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minimize litigation, eliminate

ambiguity, and reduce burden.

10. Protection of Children

We have analyzed this rule under

Executive Order 13045, Protection of

Children from Environmental Health

Risks and Safety Risks. This rule is not

an economically significant rule and

does not create an environmental risk to

health or risk to safety that may

disproportionately affect children.

11. Indian Tribal Governments

This rule does not have tribal

implications under Executive Order

13175, Consultation and Coordination

with Indian Tribal Governments,

because it does not have a substantial

direct effect on one or more Indian

tribes, on the relationship between the

Federal Government and Indian tribes,

or on the distribution of power and

responsibilities between the Federal

Government and Indian tribes.

12. Energy Effects

We have analyzed this rule under

Executive Order 13211, Actions

Concerning Regulations That

Significantly Affect Energy Supply,

Distribution, or Use. We have

determined that it is not a ‘‘significant

energy action’’ under that order because

it is not a ‘‘significant regulatory action’’

under Executive Order 12866 and is not

likely to have a significant adverse effect

on the supply, distribution, or use of

energy. The Administrator of the Office

of Information and Regulatory Affairs

has not designated it as a significant

energy action. Therefore, it does not

require a Statement of Energy Effects

under Executive Order 13211.

13. Technical Standards

This rule does not use technical

standards. Therefore, we did not

consider the use of voluntary consensus

standards.

14. Environment

We have analyzed this rule under

Department of Homeland Security

Management Directive 023–01 and

Commandant Instruction M16475.lD,

which guide the Coast Guard in

complying with the National

Environmental Policy Act of 1969

(NEPA) (42 U.S.C. 4321–4370f), and

have made a determination that this

action is one of a category of actions

which do not individually or

cumulatively have a significant effect on

the human environment. This rule is

categorically excluded, under figure 2–

1, paragraph (34)(g), of the Instruction.

This regulation establishes one security

zone. A final ‘‘Environmental Analysis

Check List’’ and a final ‘‘Categorical

Exclusion Determination’’ are available

in the docket where indicated under

ADDRESSES

List of Subjects in 33 CFR Part 165

Harbors, Marine security, Navigation

(water), Reporting and recordkeeping

requirements, Security measures, and

Waterways.

For the reasons discussed in the

preamble, the Coast Guard amends 33

CFR part 165 as follows:

PART 165—REGULATED NAVIGATION

AREAS AND LIMITED ACCESS AREAS

■1. The authority citation for part 165

continues to read as follows:

Authority: 33 U.S.C. 1226, 1231; 46 U.S.C.

Chapter 701; 50 U.S.C. 191, 195; 33 CFR

1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L.

107–295, 116 Stat. 2064; Department of

Homeland Security Delegation No. 0170.1.

■2. Add § 165.T14–215 to read as

follows:

§ 165.T14–215 Security Zone; On the

Waters in Kailua Bay, Oahu, HI.

(a) Location. The following area,

within the Honolulu Captain of the Port

Zone (See 33 CFR 3.70–10), from the

surface of the water to the ocean floor

is a temporary security zone: All waters

in Kailua Bay to the west of a line

beginning at Kapoho Point and thence

southwestward at a bearing of 240°

(true) to the shoreline at the

southeastern corner of Kailuana Loop;

as well as the nearby channel from its

entrance at Kapoho Point to a point 150-

yards to the southwest of the N. Kalaheo

Avenue Road Bridge. This zone extends

from the surface of the water to the

ocean floor. This zone will include the

navigable waters of the channel

beginning at point 21°24′56″ N,

157°44′58″ W, then extending to

21°25′26″ N, 157°44′21″ W (Kapoho

Point) including all the waters to the

west of a straight line to 21°25′11″ N,

157°43′34″ W (Kailuana Loop), and then

extending back to the original point

21°24′56″ N, 157°44′58″ W.

(b) Effective period. This section is

effective from 6 a.m. HST on December

17, 2012, through 10 p.m. HST on

January 6, 2013.

regulations governing security zones

contained in 33 CFR 165.33, subpart D,

apply to the security zone created by

this temporary final rule.

(1) All persons are required to comply

with the general regulations governing

security zones found in 33 CFR part

165.

(2) Entry into or remaining in this

zone is prohibited unless authorized by

the Coast Guard Captain of the Port

Honolulu.

(3) Persons desiring to transit the

security zones identified in paragraph

(a) of this section may contact the

Captain of the Port at Command Center

telephone number (808) 842–2600 and

(808) 842–2601, fax (808) 842–2624 or

on VHF channel 16 (156.8 Mhz) to seek

permission to transit the zones. If

permission is granted, all persons and

vessels must comply with the

instructions of the Captain of the Port

Honolulu or his designated

representative and proceed at the

minimum speed necessary to maintain a

safe course while within the zone.

(4) The U.S. Coast Guard may be

assisted in the patrol and enforcement

of the zones by Federal, State, and local

agencies.

(d) Notice of enforcement. The

Captain of the Port Honolulu will cause

notice of the enforcement of the security

zone described in this section to be

made by verbal broadcasts and written

notice to mariners and the general

public.

(e) Definitions. As used in this

section, designated representative

means any Coast Guard commissioned,

warrant, or petty officer who has been

authorized by the Captain of the Port

Honolulu to assist in enforcing the

security zones described in paragraph

(a) of this section.

Dated: November 29, 2012.

J.M. Nunan,

Captain, U.S. Coast Guard, Captain of the

Port, Honolulu.

[FR Doc. 2012–30628 Filed 12–18–12; 8:45 am]

BILLING CODE 9110–04–P

DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Part 1

[Docket No.: PTO–P–2011–0016]

RIN 0651–AC78

Changes To Implement Micro Entity

Status for Paying Patent Fees

AGENCY

: United States Patent and

Trademark Office, Commerce.

ACTION

: Final rule.

SUMMARY

: The United States Patent and

Trademark Office (Office) is revising the

rules of practice in patent cases to

implement the micro entity provision of

the Leahy-Smith America Invents Act

(AIA). Certain patent fees set or adjusted

under the fee setting authority in the

AIA will be reduced by seventy-five

percent for micro entities. The Office is

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revising the rules of practice to set out

the procedures pertaining to claiming

micro entity status, paying patent fees as

a micro entity, notification of loss of

micro entity status, and correction of

payments of patent fees paid

erroneously in the micro entity amount.

In a separate rulemaking, the Office is

in the process of proposing to set or

adjust patent fees under the Leahy-

Smith America Invents Act, including

setting fees for micro entities with a

seventy-five percent reduction. The

Office has sought to address the

concerns of its stakeholders as

expressed in the public comment, and

plans to seek additional public

comment on the micro entity provisions

after the Office and the public have

gained experience with the micro entity

procedures in operation. The Office will

pursue further improvements to the

micro entity procedures in light of the

public comment and its experience with

the micro entity procedures.

DATES

: Effective March 19, 2013.

FOR FURTHER INFORMATION CONTACT

James Engel, Senior Legal Advisor ((571)

272–7725), Office of Patent Legal

Administration, Office of the Deputy

Commissioner for Patent Examination

Policy.

SUPPLEMENTARY INFORMATION

Executive Summary: Purpose: The

AIA provides that: (1) The Office may

set or adjust any patent fee, provided

that the aggregate revenue generated by

patent fees recovers only the aggregate

estimated costs to the Office for

processing, activities, services, and

materials relating to patents (including

administrative costs); and (2) most fees

set or adjusted under this authority are

reduced by fifty percent for small

entities and by seventy-five percent for

micro entities. The AIA also adds a new

section to Title 35 of the United States

Code that defines a ‘‘micro entity.’’ The

rules of practice currently have

provisions pertaining to small entity

status, as the patent laws provided a

small entity discount prior to the Leahy-

Smith America Invents Act. This final

rule revises the rules of practice to

implement the ‘‘micro entity’’

provisions added by the Leahy-Smith

America Invents Act.

Summary of Major Provisions: The

Office is adding a provision to the rules

of practice pertaining to micro entity

status. The provision sets out the

requirements to qualify as a micro entity

tracking the statutory requirements for a

micro entity set forth in section 10 of

the Leahy-Smith America Invents Act.

The provision also sets out procedures

relating to micro entity status that

largely track the regulatory requirements

and procedures in 37 CFR 1.27 for small

entity status. These new procedures

pertain to claiming micro entity status,

paying patent fees as a micro entity,

notifying the Office of loss of micro

entity status, and correcting payments of

patent fees paid erroneously in the

micro entity amount. The procedures for

claiming micro entity status require the

filing of a certification of entitlement to

micro entity status. The Office is

developing forms (paper and electronic)

for use by members of the public to

provide a certification of micro entity

status. The procedures for paying fees as

a micro entity provide that a micro

entity certification need only be filed

once in an application or patent, but

that a fee may be paid in the micro

entity amount only if the applicant or

patentee is still entitled to micro entity

status on the date the fee is paid. The

procedures pertaining to notifying the

Office of loss of micro entity status and

correcting payments of patent fees paid

erroneously in the micro entity amount

track the corresponding small entity

provisions for notifying the Office of

loss of small entity status and correcting

payments of patent fees paid

erroneously in the small entity amount.

Costs and Benefits: This rulemaking is

not economically significant as that

term is defined in Executive Order

12866 (Sept. 30, 1993).

