history.

The Court remanded the case to the Federal Circuit for further determination of the patent in this suit.

Limelight Networks, Inc. v. Akamai Techs., Inc.

In 2012, a fractured Federal Circuit permitted that multi-party infringement for induced infringement, even in the absence of a direct infringement by a single party.  This result was contrary to the general rule that a party can only be liable for inducement to infringe a patent if there is direct infringement of the patent.

A unanimous Supreme Court, per Justice Alito, has reversed the earlier Federal Circuit opinion.  He reasons that this case is really quite straight forward.  The Court reiterated that a party can only be liable for induced infringement if there is a direct infringement of the patent.

The Federal Circuit had previously decided in Muniauction that to infringe a method claim, the same entity must perform each step of the claim.  The parties dispute whether this holding was correct, but the Supreme Court refused to address that issue.  The Court did note, however, that if that is correct, there can be no liability for induced infringement either.  A party cannot be held liable for inducing conduct that is not itself infringement.  The Supreme Court was unpersuaded by analogies to other areas of tort law.

The Court’s holding in this case is quite simple.  If there is no direct infringement, there can be no induced infringement.  If the Federal Circuit revisits the definition of direct infringement, such as by overruling Muniauction to permit multi-party direct infringement, then there could possibly be multi-party induced infringement.  Until that time, the Court answers the question in the negative.

Senate to Slow Down Troll Legislation

Yesterday, Sen. Patrick Leahy (D-VT) issued a press release where he states that he has taken the currently pending patent troll legislation off the Senate Judiciary Committee agenda.

Sen. Leahy notes that while there is general agreement that patent trolls abuse is a problem, there has been no agreement on how to combat the problem.  The interested parties have not been able to reach a consensus on the best way to proceed.  Thus, Chairman Leahy has decided to wait to consider the issue until at least later this year.

The House passed the Innovation Act in December.  Since then, there has been a significant amount of debate by the relevant parties on the issues.  Many have pointed to problems with the legislation as not addressing the real problems with patent trolls, as being too broad so as to encompass many legitimate companies, and others.  And, probably due to the lack of leadership at the agency, the PTO has not yet weighed in on the issues.

After passing the America Invents Act with little input from many of the affected parties, this time the Senate appears to be doing it right.  Let’s get all the input and have a proper debate before rushing this through.

Reduced PTO Fees

Under PTO rules, a “Small Entity” is entitled to pay certain PTO fees associated with patent prosecution at a reduced rate, usually 50%.  As the PTO raises filing and post-issuance fees, it is important to determine just who qualifies as a Small Entity.

In the early 1980s, Congress substantially raised many of the PTO fees associated with patent prosecution and introduced some new fees that had not previously been charged, such as issue fees and maintenance fees.  To help off-set the burden this would cause for smaller or non-profit parties, Congress also introduced the Small Entity Status.

PTO rules define a Small Entity as an individual inventor or inventors, a small business concern, or a nonprofit organization.  In order to qualify as one of these three types of entities, none of the rights associated with a patent or patent application may have been assigned or licensed to any party that would not qualify for Small Entity Status, nor must there be any obligation on the part of the small entity to make such an assignment or license.  All of the rights in the patent or patent application must be held by a small entity.

In other words, IBM cannot set up a small holding company for all of its patents in order to qualify for Small Entity Status if it wishes to retain any rights in the patents.  Nor can IBM pay Small Entity Fees and wait until the patent issues to assign it to the company if the inventor(s) had an obligation to assign the invention to the company at the time of filing.

An individual inventor is anyone who has not assigned his patent application to a business or other organization.  The rules define a Small Business Concern as a company having fewer than 500 employees.  The rules define a Nonprofit Organization as a university, 501(c)(3) organization, or a scientific or educational organization under any state law or in a foreign country.  If an individual inventor, small business concern, or nonprofit organization licenses the patent or patent application to a company that doesn’t qualify for Small Entity Status, the full price fees must be paid at the PTO.

Previously, the PTO required the applicant or assignee to sign a verification of Small Entity Status.  Now, the simple written assertion of such status or even the payment of Small Entity Fees is sufficient.  This puts more of the burden on the patent applicant and the patent attorney to verify Small Entity Status.

If a small entity pays large entity fees, the small entity may request a refund of the overpayment.  Conversely, if Small Entity Fees are paid by an entity that is actually a large entity, it can usually be corrected by simply paying the required deficiency, if the incorrect amount was paid in good faith.  The rules do warn, however, that fraudulently paying Small Entity Fees when the applicant is not entitled payment of such fees can result in the resulting patent being held unenforceable due to inequitable conduct.

The PTO notes applicants have a contiuing duty to conduct a thorough investigation of the facts surrounding a claim of Small Entity Status.  The facts should especially be revisited at the times of paying the issue fee and maintenance fees.  For example, a patent issued to a Small Entity may have been licensed to a non-small entity between the time of its issuance and the time to pay a maintenance fee, or the company itself might have grown to more than 500 employees, making Small Entity Status inappropriate.

Micro-Entity

The America Invents Act included provisions for a new entity called a “micro-entity” that would pay certain fees at a 75% reduction of the normal amount.  To qualify as a micro-entity, certain conditions must be met.

For unassigned applications, the entity must not include any inventors that have been named on 5 or more patent applications, not including provisional or non-US applications.  Thus, “micro-entities” are newer inventors.  The application must not be licensed or the inventors must not be legally obligated to license or assign the application.  Each inventor must have an income of less than 3 times the average gross income reported by the Department of Labor for the previous calendar year.

For assigned applications, the inquiry is similar.  None of the inventors must be named on 5 or more patent applications.  The application can only be assigned to an entity with 5 or fewer employees.  And the assignee must have an income of less than 3 times the average gross income for the previous calendar year.

Finally, for applications where the applicant receives the majority of his income from an institution of higher learning or where the applicant is under an obligation to assign or license the application to an institution of higher learning, micro-entity status applies.  This is regardless of the income level or number of applications previously filed by the applicant.

Thus, micro-entities will be a very small group of applicants, but it can result in significant savings on PTO fees.

When paying PTO fees, it is important to stay up-to-date on whether the applicant qualifies as a Small or Micro Entity.