When you file a patent application with the U.S. Patent and Trademark Office (USPTO), you’ll encounter a seemingly simple question: What is your entity status – micro, small, or large? It’s not about your coffee order (no, there is no “Vente Entity”); it’s a legal classification that primarily serves to scale the fees you need to pay. Choosing the right status is crucial — indeed, intentionally picking the wrong entity size (usually in order to save money) could invalidate your patent due to fraud on the patent office. In this post, we’ll break down what each status means, how to qualify, how they affect your wallet, and the real-world implications of getting it right (or wrong).
What Is a Small Entity?
A small entity is essentially the USPTO’s way of recognizing “the little guys” – individual inventors, small businesses, and certain nonprofits – and giving them a break on fees. Of course, every penny counts when you are a startup or independent inventor, but understand that we’re only talking about patent office fees. Your legal fees are a matter of negotiation between you and your lawyers. To qualify as a small entity, at least one of these must be true:
- Individual Inventor: You’re an inventor filing on your own, not obligated to assign the patent to any company.
- Small Company: Your business, including affiliates, has no more than 500 employees. This includes startups and small companies well below big-corporation size.
- Nonprofit or University: You’re a 501(c)(3) nonprofit organization or a university (most universities count as nonprofits for this purpose).
Importantly, even if you fall into one of the above categories, you must not have assigned or licensed rights (and not be obligated to do so) to a company that doesn’t qualify as a small entity. In plain terms: if you’ve made a deal to license or sell your invention to a large company (say, a Fortune 500 firm), you lose the right to claim small entity status. For example, an inventor who licenses her patent to a big tech company would no longer be considered a small entity for that patent.
Fee benefits for small entities: The incentive to qualify as a small entity is significant – the USPTO charges 60% less on most patent fees for small entities than it does for large entities. In other words, small entities pay only 40% of the standard (large entity) fee amount. This discount applies to many patent-related fees, including filing, examination, and maintenance fees. For instance, if a standard filing fee for a patent application is $300, a small entity would pay around $120 instead of $300 under the current discount structure (previously it was a 50% reduction, now 60% under recent law updates). Over the life of a patent (with various fees due at filing, issuance, and for maintenance), these savings add up , making patents more affordable for independent inventors and small firms. When we say “more affordable”, of course, that is not the same thing as “affordable”. Even leaving attorneys’ fees out of the equation, the small entity filing fees are a lot of money for an independent inventor.
What Is a Micro Entity?
Think of a micro entity as a super-small entity – a special status for applicants who are especially small or early-stage in their patent endeavors. Micro entities get even bigger fee reductions than small entities, but the eligibility criteria are stricter. In fact, a micro entity must first qualify as a small entity and then meet additional requirements.
There are two ways to qualify for micro entity status: one based on your income and patent experience, and another based on your affiliation with a university. You only need to satisfy one of these pathways (not both):
- Path 1: Income & Experience Criteria. You (and each inventor/applicant, if multiple) have very limited prior patent experience and income:
- Limited patent filings: You have not been named as an inventor on more than four previously filed patent applications. (In counting these, the USPTO ignores provisional applications, international applications that didn’t enter the U.S., and foreign filings – basically, they’re looking at how many real U.S. patent applications you’ve filed before. Four or fewer is okay; five means you’re out of micro entity range.)
- Income below threshold: Your gross income is low – specifically, your income last year was no more than 3× the median household income for that year. This limit changes over time as the median income changes; in recent years it’s roughly in the low $200,000s (for example, about $212,000 for calendar year 2023). If you earned more than that, you’re too financially “big” to be a micro entity (but might still be small).
- No big assignee: You haven’t assigned or aren’t legally obligated to assign rights in your invention to any entity that itself has an income above the same 3× median income threshold. This is to prevent a scenario where, say, a wealthy corporation tries to funnel a patent through a low-income inventor just to get a fee discount – not allowed. In short, the micro entity discount is meant for truly small-time inventors, not just as a loophole for big players.
- Path 2: University Affiliation Criteria. This route recognizes that inventors affiliated with universities (or other institutions of higher education) also deserve a break, even if their personal income might be higher or they have filed multiple patents through their research work. For the more jaded patent professionals, this is better read as a give-away to universities. No matter how many billions the university has in an endowment, it is still considered too financially small to pay the full fees. You can qualify as a micro entity if:
- Majority of income from a university: You are employed by an institution of higher education (such as a university) and receive the majority of your income from that institution, orAssignment to a university: You have assigned (or are obligated to assign) your patent rights to such an institution.
Fee benefits for micro entities: The USPTO gives micro entities an 80% discount on most fees. In other words, a micro entity pays only 20% of the standard fee amount – half of what a small entity would pay. For example, if a certain patent fee is $1,000 at the regular (large) rate, a small entity might pay $400, but a micro entity (those impoverished universities) would pay only $200. This is a huge cost reduction intended to remove barriers for individual inventors, very small startups, and well funded Universities. Essentially, the patent system is saying “we want you in the game, even if you have minimal resources.”