Background: The AIA was enacted

into law on September 16, 2011. See

Public Law 112–29, 125 Stat. 283

(2011). Section 10(a) of the AIA

provides that the Office may set or

adjust by rule any patent fee

established, authorized, or charged

under title 35, United States Code,

provided that aggregate patent fees

recover only the aggregate estimated

costs to the Office for processing,

activities, services, and materials

relating to patents (including

administrative costs). See 125 Stat. at

316. Section 10(b) of the AIA provides

that ‘‘the fees set or adjusted under

[section 10(a)] for filing, searching,

examining, issuing, appealing, and

maintaining patent applications and

patents shall be reduced by 50 percent

with respect to the application of such

fees to any small entity that qualifies for

reduced fees under [35 U.S.C.] 41(h)(1)

* * *, and shall be reduced by 75

percent with respect to the application

of such fees to any micro entity as

defined in [35 U.S.C.] 123.’’ See 125

Stat. at 316–17. The patent laws

provided in 35 U.S.C. 41(h) for small

entities prior to the Leahy-Smith

America Invents Act. Section 10(g) of

the AIA adds a new 35 U.S.C. 123 to

define a ‘‘micro entity.’’ See 125 Stat. at

318–19.

35 U.S.C. 123(a) provides one basis

under which an applicant may establish

micro entity status. 35 U.S.C. 123(d)

provides another basis under which an

applicant may establish micro entity

status. Each will be discussed in turn.

35 U.S.C. 123(a) provides that the

term ‘‘micro entity’’ means an applicant

who makes a certification that the

applicant: (1) Qualifies as a small entity

as defined in 37 CFR 1.27; (2) has not

been named as an inventor on more

than four previously filed patent

applications, other than applications

filed in another country, provisional

applications under 35 U.S.C. 111(b), or

international applications for which the

basic national fee under 35 U.S.C. 41(a)

was not paid; (3) did not, in the

calendar year preceding the calendar

year in which the applicable fee is being

paid, have a gross income, as defined in

section 61(a) of the Internal Revenue

Code of 1986 (26 U.S.C. 61(a)),

exceeding three times the median

household income for that preceding

calendar year, as most recently reported

by the Bureau of the Census; and (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,

in the calendar year preceding the

calendar year in which the applicable

fee is being paid, had a gross income, as

defined in section 61(a) of the Internal

Revenue Code of 1986, exceeding three

times the median household income for

that preceding calendar year, as most

recently reported by the Bureau of the

Census. See 125 Stat. at 318. 35 U.S.C.

123(a) provides one basis under which

an applicant may establish micro entity

status.

The Office will indicate the income

level that is three times the median

household income for the calendar year

most recently reported by the Bureau of

the Census (the income threshold set

forth in 35 U.S.C. 123(a)(3) and (a)(4))

on its Internet Web site, with its

Independent Inventor resource

information, and on the Office’s

certification of micro entity status (gross

income basis) form (Form PTO/SB/15A).

The Office will also make available

resources to micro entities to help

navigate the new micro entity

procedures.

35 U.S.C. 123(b) provides that an

applicant is not considered to be named

on a previously filed application for

purposes of 35 U.S.C. 123(a)(2) if the

applicant has assigned, or is under an

obligation by contract or law to assign,

all ownership rights in the application

as the result of the applicant’s previous

employment. See id.

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35 U.S.C. 123(c) provides that if an

applicant’s or entity’s gross income in

the preceding calendar year is not in

United States dollars, the average

currency exchange rate, as reported by

the Internal Revenue Service, during

that calendar year shall be used to

determine whether the applicant’s or

entity’s gross income exceeds the

threshold specified in 35 U.S.C.

123(a)(3) or (4). See 125 Stat. at 319.

35 U.S.C. 123(d) provides that a micro

entity shall also include an applicant

who certifies that: (1) The applicant’s

employer, from which the applicant

obtains the majority of the applicant’s

income, is an institution of higher

education as defined in section 101(a) of

the Higher Education Act of 1965 (20

U.S.C. 1001(a)); or (2) the applicant has

assigned, granted, conveyed, or is under

an obligation by contract or law, to

assign, grant, or convey, a license or

other ownership interest in the

particular application to such an

institution of higher education. See id.

As explained earlier, 35 U.S.C. 123(a)

provides one basis under which an

applicant may establish micro entity

status, and 35 U.S.C. 123(d) provides

another basis under which an applicant

may establish micro entity status.

35 U.S.C. 123(e) provides that in

addition to the limits imposed by this

section, the Director has the discretion

to impose income limits, annual filing

limits, or other limits on who may

qualify as a micro entity pursuant to this

section if the Director determines that

such additional limits are reasonably

necessary to avoid an undue impact on

other patent applicants or owners or are

otherwise reasonably necessary and

appropriate. 35 U.S.C. 123(e) also

provides that at least three months

before any limits proposed to be

implemented pursuant to 35 U.S.C.

123(e) take effect, the Director shall

inform the Committee on the Judiciary

of the House of Representatives and the

Committee on the Judiciary of the

Senate of any such proposed limits. See

id.

The micro entity provisions of 35

U.S.C. 123 are currently in effect.

However, no patent fee is currently

eligible for the seventy-five percent

micro entity reduction as no patent fee

has yet been set or adjusted under

section 10 of the Leahy-Smith America

Invents Act. The Office is in the process

of proposing to set or adjust patent fees

under section 10 of the AIA in a

separate rulemaking. See Setting and

Adjusting Patent Fees, 77 FR 55028

(Sept. 6, 2012). The fees set or adjusted

by the Office under section 10 of the

AIA for filing, searching, examining,

issuing, appealing, and maintaining a

patent application and patent will be

reduced by: (1) Fifty percent for an

applicant or patentee who establishes

small (but not micro) entity status in the

patent application or patent; and (2)

seventy-five percent for an applicant or

patentee who establishes micro entity

status in the patent application or

patent.

The Office plans to rely upon the

applicant’s certification of micro entity

status (except where it conflicts with the

information contained in the Office’s

records, such as where Office records

indicate that the applicant is named as

an inventor on more than four

previously filed and unassigned

nonprovisional patent applications) and

will not require any additional

documents from the applicant

concerning the applicant’s entitlement

to claim micro entity status. This

practice is similar to small entity

practice where the Office generally does

not question a claim of entitlement to

small entity status. See 37 CFR 1.27(f);

see also Manual of Patent Examining

Procedure § 509.03 (8th ed. 2001) (Rev.

9, Aug. 2012) (MPEP).

The Office does not plan to provide

advisory opinions on whether a

particular entity is entitled to claim

micro entity status. See MPEP § 509.03.

The Office, however, is providing the

following information concerning

procedures for micro entity status under

35 U.S.C. 123:

35 U.S.C. 123 uses the term

‘‘applicant’’ throughout, which was

virtually synonymous with ‘‘inventor’’

on September 16, 2011 (the date of

enactment of the AIA as well as the

effective date of 35 U.S.C. 123). 35

U.S.C. 118, however, as amended

effective on September 16, 2012, by

Section 4 of the AIA, now permits an

application to be made by a person to

whom the inventor has assigned or is

under an obligation to assign the

invention. In addition, a person who

otherwise shows sufficient proprietary

interest in the matter may make an

application for patent on behalf of and

as agent for the inventor. Thus, 35

U.S.C. 118 now allows a person other

than the inventor to file an application

as the applicant if the inventor has

assigned or is under an obligation to

assign the invention to the person or if

the person shows sufficient proprietary

interest in the matter. Note also that as

of March 16, 2013, 35 U.S.C. 100 will

be amended to provide new and specific

definitions of the terms ‘‘inventor,’’

‘‘joint inventor,’’ and ‘‘coinventor.’’

35 U.S.C. 123 does not explicitly

preclude an assignee-applicant under 35

U.S.C. 118 from claiming micro entity

status under 35 U.S.C. 123(a) or (d),

although some provisions of 35 U.S.C.

123(a) and (d) refer to an applicant who

is a natural person inventor rather than

a juristic entity. See 35 U.S.C. 123(a)(2)

(provides that a micro entity applicant

under 35 U.S.C. 123(a) must not have

‘‘been named as an inventor on more

than 4 previously filed patent

applications’’) and 123(d)(1) (provides

that the term micro entity includes an

applicant who certifies that ‘‘the

applicant’s employer, from which the

applicant obtains the majority of the

applicant’s income, is an institution of

higher education’’ as defined by section

101(a) of the Higher Education Act of

1965). In addition, 35 U.S.C. 123(a), (b)

and (d) specifically refer to a situation

in which the applicant has assigned

rights in the invention to an assignee.

See 35 U.S.C. 123(a)(4) (provides that a

micro entity applicant under 35 U.S.C.

123(a) must not have ‘‘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’’ exceeding a

specified gross income); 35 U.S.C.

123(b) (provides that an applicant is not

considered to be named on a previously

filed application for purposes of 35

U.S.C. 123(a)(2) if ‘‘the applicant has

assigned, or is under an obligation by

contract or law to assign, all ownership

rights in the application as the result of

the applicant’s previous employment’’);

and 35 U.S.C. 123(d)(2) (provides that

the term micro entity includes an

‘‘applicant [who] has assigned, granted,

conveyed, or is under an obligation by

contract or law, to assign, grant, or

convey, a license or other ownership

interest in the particular applications’’

to an institution of higher education as

defined by section 101(a) of the Higher

Education Act of 1965). Finally, the

legislative history of 35 U.S.C. 123

includes a reference to micro entities as

inventors and not the assignees of

inventors. See H.R. Rep 112–98 at 50

(2011) (describing micro entities as ‘‘a

group of inventors’’ and ‘‘truly

independent inventors’’). Nevertheless,

35 U.S.C. 123 does not explicitly

preclude an assignee-applicant under 35

U.S.C. 118 from claiming micro entity

status for an application under 35 U.S.C.

123(a) or 123(d), provided there is

compliance with the applicable micro

entity criteria. Each applicant must

qualify for micro entity status, and any

other party holding rights in the

application must qualify for small entity

status. See 37 CFR 1.29 (h). Note that a

party who qualifies for micro entity

status necessarily qualifies for small

entity status, as under 37 CFR 1.29 a

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micro entity must first qualify as a small

entity under 37 CFR 1.27.

