The U.S. Patent and Trademark Office (USPTO) is stepping up enforcement against applicants who falsely claim small entity or micro entity status to receive fee discounts. This enforcement started in 2023, but a new June 2025 memooutlines a formal notice-and-order process with real consequences, such as removal from examination, penalties, and delays in patent term adjustments.
Under new provisions in 35 U.S.C. §41(j) and §123(f), applicants found to have made false certifications can face fines of at least three times the unpaid amount. A December 2024 update to the Patent Act did add a good faith exception, but the threshold for avoiding penalties remains high, so be clear in your fee payment practices.
Madison Building. USPTO. Alexandria, Virginia, USA.
Entity status
The fees at the USPTO have three (3) tiers – Regular (undiscounted, 100%), Small (40% – 50%), and Micro (20%). Applicants can claim to have a small or micro entity status to save applicants up to 60–80% on USPTO fees and reduce their patent costs.
- Small entity status under 37 C.F.R. §1.27 includes individual inventors, nonprofits, and businesses with fewer than 500 employees. All rights-holders must qualify, and transferring rights to a large entity during prosecution immediately disqualifies the application from that status.
- Micro entity status (37 C.F.R. §1.29) is even narrower. Applicants must first qualify as small entities, plus either:
- Have a gross income no more than 3× the median U.S. household income and fewer than five prior nonprovisional patent filings (excluding employer-assigned ones), or
- Be affiliated with a U.S. institution of higher education
Who qualifies as a small entity?
The common problem here is if you do qualify as a small entity because of headcount, but you have assigned or are obligated to assign the patent rights. Then you are no longer a small entity.
There is a debate over whether the measure is headcount or full-time equivalence (FTE). The differences are important, and we advocate that you use headcount.
Who qualifies as a micro entity?
You need to have not been named as an inventor on five or more previously filed nonprovisional patent applications. U.S. application. There is one exception for applications assigned to a former employer, as these are excluded under 35 U.S.C. §123(b).
Interpretation of micro entity status is difficult, and we expect to see court cases, changes in the Patent Act, or patent rules.
Do Canadians qualify?
Yes, you can qualify as a small or micro entity. There is no residency or citizenship requirements.
For micro-entity status, we at PMP have a principled way of converting your Canadian household income into US dollars. Our Canadian clients have benefited from this program.
Best practices
The goal is to reduce your patent costs. Never apply for a micro entity discount on a low fee. Often, it is faster and cheaper to pay as a small entity. Mistakes can increase your costs.
Be conservative if you are near the thresholds. Use headcount and not FTE, and don’t assert small entity status if you are 499 (US) or 99 (in Canada) in headcount. Have a lower safety threshold that reflects your confidence in the company size and the currency of your information.
Micro-entity status has some paperwork that you need a patent agent for in some cases.
There is one program available to those with micro-entity status. Use this to accelerate your applications.
Know that in the US, if your status changes, you can can apply that change for future fees. So you should track factors that affect your status, including headcount and IP licensing deals. Indeed, the USPTO can easily track
- Applicants who exceed the five-application micro entity cap
- Applicants/patentees who continued small entity fee payments after transferring patent rights to a large entity
There is no penalty from the patent office or courts for mistakenly paying a higher rate.
Conclusion
We hope this information on entity status helps. If you have questions on the protection of an invention or an industrial design, please contact us.