Keep in mind that every inventor/applicant on the patent must individually qualify for micro entity status for the application to get the discount. If you have co-inventors, you all need to meet the criteria. If even one inventor doesn’t qualify (perhaps one person has more than four prior patents or a high income), then the application as a whole can’t be filed as a micro entity. In that case, you’d default to small or large entity status based on whoever is the “largest” among the group.
What Is a Large Entity?
A large entity is basically everyone else – any applicant that doesn’t fit the small or micro criteria. There is no special checklist to be a large entity; it’s the default status. If you’re a big company (over 500 employees) or an organization that doesn’t qualify as a small business or nonprofit, you’re a large entity. If you’re an individual or small business but you’ve assigned or licensed your patent rights to a large company, that particular application becomes effectively a large entity application. Many well-known tech corporations, pharmaceutical companies, and other industry giants fall in this category.
Fee implications: Large entities pay the full fees with no discounts. Going back to our fee examples, a large entity pays 100% of the standard fee (e.g., the full $1,000 in that example, versus $400 for small or $200 for micro). It might feel like a penalty, but the idea is that larger companies can afford to pay and their patent activities help fund the system, whereas small entities get a break to encourage innovation from all sources.
It’s worth noting that if you qualify for a discount, the USPTO won’t apply it automatically – you have to explicitly claim small or micro status (usually by checking a box or filing a certification when you submit fees). If you don’t claim a status, the USPTO assumes large entity and charges full price. So, know your status in advance to avoid overpaying.
Why Do These Discounts Exist?
Briefly, the rationale for having small and micro entity statuses is (as to individuals and startups, not so much as to universities) to promote inclusive innovation. The patent system recognized that high fees could discourage solo inventors, academics, startups, and other cash-strapped innovators from pursuing patents. By introducing the small entity discount decades ago (and more recently the micro entity discount in 2013), Congress and the USPTO aimed to lower the barrier to entry. In fact, laws like the Unleashing American Innovators Act of 2022 have even increased the discount levels (from 50% to 60% for small entities, and 75% to 80% for micro entities) to further help under-resourced inventors. The goal is to ensure that great ideas can be patented regardless of the inventor’s size or wealth, which ultimately benefits society by spurring more innovation.
The Importance of Claiming the Right Status (and Consequences of Getting It Wrong)
Choosing the correct entity status is not just about saving money – it’s also about staying on the right side of the law and keeping your patent enforceable. The USPTO basically operates on an honor system for entity size: you certify that you qualify, and they give you the discount. If you misrepresent your status (intentionally or by careless mistake), there can be serious repercussions.
Underpaying fees: If you claim to be small or micro but don’t actually qualify, you will have underpaid your fees. In the short term, the USPTO may eventually catch this and send a fee deficiency notice requiring you to pay the difference (and a penalty surcharge). In the worst case, an unpaid fee deficiency could result in your patent application being regarded as abandoned or a granted patent being in jeopardy because full fees were never properly paid.
Patent enforceability issues: Even if the USPTO doesn’t catch it right away, an incorrect claim can haunt you later. Imagine you get a patent and then try to enforce it in court against an infringer. The defendant discovers you paid small entity fees despite, say, having licensed the patent to a large company early on. They could argue that you committed inequitable conduct by misleading the USPTO to get a fee discount. Inequitable conduct is like the nuclear option in patent law – if proven, it can render a patent unenforceable (meaning you can’t sue anyone on it, effectively losing your patent rights). In fact, there have been cases where patents were deemed unenforceable because the patent owner improperly claimed small entity status and paid the discounted fees when they shouldn’t have. That’s a disaster scenario for an inventor or company: trying to save a few hundred or thousand dollars in fees could wipe out the much larger value of a patent.
Good faith errors vs. fraud: The good news is that if a mistake truly was in good faith, there are often ways to correct it. The USPTO allows you to pay the missing fees (with interest/penalty) and restore the correct status if the error was unintentional. Courts have also recognized that a genuine error in claiming small entity can be corrected and does not automatically make a patent invalid or unenforceable, as long as there was no deceptive intent. For example, if a startup was small at filing but forgot to change status after a growth spurt, they might fix it by promptly paying the difference when they realize the mistake.
Final Thoughts
Whether you’re a solo inventor sketching ideas in a garage or a burgeoning startup assembling your first patent portfolio, understanding these entity statuses can save you money and protect your innovations. Micro, small, and large entity status isn’t just a check-the-box formality – it determines how much you pay and carries legal significance. The USPTO created these categories to level the playing field, so take advantage of a small or micro entity discount if you honestly qualify. Just be sure to claim it correctly, and keep an eye on your status as circumstances change.
In the patent world, bigger isn’t always better – being “small” or “micro” has its perks! But with great discounts comes great responsibility: you must adhere to the rules. Accurately assessing your status and updating it when needed will help ensure that you maximize savings without jeopardizing your patent rights. In the end, the goal is to spend less time worrying about fees and more time focusing on innovation. Happy patenting!
Side note: I haven’t posted in a little over a week. I try to get a few posts up every week, but right after my last post we adopted a new rescue dog from Mexico. She’s very cute, an incredible amount of work, and entirely worth it. But it did (and probably will for a while) slow down my posting schedule. To make up for it, here is a photo of her (our 13 year old rescue is on the left, our new 8 month old is on the right with the cute underbite!).