An ‘‘institution of higher education,’’

as that term is used in 35 U.S.C. 123(d),

is defined in the Higher Education Act

of 1965 (20 U.S.C. 1001(a)). Section

101(a) of the Higher Education Act of

1965 (20 U.S.C. 1001) provides that:

‘‘For purposes of this chapter, other

than subchapter IV, the term ‘institution

of higher education’ means an

educational institution in any State

that—(1) Admits as regular students

only persons having a certificate of

graduation from a school providing

secondary education, or the recognized

equivalent of such a certificate, or

persons who meet the requirements of

section 1091(d)(3) of this title; (2) is

legally authorized within such State to

provide a program of education beyond

secondary education; (3) provides an

educational program for which the

institution awards a bachelor’s degree or

provides not less than a 2-year program

that is acceptable for full credit toward

such a degree, or awards a degree that

is acceptable for admission to a graduate

or professional degree program, subject

to review and approval by the Secretary;

(4) is a public or other nonprofit

institution; and (5) is accredited by a

nationally recognized accrediting

agency or association, or if not so

accredited, is an institution that has

been granted pre-accreditation status by

such an agency or association that has

been recognized by the Secretary for the

granting of pre-accreditation status, and

the Secretary has determined that there

is satisfactory assurance that the

institution will meet the accreditation

standards of such an agency or

association within a reasonable time.’’

Section 103 of the Higher Education Act

of 1965 (20 U.S.C. 1003) provides ‘‘the

term ‘State’ includes, in addition to the

several States of the United States, the

Commonwealth of Puerto Rico, the

District of Columbia, Guam, American

Samoa, the United States Virgin Islands,

the Commonwealth of the Northern

Mariana Islands, and the Freely

Associated States’’ and that the Freely

Associated States means the ‘‘Republic

of the Marshall Islands, the Federated

States of Micronesia, and the Republic

of Palau.’’

The Office is setting out in the rules

of practice the requirements for micro

entity status and procedures for

claiming micro entity status, paying

patent fees as a micro entity, notifying

the Office of loss of micro entity status,

and correcting payments of patent fees

paid erroneously in the micro entity

amount. The Office is also developing

forms for use by members of the public

to provide a certification of micro entity

status. The procedures track the

corresponding provisions in 37 CFR

1.27 and 1.28 for small entities, except

where the small entity procedure is not

appropriate for micro entity status

under the provisions of 35 U.S.C. 123.

For example, 35 U.S.C. 123 requires a

certification as a condition for an

applicant to be considered a micro

entity. Thus, the process in 37 CFR

1.27(c)(3) for establishing small entity

status by payment of certain fees in the

small entity amount cannot be made

applicable to establishing micro entity

status, and the process in 37 CFR 1.28(a)

for a refund based upon subsequent

establishment of small entity status is

not applicable where there is

subsequent establishment of micro

entity status. In addition, 35 U.S.C.

123(a)(3) and (a)(4) require that the

income level be met for the calendar

year preceding the calendar year in

which the applicable fee is paid. Thus,

the provision in 37 CFR 1.27(g)(1) that

the applicant need only determine

continued eligibility for small entity

status for issue and maintenance fee

payments, but can pay intervening fees

at small entity rate without determining

whether still entitled to small entity

status, cannot be made applicable to

payment of patent fees as a micro entity.

Discussion of Specific Rules

The following is a discussion of the

amendments to Title 37 of the Code of

Federal Regulations, Part 1.

Section 1.29: Section 1.29 is added to

implement procedures for claiming

micro entity status.

Since 35 U.S.C. 123(a) through (d)

specify the requirements to qualify as a

micro entity, the provisions in §§ 1.29(a)

through (d) generally track the

provisions of 35 U.S.C. 123(a) through

(d).

Section 1.29(a) implements the

provisions of 35 U.S.C. 123(a), and

includes reference to inventors or joint

inventors where appropriate. Section

1.29(a) provides that an applicant

claiming micro entity status under 35

U.S.C. 123(a) must certify that: (1) The

applicant qualifies as a small entity as

defined in § 1.27; (2) neither the

applicant nor the inventor nor a joint

inventor has been named as the inventor

or a joint inventor (see 35 U.S.C. 100)

on more than four previously filed

patent applications, other than

applications filed in another country,

provisional applications under 35

U.S.C. 111(b), or international

applications for which the basic

national fee under 35 U.S.C. 41(a) was

not paid; (3) neither the applicant nor

the inventor nor a joint inventor, in the

calendar year preceding the calendar

year in which the applicable fee is being

paid, had a gross income, as defined in

section 61(a) of the Internal Revenue

Code of 1986 (26 U.S.C. 61(a)),

exceeding three times the median

household income for that preceding

calendar year, as most recently reported

by the Bureau of the Census; and (4)

neither the applicant nor the inventor

nor a joint inventor has assigned,

granted, or conveyed, nor is 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, in the

calendar year preceding the calendar

year in which the applicable fee is being

paid, had a gross income, as defined in

section 61(a) of the Internal Revenue

Code of 1986, exceeding three times the

median household income for that

preceding calendar year, as most

recently reported by the Bureau of the

Census. See also § 1.29(h) (each

applicant must qualify for micro entity

status, and each other party holding

rights in the invention must qualify for

small entity status).

Section 61(a) of the Internal Revenue

Code of 1986 (26 U.S.C. 61(a)) provides

that: ‘‘[e]xcept as otherwise provided in

this subtitle, gross income means all

income from whatever source derived,

including (but not limited to) the

following items: (1) Compensation for

services, including fees, commissions,

fringe benefits, and similar items; (2)

Gross income derived from business; (3)

Gains derived from dealings in property;

(4) Interest; (5) Rents; (6) Royalties; (7)

Dividends; (8) Alimony and separate

maintenance payments; (9) Annuities;

(10) Income from life insurance and

endowment contracts; (11) Pensions;

(12) Income from discharge of

indebtedness; (13) Distributive share of

partnership gross income; (14) Income

in respect of a decedent; and (15)

Income from an interest in an estate or

trust.’’ The median household income

for calendar year 2011 (the year most

recently reported by the Bureau of the

Census) was $50,054. See Income,

Poverty, and Health Insurance Coverage

in the United States in 2011 at pages 5

and 31 (Table A–1) (Sept. 2012). Thus,

the income level specified in

§§ 1.29(a)(3) and (a)(4) (three times the

median household income) is $150,162

for calendar year 2011 (the year most

recently reported by the Bureau of the

Census).

If an application names more than one

applicant or inventor, each applicant

and each inventor must meet the

requirements of § 1.29(a) for the

applicants to file a micro entity

certification under § 1.29(a) in the

application. It would not be appropriate

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to file a micro entity certification under

§ 1.29(a) for the application if there were

more than one applicant or inventor and

not all of the applicants and inventors

qualified as micro entities under 35

U.S.C. 123(a): e.g., (1) an applicant or

inventor exceeded the gross income

levels; (2) an applicant or inventor had

more than four other nonprovisional

applications; or (3) an applicant or

inventor had assigned, granted, or

conveyed the application or was under

an obligation to do so, to an entity that

exceeds the gross income levels.

Additionally, the income level

requirement in 35 U.S.C. 123(a)(3)

applies to each applicant’s and

inventor’s income separately (i.e., the

combined gross income of all of the

applicants and inventors need not be

below the income level in 35 U.S.C.

123(a)(3)). Further, the assignment

requirement in § 1.29(a)(4) applies to

each applicant and inventor (i.e., if an

applicant or inventor assigns or is

obligated to assign the invention to

more than one assignee (e.g., half

interest in the invention to two

assignees), each of the assignees must

meet the income limit specified in

§ 1.29(a)(4)). Note also that in this

context an inventor ordinarily should

qualify as a small entity under

§§ 1.29(a)(1) and 1.27(a)(1). Under

§ 1.27(a)(1), an inventor generally is a

small entity and retains such status even

if the inventor assigns some rights to

another small entity. Similarly, to obtain

micro entity status, § 1.29(h) requires

that any non-applicant assignee be a

small entity.

Section 1.29(b) implements the

provisions of 35 U.S.C. 123(b). Section

1.29(b) provides that an applicant,

inventor, or joint inventor is not

considered to be named on a previously

filed application for purposes of

§ 1.29(a)(2) if the applicant, inventor, or

joint inventor has assigned, or is under

an obligation by contract or law to

assign, all ownership rights in the

application as the result of the

applicant’s, inventor’s, or joint

inventors previous employment.

Section 1.29(c) implements the

provisions of 35 U.S.C. 123(c). Section

1.29(c) provides that if an applicant’s,

inventor’s, joint inventor’s, or entity’s

gross income in the preceding calendar

year is not in United States dollars, the

average currency exchange rate, as

reported by the Internal Revenue

Service, during that calendar year shall

be used to determine whether the

applicant’s, inventor’s, joint inventor’s,

or entity’s gross income exceeds the

threshold specified in § 1.29(a)(3) or

(a)(4). The Internal Revenue Service

reports the average currency exchange

rate (Yearly Average Currency Exchange

Rates) on its Internet Web site (http://

www.irs.gov/businesses/small/

international/article/

0,,id=206089,00.html).

Section 1.29(d) implements the

provisions of 35 U.S.C. 123(d). Section

1.29(d) provides that an applicant

claiming micro entity status under 35

U.S.C. 123(d) must certify that: (1) The

applicant qualifies as a small entity as

defined in § 1.27; and (2)(i) the

applicant’s employer, from which the

applicant obtains the majority of the

applicant’s income, is an institution of

higher education as defined in section

101(a) of the Higher Education Act of

1965 (20 U.S.C. 1001(a)); or (ii) the

applicant has assigned, granted,

conveyed, or is under an obligation by

contract or law, to assign, grant, or

convey, a license or other ownership

interest in the particular application to

such an institution of higher education.

To the extent that 35 U.S.C. 123(d)

(unlike 35 U.S.C. 123(a)) does not

expressly require that an applicant

qualify as a small entity under § 1.27,

the Office is invoking its authority

under 35 U.S.C. 123(e) to expressly

require that a party claiming micro

entity status via 35 U.S.C. 123(d) qualify

as a small entity under § 1.27. The

legislative history of 35 U.S.C. 123 refers

to micro entities as a subset of small

entities, namely, ‘‘truly independent

inventors.’’ See H.R. Rep 112–98 at 50

(‘‘[t]he Committee was made aware,

however, that there is likely a benefit to

describing—and then accommodating—

a group of inventors who are even

smaller [than small entities], in order to

ensure that the USPTO can tailor its

requirements, and its assistance, to the

people with very little capital, and just

a few inventions, as they are starting

out. This section of the Act defines this

even smaller group—the micro-entity—

that includes only truly independent

inventors’’). Thus, permitting an

applicant who does not qualify as a

small entity to take advantage of the

benefits of micro entity status via 35

U.S.C. 123(d) would be inconsistent

with the purposes of micro entity

provisions of 35 U.S.C. 123. The statute

and its legislative history do not, for

example, contemplate a for-profit, large

entity applicant becoming a ‘‘micro

entity’’ (and thus obtaining a 75 percent

discount) merely by licensing or

assigning some interest (even merely a

nominal or miniscule interest) to an

institution of higher education.

Accordingly, the Office has determined

that requiring all micro entities to

qualify as small entities is reasonably

necessary and appropriate to ensure that

applicants who do not qualify as a small

entity do not inappropriately attempt to

take advantage of micro entity status.

See also § 1.29(h) (each applicant must

qualify for micro entity status, and each

other party holding rights in the

invention must qualify for small entity

status).

Section 1.29(e) provides that micro

entity status must be established in an

application in by filing a certification in

writing that complies with either

§ 1.29(a) or § 1.29(d) and that is signed

in compliance with § 1.33(b). Section

1.29(e) also contains provisions for a

micro entity that correspond to the

provisions of § 1.27(c)(4) for a small

entity. Section 1.29(e) provides that: (1)

Status as a micro entity must be

specifically established by an assertion

in each related, continuing, and reissue

application in which status is

appropriate and desired; (2) status as a

small or micro entity in one application

or patent does not affect the status of

any other application or patent,

regardless of the relationship of the

applications or patents; and (3) the

refiling of an application under § 1.53 as

a continuation, divisional, or

continuation-in-part application

(including a continued prosecution

application under § 1.53(d)), or the

filing of a reissue application, requires

a new certification of entitlement to

micro entity status for the continuing or

reissue application.

Section 1.29(f) contains provisions for

a micro entity that correspond to the

provisions of § 1.27(d) for a small entity.

Section 1.29(f) provides that a fee may

be paid in the micro entity amount only

if it is submitted with, or subsequent to,

the submission of a certification of

entitlement to micro entity status.

Section 1.29(g) contains provisions for

a micro entity that correspond to the

provisions of § 1.27(e) for a small entity.

Section 1.29(g) provides that a

certification of entitlement to micro

entity status need only be filed once in

an application or patent, and that micro

entity status, once established, remains

in effect until changed pursuant to

§ 1.29(i). However, a fee may be paid in

the micro entity amount only if status as

a micro entity as defined in § 1.29(a) or

(d) is appropriate (which requires that

status as a small entity is also

appropriate) on the date the fee is being

paid. Thus, while an applicant is not

required to provide a certification of

entitlement to micro entity status with

each fee payment once micro entity

status has been established in an

application, the applicant must still be

entitled to micro entity status to pay a

fee in the micro entity amount at the

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time of all payments of fees in the micro

entity amount.

For micro entity status under 35

U.S.C. 123(a), the applicant must

determine that the applicant and each

inventor or joint inventor still meet the

applicable conditions of 35 U.S.C.

123(a) and § 1.29(a) to claim micro

entity status. For example, the applicant

must determine that neither the

applicant nor inventor nor joint

inventor has had a change in gross

income that exceeds the gross income

threshold in 35 U.S.C. 123(a)(3) (a new

determination must be made each year

because gross income may change from

year to year, and micro entity status is

based upon gross income in the

calendar year preceding the calendar

year in which the applicable fee is being

paid). In addition, the applicant must

determine that neither the applicant nor

inventor nor joint inventor has made, or

is obligated by contract or law to make,

an assignment, grant, or conveyance to

an entity not meeting the gross income

threshold in 35 U.S.C. 123(a)(4), and

that no new inventor or joint inventor

has been named in the application who

does not meet the conditions specified

in 35 U.S.C. 123(a) and § 1.29(a)). For

micro entity status under 35 U.S.C.

123(d), the applicant must determine

that each applicant and inventor still

complies with 35 U.S.C. 123(d) and

§ 1.29(d) (e.g., still obtains the majority

of his or her income from an institution

of higher education as defined in

section 101(a) of the Higher Education

Act of 1965 (20 U.S.C. 1001(a)). Section

1.29(g) also provides that where an

assignment of rights or an obligation to

assign rights to other parties who are

micro entities occurs subsequent to the

filing of a certification of entitlement to

micro entity status, a second

certification of entitlement to micro

entity status is not required.

Section 1.29(h) contains provisions

for a micro entity that correspond to the

provisions of § 1.27(f) for a small entity.

Section 1.29(h) provides that prior to

submitting a certification of entitlement

to micro entity status in an application,

including a related, continuing, or

reissue application, a determination of

such entitlement should be made

pursuant to the requirements of § 1.29(a)

or 1.29(d). Section 1.29(h) also indicates

that each applicant must qualify for

micro entity status under § 1.29(a) or

1.29(d), and that any other party holding

rights in the application must qualify for

small entity status under § 1.27. As

discussed previously, a party who

qualifies for micro entity status

necessarily qualifies for small entity

status, as under § 1.29(a)(1) and (d)(1) a

micro entity must first qualify as a small

entity under § 1.27. Section 1.29(h) also

indicates that the Office will generally

not question certification of entitlement

to micro entity status that is made in

accordance with the requirements of

§ 1.29.

Section 1.29(i) contains provisions for

a micro entity that correspond to the

provisions of § 1.27(g)(2) for a small

entity. Section 1.29(i) provides that

notification of a loss of entitlement to

micro entity status must be filed in the

application or patent prior to paying, or

at the time of paying, any fee after the

date on which status as a micro entity

as defined in § 1.29(a) or 1.29(d) is no

longer appropriate. The notification that

micro entity status is no longer

appropriate must be signed by a party

identified in § 1.33(b). Payment of a fee

in other than the micro entity amount is

not sufficient notification that micro

entity status is no longer appropriate.

Section 1.29(i) further provides that a

notification that micro entity status is

no longer appropriate will not be treated

as a notification that small entity status

is also no longer appropriate unless it

also contains a notification of loss of

entitlement to small entity status under

§ 1.27(f)(2). Thus, an applicant or

patentee who files a notification that

micro entity status is no longer

appropriate will be treated as a small

entity by default unless the notification

also contains a notification of loss of

entitlement to small entity status under

§ 1.27(f)(2).

Section 1.29 finally provides that

once a notification of a loss of

entitlement to micro entity status is

filed in the application or patent, a new

certification of entitlement to micro

entity status is required to again obtain

micro entity status.

Section 1.29(j) contains provisions for

a micro entity that correspond to the

provisions of § 1.27(h) for a small entity.

Section 1.29(j) provides that any attempt

to fraudulently establish status as a

micro entity, or pay fees as a micro

entity, shall be considered as a fraud

practiced or attempted on the Office,

and that establishing status as a micro

entity, or paying fees as a micro entity,

improperly, and with intent to deceive,

shall be considered as a fraud practiced

or attempted on the Office.

Section 1.29(k) contains provisions

for a micro entity that correspond to the

provisions of § 1.28(c) for a small entity.

Section 1.28(c) permits an applicant or

patentee to correct the erroneous

payment of a patent fee in the small

entity amount if status as a small entity

was established in good faith, and fees

as a small entity were paid in good faith.

See DH Tech. Inc. v. Synergystex Int’l

Inc., 154 F.3d 1333 (Fed. Cir. 1998).

Section 1.29(k) provides that if: (i) An

applicant or patentee establishes micro

entity status in an application or patent

in good faith; (ii) the applicant or

patentee pays fees as a micro entity in

the application or patent in good faith;

and (iii) applicant or patentee later

discovers that such micro entity status

either was established in error, or that

the Office was not notified of a loss of

entitlement to micro entity status as

required by § 1.29(i) through error, the

error will be excused upon compliance

with the separate submission and

itemization requirements of § 1.29(k)(1)

and the deficiency payment requirement

of § 1.29(k)(2).

Section 1.29(k)(1) provides that any

paper submitted under § 1.29(k) must be

limited to the deficiency payment (all

fees paid in error) required for a single

application or patent. Section 1.29(k)(1)

provides that where more than one

application or patent is involved,

separate submissions of deficiency

payments (e.g., checks) and itemizations

are required for each application or

patent. Section 1.29(k)(1) also provides

that the paper must contain an

itemization of the total deficiency

payment and include the following

information: (1) Each particular type of

fee that was erroneously paid as a micro

entity, (e.g., basic statutory filing fee,

two-month extension of time fee) along

with the current fee amount for a small

or non-small entity; (2) the micro entity

fee actually paid, and the date on which

it was paid; (3) the deficiency owed

amount (for each fee erroneously paid);

and (4) the total deficiency payment

owed, which is the sum or total of the

individual deficiency owed amounts as

set forth in § 1.29(k)(2).

Section 1.29(k)(2) provides that the

deficiency owed, resulting from the

previous erroneous payment of micro

entity fees, must be paid. The deficiency

owed for each previous fee erroneously

paid as a micro entity is the difference

between the current fee amount for a

small entity or non-small entity, as

applicable, on the date the deficiency is

paid in full and the amount of the

previous erroneous micro entity fee

payment. The total deficiency payment

owed is the sum of the individual

deficiency owed amounts for each fee

amount previously and erroneously

paid as a micro entity. This corresponds

to the procedure for fee deficiency

payments based upon the previous

erroneous payment of patent fees in the

small entity amount. See § 1.28(c)(2)(i)

(‘‘[t]he deficiency owed for each

previous fee erroneously paid as a small

entity is the difference between the

current full fee amount (for non-small

entity) on the date the deficiency is paid

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in full and the amount of the previous

erroneous (small entity) fee payment’’).

Section 1.29(k)(3) provides that if the

requirements of §§ 1.29(k)(1) and (k)(2)

are not complied with, such failure will

either be treated at the option of the

Office as an authorization for the Office

to process the deficiency payment and

charge the processing fee set forth in

§ 1.17(i), or result in a requirement for

compliance within a one-month non-

extendable time period under § 1.136(a)

to avoid the return of the fee deficiency

payment.

Section 1.29(k)(4) provides that any

deficiency payment (based on a

previous erroneous payment of a micro

entity fee) submitted under § 1.29(k)

will be treated as a notification of a loss

of entitlement to micro entity status

under § 1.29(i).

Comments and Responses to

Comments: The Office published a

notice on May 30, 2012, proposing to

change the rules of practice to

implement the micro entity provisions

of the AIA. See Changes to Implement

Micro Entity Status for Paying Patent

Fees, 77 FR 31806 (May 30, 2012). The

Office received twenty-seven written

comments (from intellectual property

organizations, industry, law firms,

individual patent practitioners, and the

general public) in response to this

notice. There were some comments

received that related to practice before

the agency but not related to the

proposed changes to the rules of

practice to implement the micro entity

provisions of the AIA, and these

comments have been forwarded to the

Office of Innovation Development for

further consideration. The Office is

always interested to hear feedback from

the public concerning ways in which it

can assist small and independent

inventors. The comments germane to

the proposed changes to the rules of

practice to implement the micro entity

provisions of the AIA and the Office’s

responses to the comments follow:

Comment 1: One comment stated that

there are several instances in 35 U.S.C.

123 and proposed § 1.29 where the term

‘‘applicant’’ is inapplicable to an

organization and must really be

referring to the inventor(s) (e.g., a

certification that ‘‘applicant’’ has not

been named as an ‘‘inventor’’ in more

than four previously filed applications,

references to applicant’s previous

employment or employer). One

comment indicated that the term

‘‘applicant’’ should be used in an

interchangeable manner so as to mean

either the inventor(s) or a company to

which the patent application is assigned

(i.e., the rules should refer to ‘‘applicant

or inventor’’) in view of the AIA’s

change to 35 U.S.C. 118. That comment

further indicated, however, that the

ability to vary from the statute ‘‘may be

limited.’’ One comment similarly

indicated that the final rules should

replace all instances of ‘‘applicant’’ and

‘‘applicant’s’’ with ‘‘inventor’’ and

‘‘inventor’s’’ in § 1.29(a) (second

instance), (b), (c), (d)(1), (d)(2)(i), and

(d)(2)(ii) in view of the AIA’s change to

35 U.S.C. 118. One comment stated that

in the case of university inventions, the

university typically is the applicant and

this creates anomalies in proposed

§ 1.29(d), since the institution

(university) logically cannot make the

certifications required under

§ 1.29(d)(2)(i) and (d)(2)(ii) (that the

employer from which the university

obtains the majority of its income is an

institution of higher education as

defined by section 101(a) of the Higher

Education Act of 1965, or that the

university itself has assigned, granted,

conveyed, or is under an obligation by

contract or law, to assign, grant, or

convey, a license or other ownership

interest in the particular application).

Response: The Office specifically

invited public comment in the notice of

proposed rulemaking on the issue of

whether the term ‘‘inventor’’ should be

used in place of ‘‘applicant’’ at any

instance in the proposed micro entity

rules. See Changes to Implement Micro

Entity Status for Paying Patent Fees, 77

FR at 31808. The Office agrees that

some, though not all, provisions of 35

U.S.C. 123 refer to a situation where an

inventor is the applicant. The micro

entity provisions of 35 U.S.C. 123 were

enacted as part of the AIA, which also

revised the patent laws to provide a

specific definition of the term

‘‘inventor’’ and to change who may be

the applicant for a patent. See 125 Stat.

at 285 (defining ‘‘inventor’’) and 293–97

(changing the patent laws to distinguish

between who may apply for a patent as

the applicant and who must be named

as the inventor); see also 35 U.S.C. 100;

35 U.S.C. 118. The Office does not

consider it appropriate either to amend

the language of 35 U.S.C. 123 as

incorporated into the corresponding

provisions of § 1.29 or to somehow view

the terms ‘‘applicant’’ and ‘‘inventor’’ as

interchangeable in all instances under

35 U.S.C. 123. See Brown v. Gardner,

513 U.S. 115, 118 (1994) (presumption

that a given term is used to mean the

same thing throughout a statute). As

discussed previously, while some of the

provisions in 35 U.S.C. 123(a) and (d)

refer to an inventor-applicant, 35 U.S.C.

123 does not explicitly preclude an

assignee-applicant under 35 U.S.C. 118

from claiming micro entity status under

35 U.S.C. 123(a) or (d), provided there

is compliance with the applicable micro

entity criteria by each applicant.

However, each applicant must qualify

for micro entity status, and any other

party holding rights in the application

must qualify for small entity status. See

37 CFR 1.29(h).

Comment 2: One comment stated that

it is possible that the legislative intent

of 35 U.S.C. 123(a)(2) was that an

applicant should satisfy this criterion so

long as the applicant has fewer than

four previously filed applications in

which micro entity fees were paid. One

comment stated that the four

application limit under 35 U.S.C.

123(a)(2) should apply only to

applications filed within the past

twenty years or so. One comment stated

that it would make sense for the term

‘‘inventor’’ in § 1.29(a)(2) to refer to an

applicant who has had the opportunity

to claim micro entity status in four

previously filed patent applications.

One comment indicated that § 1.29(a)(2)

should be amended to provide that if an

application is entitled to micro entity

status, then continuation and divisional

applications of that parent application

should normally be entitled to micro

entity status without counting the

parent application or any parallel filed

continuing or divisional patent

applications in the same patent family

toward the four application limit.

Response: Section 1.29(a)(2) tracks the

provisions of 35 U.S.C. 123(a)(2) with

the clarification to reference non-

applicant inventors and joint inventors.

35 U.S.C. 123(a)(2) provides a

certification that the applicant, inter

alia, ‘‘has not been named as an

inventor on more than 4 previously filed

patent applications, other than

applications filed in another country,

provisional applications under 35

U.S.C. 111(b), or international

applications * * * for which the basic

national fee under 35 U.S.C. 41(a) was

not paid.’’ This provision refers to when

an inventor-applicant has been named

as an inventor in a previous application,

including as one in a group of joint

inventors. See 35 U.S.C. 100. An

applicant that is not an inventor would

plainly not violate this criteria.

Moreover, this provision has been

clarified to refer to an inventor or joint

inventor who is not the applicant. 35

U.S.C. 123(a)(2) by its express terms

does not, however, provide for

exceptions to this four-application limit

suggested by the comments. In addition,

while 35 U.S.C. 123(e) authorizes the

Office to place additional limits on who

may qualify as a micro entity under 35

U.S.C. 123, it does not authorize the

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Office to remove limitations contained

in 35 U.S.C. 123.

Comment 3: One comment suggested

expanding the scope of the § 1.29(b)

exception to applications counted

toward the four application limit in

§ 1.29(a)(2) by including applications

assigned to the inventor’s current

employer when the invention is outside

the current employer’s scope of

employment with the inventor.

Response: Section 1.29(b) tracks the

provisions of 35 U.S.C. 123(b) with the

clarification to reference non-applicant

inventors and joint inventors. 35 U.S.C.

123(b) provides that an applicant is not

considered to be named on a previously

filed application for purposes of 35

U.S.C. 123(a)(2) if the applicant has

assigned, or is under an obligation by

contract or law to assign, all ownership

rights in the application ‘‘as the result

of applicant’s previous employment.’’

Thus, the exception in 35 U.S.C. 123(b)

by its express terms does not apply to

applications assigned to a current

employer. In addition, as discussed

previously, while 35 U.S.C. 123(e)

authorizes the Office to place additional

limits on who may qualify as a micro

entity under 35 U.S.C. 123, it does not

authorize the Office to remove

limitations contained in 35 U.S.C. 123.

Comment 4: One comment noted that

the Office has indicated that it will

publish the income level that is three

times the median household income for

the calendar year most recently reported

by the Bureau of the Census, but that 35

U.S.C. 123(a) (and § 1.29(a)) require that

applicants use the median household

income data for ‘‘the calendar year

preceding the calendar year in which

the applicable fee is being paid.’’ The

comment expressed concern that

median household income data for a

given year is not reported by the Bureau

of the Census until the succeeding year.

One comment suggested that § 1.29(a)(3)

be amended to provide that an applicant

may rely on his or her most recently

filed income tax return regardless of

whether the most recently filed tax

return accounted for the previous

calendar year’s gross income.

Response: Section 1.29(a)(3) tracks the

provisions of 35 U.S.C. 123(a)(3) with

the clarification to reference non-

applicant inventors and joint inventors.

35 U.S.C. 123(a)(3) provides that each

inventor’s gross income ‘‘in the calendar

year preceding the calendar year in

which the applicable fee is being paid’’

must not exceed ‘‘three times the

median household income for that

preceding calendar year as most

recently reported by the Bureau of the

Census.’’ 35 U.S.C. 123(a)(3) does not

provide for an applicant to simply rely

on his or her most recently filed income

tax return if the most recently filed tax

return does not pertain to the calendar

year preceding the calendar year in

which the applicable fee is being paid.

The Office will post on its Internet Web

site the U.S. dollar amount that equals

three times the median household

income as most recently reported by the

Bureau of the Census. Thus, the Office’s

Internet Web site will contain the U.S.

dollar amount that equals three times

the median household income as most

recently reported by the Bureau of the

Census as provided for in § 1.29(a)(3)

and 35 U.S.C. 123(a)(3).

Comment 5: One comment requested

guidance as to what effect marital status

has on ‘‘gross income’’ in terms of

§ 1.29(a)(3), and whether the inventor’s

tax return is filed jointly or separately

changes the amount of ‘‘gross income’’

for purposes of meeting the requirement

of proposed § 1.29(a)(3). The comment

also indicated that in community

property states, the law may be

construed such that the inventor/

applicant has assigned his or her rights

in part to the spouse, as a matter of law.

Another comment stated that marital

status of an individual applicant may

have an impact on the assignment or

ownership rights in an invention and

the gross income of the applicant, and

that it may require an opinion from an

accountant or tax attorney with respect

to the applicant’s income.

Response: The Office reads the ‘‘gross

income’’ requirement contained in 35

U.S.C. 123(a)(3) and § 1.29(a)(3) with

respect to a married person as applying

to the amount of income the person

would have reported as gross income if

that person were filing a separate tax

return (which includes properly

accounting for that person’s portion of

interest, dividends, and capital gains

from joint bank or brokerage accounts),

regardless of whether the person

actually filed a joint return or a separate

return for the relevant calendar year.

Additionally, the Office does not

consider a spouse’s ownership interest

in a patent application or patent arising

by operation of residence in a

community property state as falling

within the ambit of 35 U.S.C. 123(a)(4)

and § 1.29(a)(4) because the spouse’s

ownership interest arises by operation

of state law, rather than an assignment,

grant, conveyance, or obligation to

assign, grant, or convey.

Comment 6: One comment questioned

the situation where the applicant’s

income is not in U.S. dollars and the

applicable currency exchange rate is

applied to determine the applicant’s

gross income in U.S. dollars in

accordance with § 1.29(c), whether the

applicant’s gross income in terms of

U.S. dollars should be compared to

three times the median household

income for the preceding calendar year

in the United States, or should be

compared to the median household

income for the preceding calendar year

in the country in which the applicant

obtained income.

Response: In all cases, the inventor’s

gross income in the previous calendar

year must be compared to the U.S.

dollar amount equaling three times the

median household income as most

recently reported by the Bureau of the

Census (which will be posted on the

Office’s Internet Web site) at the time

the applicable fee is being paid in order

to meet the gross income requirement of

§ 1.29(a)(3).

Comment 7: One comment suggested

that the language ‘‘that calendar year’’ in

proposed § 1.29(c) should be changed to

‘‘the preceding calendar year’’ to clarify

that applicants whose income is not in

U.S. dollars must apply the currency

exchange rate from the preceding

calendar year when calculating income

in U.S. dollars in order to determine

whether the proposed § 1.29(a)(3) ‘‘gross

income’’ requirement is met.

Response: Section 1.29(c) tracks the

provisions of 35 U.S.C. 123(c) with the

clarification to reference non-applicant

inventors and joint inventors. The

phrase ‘‘that calendar year’’ in 35 U.S.C.

123(c) and § 1.29(c) means ‘‘the

preceding calendar year’’ as previously

recited in 35 U.S.C. 123(c) and § 1.29(c).

Comment 8: One comment indicated

that foreign applicants should be

directed to make a ‘‘good faith attempt’’

to estimate their gross income in terms

of U.S. tax law.

Response: 35 U.S.C. 123(c) provides

that if an applicant’s or entity’s gross

income in the preceding calendar year

is not in United States dollars, the

average currency exchange rate, as

reported by the Internal Revenue

Service, during that calendar year shall

be used to determine whether the

applicant’s or entity’s gross income

exceeds the threshold specified in 35

U.S.C. 123(a)(3) or (4). 35 U.S.C. 123

does not provide any alternative basis,

such as a good faith estimation as

suggested by the comment, for

determining whether an applicant or

entity meets the gross income

requirement of 35 U.S.C. 123(a)(3). For

an applicant or entity whose previous

calendar year’s gross income was

received partially in U.S. dollars and

partially in non-United States currency,

the gross income amount in non-United

States currency must be converted into

U.S. dollars in accordance with § 1.29(c)

and then added to the gross income

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amount in U.S. dollars to determine

whether the applicant or entity meets

the gross income requirement of

§ 1.29(a)(3).

Comment 9: One comment suggested

that the definition of micro entity status

should be broadened to benefit even

more small inventors than those who

meet the requirements of 35 U.S.C.

123(a).

Response: The legislative history

includes a statement that Congress

developed the micro entity provision to

benefit truly independent inventors,

people with very little capital and just

a few inventions, who are just starting

out. See H.R. Rep 112–98 at 50. Small

entity inventors who do not meet the

micro entity requirements of 35 U.S.C.

123 may still claim small entity status

and receive the fifty percent small entity

fee reduction. In any event, as discussed

previously, while 35 U.S.C. 123(e)

authorizes the Office to place additional

limits on who may qualify as a micro

entity under 35 U.S.C. 123, it does not

authorize the Office to remove

limitations contained in 35 U.S.C. 123

or expand the scope of 35 U.S.C. 123 to

include more small entities.

Comment 10: Several comments

objected to the requirement under

§ 1.29(d)(1) that in order to qualify for

micro entity status under § 1.29(d), the

applicant must qualify as a small entity

as defined in § 1.27 in addition to

meeting one of the requirements under

§ 1.29(d)(2)(i) or (d)(2)(ii).

Response: 35 U.S.C. 123(e) provides

that in addition to the limits imposed by

35 U.S.C. 123, the Director may, in the

Director’s discretion, impose income

limits, annual filing limits, or other

limits on who may qualify as a micro

entity pursuant to this section if the

Director determines that such additional

limits are reasonably necessary to avoid

an undue impact on other patent

applicants or owners or are otherwise

reasonably necessary and appropriate.

The Office has determined that

requiring all micro entities to qualify as

small entities (§ 1.29(d)(1)) is reasonably

necessary and appropriate to ensure that

applicants who do not qualify as a small

entity do not inappropriately attempt to

take advantage of micro entity status. As

discussed in the notice of proposed

rulemaking, the legislative history of 35

U.S.C. 123 includes a statement that

micro entity status is directed to a

subset of small entities, namely, ‘‘truly

independent inventors.’’ See H.R. Rep

112–98 at 50.

Comment 11: Several comments

indicated that § 1.29(d)(2)(ii) should

provide that the rights transferred or

owed to an institution of higher

education should be substantial. The

comments indicated that institutions of

higher education are generally non-

practicing entities or that applicants

could engage in sham transfers of a de

minimus interest to an institution of

higher education, and suggested the

Office use its authority under 35 U.S.C.

123(e) to ensure the transfer of rights is

for a substantial purpose. One comment

indicated that micro entity status by a

grant of rights to an institution of higher

education under § 1.29(d)(2)(ii) should

not be available to an institution of

higher education and that without such

a limitation, institutions of higher

education could simply grant rights to

each other and thereby qualify their

patent for micro entity status.

Response: As discussed previously,

the Office is requiring that all micro

entities qualify as small entities

(§ 1.29(d)(1)) to ensure that applicants

who do not qualify as a small entity do

not inappropriately attempt to take

advantage of micro entity status. This

requires that any person or entity

claiming micro entity status not have

assigned, granted, conveyed, or

licensed, and be under no obligation

under contract or law to assign, grant,

convey, or license, any rights in the

invention to any person, concern, or

organization which would not qualify

for small entity status as a person, small

business concern, or nonprofit

organization. See § 1.27(a). The Office

plans to closely monitor the percentage

of applicants claiming small entity

status under 35 U.S.C. 123(d) and will

propose additional limits under the

authority provided in 35 U.S.C. 123(e) if

it appears that a substantial number of

applicants are engaging in sham

transactions with institutions of higher

education to obtain micro entity status.

Comment 12: One comment indicated

that 35 U.S.C. 123(d) is unclear as to

whether it was intended to cover a

separate non-profit corporation,

research foundation, or other institution

that is legally separate from an

institution of higher education but

whose stated mission is to represent that

institution of higher education, to act on

its behalf, and/or commercialize the

intellectual property of that institution

of higher education. The comment

suggested that a research foundation

should be treated as a qualifying

institution of higher education for

purposes of micro entity status if the

research foundation is acting on behalf

of a university which is an institution of

higher education as defined in section

101(a) of the Higher Education Act of

1965. Another comment suggested that

the Office consider expanding the scope

of § 1.29(d) to include technology

transfer organizations whose primary

purpose is to facilitate the

commercialization of technologies

developed by one or more institutions of

higher education as defined by section

101(a) of the Higher Education Act of

1965. Another comment suggested that

micro entity status be made available to

applicants whose inventions are co-

owned with Federal Government

research laboratories and that patent

applications on inventions made solely

or jointly by Federal laboratory

personnel should be considered in the

same manner as applications made

solely by personnel at academic

research laboratories. Another comment

suggested amending § 1.29(d) to extend

the definition of ‘‘institution of higher

education’’ to include certain nonprofit

scientific or educational organizations

that are not institutions of higher

education ‘‘as defined in section 101(a)

of the Higher Education Act of 1965 (20

U.S.C. 1001(a))’’ as required by 35

U.S.C. 123(d). Another comment

suggested that the Office interpret

‘‘institution of higher education as

defined in section 101(a) of the Higher

Education Act of 1965 (20 U.S.C.

1001(a))’’ as it appears in 35 U.S.C.

123(d) to include institutions of higher

education set forth in subsection (b) of

20 U.S.C. 1001, thus making micro

entity status available to institutions

that grant only graduate degrees if they

otherwise qualify as institutions of

higher education under 20 U.S.C.

1001(a).

Response: 35 U.S.C. 123(d) provides

that a micro entity shall also include an

applicant who certifies that: (1) The

applicant’s employer, from which the

applicant obtains the majority of the

applicant’s income, is an institution of

higher education as defined in section

101(a) of the Higher Education Act of

1965 (20 U.S.C. 1001(a)); or (2) the

applicant has assigned, granted,

conveyed, or is under an obligation by

contract or law, to assign, grant, or

convey, a license or other ownership

interest in the particular applications to

such an institution of higher education.

Consistent with the discussion above

and in the notice of proposed

rulemaking about the statutory terms

‘‘applicant’’ and ‘‘inventor,’’ note that

the statutory criteria in 35 U.S.C. 123(d)

ordinarily would not be met by an

institution of higher education that is

itself an assignee-applicant. Also, while

35 U.S.C. 123(e) authorizes the Office to

place additional limits on who may

qualify as a micro entity under 35 U.S.C.

123, it does not authorize the Office to

remove limitations contained in 35

U.S.C. 123 such as to expand the scope

of 35 U.S.C. 123(d) to include a

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separate, non-profit corporation,

research foundation, technology transfer

organization, Federal Government

research laboratory, other non-profit

scientific or educational organization,

institution of higher education as

defined in section 101(b) of the Higher

Education Act of 1965, or other

institution that is legally separate from

an institution of higher education as

defined in section 101(a) of the Higher

Education Act of 1965 as suggested by

the comments. An entity or institution

must meet the definition of an

institution of higher education as

defined in section 101(a) of the Higher

Education Act of 1965 for an applicant

employed by, or who has assigned or is

under an obligation to assignee to, the

entity or institution, to be eligible for

micro entity status under 35 U.S.C.

123(d).

Comment 13: Several comments

indicated that the proposed rules show

a bias in favor of institutions of higher

education and against independent

inventors because an independent

inventor has to meet certain criteria to

be entitled to micro entity status.

Response: Both independent

inventors under 35 U.S.C. 123(a) and

those employed by or under a legal or

contractual obligation to assign, grant,

or convey an interest in an application

to an institution of higher education as

defined in section 101(a) of the Higher

Education Act of 1965 under 35 U.S.C.

123(d), must meet certain criteria to be

eligible for micro entity status.

Specifically, the applicant must qualify

as a small entity as defined in § 1.27. In

addition, as to 35 U.S.C. 123(d) either

the applicant’s employer, from which

the applicant obtains the majority of the

applicant’s income, must be an

institution of higher education as

defined in section 101(a) of the Higher

Education Act of 1965 (20 U.S.C.

1001(a)), or the applicant must have

assigned, granted, conveyed, or be

under an obligation by contract or law,

to assign, grant, or convey, a license or

other ownership interest in the

particular application to such an

institution of higher education. The

income and application filing criteria

specified in § 1.29(a) tracks the criteria

in 35 U.S.C. 123(a).

Comment 14: One comment

questioned whether micro entity status

will be available to foreign applicants.

Response: Micro entity status is

available to any applicant (foreign or

domestic alike) who meets the

requirements of 35 U.S.C. 123 and

§ 1.29. Notably, 35 U.S.C. 123(d)

provides that an institution must meet

the definition of an institution of higher

education as defined in section 101(a) of

the Higher Education Act of 1965 for

micro entity status to be obtained based

upon the applicant’s employment at or

the applicant’s assignment or obligation

to the institution. One criteria of the

definition of ‘‘institution of higher

education’’ set forth in section 101(a) of

the Higher Education Act of 1965 is that

the institution must be located in a

‘‘State.’’ Section 103 of the Higher

Education Act of 1965 provides that the

term ‘‘State’’ as used in section 101(a)

‘‘includes the several States of the

United States, the Commonwealth of

Puerto Rico, the District of Columbia,

Guam, American Samoa, the United

States Virgin Islands, and the Freely

Associated States’’ and that the Freely

Associated States means the ‘‘Republic

of the Marshall Islands, the Federated

States of Micronesia, and the Republic

of Palau.’’

Comment 15: Several comments urged

deletion of the requirement in § 1.29(e)

that micro entity status be specifically

established by a new certification in

each related continuing and reissue

application. One comment indicated

that unless the Office removes the

provision in proposed § 1.29(g) that a

fee may be paid in the micro entity

amount only if status as a micro entity

is appropriate on the date the fee is

paid, the Office should remove the

requirement in proposed § 1.29(e) that

status as a micro entity must be

specifically established in each related,

continuing and reissue application in

which status is appropriate and desired.

One comment stated that § 1.29(e)

contains an error in that contrary to its

language, status as a micro entity in one

application does affect the status of

other applications. The commenter,

however, suggests retaining language in

§ 1.29(e) stating that micro entity status

must be specifically established in each

continuing and divisional application in

which status is appropriate and desired.

Response: The Office shares the

concerns of the comments that the small

entity and micro entity regulations and

procedures be as simple as possible. For

this reason, the Office is making the

micro entity provisions as consistent

with the small entity provisions as

possible, including the provisions

pertaining to claiming small entity

status in related continuing and reissue

applications. See § 1.27(c)(4). In

addition, 35 U.S.C. 123 requires that the

applicant make a certification under 35

U.S.C. 123(a) or (d) to qualify for micro

entity status. An applicant’s ability to

meet the requirements in 35 U.S.C.

123(a) or (d) may change over time. For

example, from a first application to a

related continuing or reissue

application, an applicant’s gross income

(35 U.S.C. 123(a)(3)) and employment

(35 U.S.C. 123(d)(1)) may change, and

the number of applications naming the

applicant as an inventor (35 U.S.C.

123(a)(2)) will change with the filing of

a related continuing or reissue

application. Therefore, the Office is

concerned about permitting micro entity

status to automatically carry over into a

related continuing or reissue application

without the certification required by 35

U.S.C. 123(a) or (d). Finally, while being

named as an inventor in other

applications may affect an applicant’s

ability to claim micro entity status in an

application, status as a micro entity in

one application does not affect the

status of other applications. Finally, as

discussed previously, the Office plans to

seek additional public comment on the

micro entity provisions after the Office

and the public have gained experience

with the micro entity procedures in

operation, and will pursue further

improvements to the micro entity

procedures in light of the public

comment and its experience with the

micro entity procedures.

Comment 16: One comment stated

that § 1.29 is unclear as to who must

sign the micro entity certification in

applications with more than one

applicant. The comment suggested that

§ 1.29 be amended to make clear that

each applicant must meet the

requirements of 35 U.S.C. 123(a) or (d)

for the applicants to file a micro entity

certification in the application. Further,

the comment suggested that §§ 1.29(a)

and (d) be revised to state that ‘‘each

applicant so establishing such status

must certify that that applicant’’ meets

all the requirements in order to establish

micro entity status. One basis given for

this suggestion is that joint applicants

will generally not be privy to each

other’s private financial information,

and should not be required to submit a

certification as to the qualification of

their joint applicants.

Response: Section 1.29(e) provides

that a micro entity status certification

must be signed in compliance with

§ 1.33(b). Section 1.33(b) requires that

amendments and other papers filed in

the application be signed by: (1) A

patent practitioner of record; (2) a patent

practitioner not of record who acts in a

representative capacity under the

provisions of § 1.34; or (3) the applicant

(§ 1.42). Section 1.33(b) further provides

that all papers submitted on behalf of a

juristic entity must be signed by a patent

practitioner unless otherwise specified.

If the application names more than one

inventor and the joint inventors are the

applicant under § 1.42(a), a micro entity

status certification must be signed by:

(1) A patent practitioner of record; (2) a

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patent practitioner not of record who

acts in a representative capacity under

the provisions of § 1.34; or (3) all of the

inventors.

Comment 17: One comment suggested

amending § 1.29(f) to include language

permitting the micro entity certification

to be filed in response to a notice of fee

deficiency mailed by the Office.

Response: Certification of micro entity

status can be made at any stage of

prosecution, or at any time before or

with payment of a maintenance fee after

the patent issues. However, a fee may be

paid in the micro entity amount only if

it is submitted with, or subsequent to,

the submission of a certification of

entitlement to micro entity status.

Comment 18: Several comments

argued that there should be no need to

recertify small entity status if micro

entity status is lost, because the

applicant had to certify small entity

status to qualify as a micro entity and

the applicant should continue to qualify

for small entity status after losing micro

entity status.

Response: Section 1.29(i) as adopted

in this final rule provides that a

notification that micro entity status is

no longer appropriate will not be treated

as a notification that small entity status

is also no longer appropriate unless it

also contains a notification of loss of

entitlement to small entity status under

§ 1.27(f)(2). An applicant or patentee

who files a notification that micro entity

status is no longer appropriate will be

treated as a small entity by default

unless the notification also contains a

notification of loss of entitlement to

small entity status under § 1.27(f)(2),

thus minimizing burdens on small

entity applicants and patentees. An

applicant or patentee who is no longer

a micro entity or a small entity must

provide both a notification under

§ 1.29(i) of loss of entitlement to micro

entity status and a notification under of

§ 1.27(f)(2) of loss of entitlement to

small entity status.

Comment 19: A number of comments

indicated that the proposed requirement

in § 1.29(g) to determine continued

qualification for micro entity status each

time a fee is paid was overly

burdensome. One comment indicated

that this proposed requirement would

inevitably lead to additional cost to

applicants in prosecuting applications

before the Office. Several comments

suggested that § 1.29(g) be revised to be

similar to small entity practice such that

once micro entity status is acquired, fees

can continue to be paid in the micro

entity amount until the issue fee or any

maintenance fee is due, or that micro

entity status be permitted to be

maintained throughout the calendar

year in which micro entity status was

established without regard to continued

qualification. The comments indicated

that an entity that licenses multiple

patent applications will need to confirm

that each licensee does not have a gross

income that exceeds three times the

median household income for the

preceding calendar year, and that an

entity with a patent application naming

multiple inventors will need to confirm

that each inventor for each application

does not have a gross income that

exceeds three times the median

household income for the preceding

calendar year. One comment

alternatively suggested that micro entity

status be maintained by applicants

through the end of a calendar year, even

if there has been a change in income

status during the calendar year that

disqualifies the applicant from a

continued claim to micro entity status.

Response: 35 U.S.C. 123(a) does not

allow for a provision similar to small

entity practice under which once micro

entity status is acquired, fees can

continue to be paid in the micro entity

amount until the issue fee or any

maintenance fee is due or that micro

entity status be maintained throughout

the calendar year in which micro entity

status was established without regard to

continued qualification. 35 U.S.C.

123(a) requires that a micro entity ‘‘not

[have] been named as an inventor on

more than 4 previously filed patent

applications, other than applications

filed in another country, provisional

applications under 35 U.S.C. 111(b), or

international applications for which the

basic national fee under 35 U.S.C. 41(a)

was not paid’’ and ‘‘not, in the calendar

year preceding the calendar year in

which the applicable fee is being paid,

have a gross income, as defined in

section 61(a) of the Internal Revenue

Code of 1986 (26 U.S.C. 61(a)),

exceeding three times the median

household income for that preceding

calendar year.’’ 35 U.S.C. 123(a)(2) and

(a)(3). Finally, while applicants with

complex licensing arrangements may

consider confirming the status of each

licensee challenging, this is more a

function of the complexity of the

licensing arrangement than any

complexity in the requirement that a fee

may be paid in the micro entity amount

only if status as a micro entity as

defined in § 1.29(a) or § 1.29(d) is

appropriate on the date the fee is being

paid.

Comment 20: Several comments

objected to the statement in proposed

§ 1.29(h) that ‘‘[i]t should be determined

that all parties holding rights in the

invention qualify for micro entity

status.’’ One comment stated that

proposed § 1.29(h) appears to require an

opinion that all parties holding rights in

the invention qualify for micro entity

status. One comment indicated that

because ‘‘parties’’ could include an

applicant under 35 U.S.C. 118 not

qualifying as a micro entity but filing an

application on behalf of an inventor

qualifying as a micro entity, the

statement should be deleted. Another

comment indicated that the sentence

cited from § 1.29(h) is redundant and/or

inconsistent with the statute as 35

U.S.C. 123(a)(4) expressly includes such

a limitation whereas 35 U.S.C. 123(d)

does not. The comment also indicated

that the sentence cited from § 1.29(h) is

inconsistent with § 1.29(d) which would

otherwise allow any entity that qualifies

for small entity status to obtain the

benefits of micro entity status by

assigning, granting, or conveying, a

license or other ownership interest to a

qualified institution of higher

education. The comment suggested

amending the sentence cited from

§ 1.29(h) by replacing ‘‘qualify for micro

entity status’’ with ‘‘qualify for small

entity status,’’ or alternatively, replacing

the phrase ‘‘all parties holding rights to

the invention’’ with ‘‘all applicants.’’

One comment indicated that

‘‘invention’’ is not the equivalent of

‘‘application,’’ and thus the word

‘‘invention’’ in the phrase ‘‘all parties

holding rights to the invention’’ should

be changed to ‘‘application,’’ or the

Office should provide guidance on the

meaning of the expression ‘‘rights in the

invention.’’

Response: The Office is revising this

provision to indicate that each applicant

must qualify for micro entity status

under § 1.29(a) or § 1.29(d), and that

each other party holding rights in the

application must qualify for small entity

status under § 1.27. Note that

§ 1.27(a)(3) provides for small entity

status with respect to nonprofit

organizations and is applicable to

universities or other institutions of

higher education. See § 1.27(a)(3)(ii)(A).

35 U.S.C. 123(e) provides that in

addition to the limits imposed by 35

U.S.C. 123, the Director may, in the

Director’s discretion, impose income

limits, annual filing limits, or other

limits on who may qualify as a micro

entity pursuant to this section if the

Director determines that such additional

limits are reasonably necessary to avoid

an undue impact on other patent

applicants or owners or are otherwise

reasonably necessary and appropriate.

As discussed previously, the Office has

determined that requiring all micro

entities to qualify as small entities and

that all other parties holding rights in

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the invention qualify for small entity

status is reasonably necessary and

appropriate to ensure that applicants

who do not qualify as a small entity do

not inappropriately attempt to take

advantage of micro entity status.

Comment 21: One comment indicated

that § 1.29(h) is an advisory opinion,

and not a statement of any requirement,

and thus should be deleted.

Response: Section 1.29(h) requires

that each applicant qualify for micro

entity status under § 1.29(a) or § 1.29(d),

and that each other party holding rights

in the application qualify for small

entity status under § 1.27, in order for

the applicant to make a certification of

entitlement to micro entity status. With

respect to the small entity status

requirement, § 1.27(a) requires that any

person or entity claiming small entity

status not have assigned, granted,

conveyed, or licensed, and is under no

obligation under contract or law to

assign, grant, convey, or license, any

rights in the invention to any person,

concern, or organization which would

not qualify for small entity status as a

person, small business concern, or

nonprofit organization.

Comment 22: Several comments

indicated that proposed § 1.29(i) is

overly burdensome. One comment

indicated that proposed § 1.29(i) would

require that possible loss of entitlement

to micro entity status be evaluated each

time a fee is to be paid. One comment

stated that the cost of compliance

defeats the Congressional purpose of

providing for micro entity status and

thus proposed § 1.29(i) should be

stricken.

Response: Section 1.29(i) requires

only that a notification of a loss of

entitlement to micro entity status must

be filed in the application or patent

prior to paying, or at the time of paying,

any fee after the date on which status as

a micro entity as defined in § 1.29(a) or

§ 1.29(d) is no longer appropriate. As

discussed previously, § 1.29(g) provides

that a fee may be paid in the micro

entity amount only if status as a micro

entity as defined in § 1.29(a) or § 1.29(d)

is appropriate on the date the fee is

being paid. Section 1.29(i) provides a

necessary step for documentation of the

cessation of micro entity status.

Comment 23: One comment suggested

that § 1.29(i) be amended to permit

payments for entity status other than

micro entity as sufficient notification of

loss of entitlement to micro entity

status, without additional

correspondence to the Office.

Response: Office experience with

small entity payments is that some

small entities will occasionally pay

patent fees in the full (non-small entity)

amounts inadvertently. If mere payment

of fees in the full or small entity amount

is treated as a notification of loss of

entitlement to micro entity status, a

micro entity who inadvertently paid a

patent fee in the full or small entity

amount will thereafter no longer be

treated as a micro entity. This could

result in increased costs for entities that

are entitled to claim micro entity status,

and there would be a lack of clear

documentation on whether micro entity

status has ceased.

Comment 24: Several comments

indicated that proposed § 1.29(j) is

vague because the proposed rule does

not define what constitutes fraud. The

comments indicated that the Office

should amend the rule to make clear

what would constitute fraud. One

comment stated that fraud is a legal

conclusion including proof of mental

state. One comment stated that some

small entities not qualifying for micro

entity status under § 1.29(a) may be

tempted to marginally align with a

university in order to take benefit under

§ 1.29(d), and requested that the Office

clarify whether such a strategy would be

considered a fraud, even if the letter of

the rules is met. One comment

requested guidance on what penalties

the Office anticipates enforcing in the

event that a fraudulent certification is

made.

Response: Section 1.29(j) provides

that ‘‘[a]ny attempt to fraudulently

establish status as a micro entity, or pay

fees as a micro entity, shall be

considered as a fraud practiced or

attempted on the Office,’’ and that

‘‘[i]mproperly, and with intent to

deceive, establishing status as a micro

entity, or paying fees as a micro entity,

shall be considered as a fraud practiced

or attempted on the Office.’’ The

language in § 1.29(j) parallels the

corresponding small entity provision in

§ 1.27(h), and thus terms ‘‘fraudulently’’

and ‘‘fraud’’ in § 1.29(j) have the same

meaning as the terms ‘‘fraudulently’’

and ‘‘fraud’’ in § 1.27(h). The definition

of common law fraud is based on the

definition discussed by the U.S. Court of

Appeals for the Federal Circuit (Federal

Circuit). See Unitherm Food Systems,

Inc. v. Swift-Ekrich, Inc., 375 F.3d 1341,

1358 (Fed. Cir. 2004); In re Spalding

Sports Worldwide, Inc., 203 F.3d 800,

807 (Fed. Cir. 2000). Applicants

questioning how to resolve close

situations or what penalties may result

from a fraudulent certification should

consider that: (1) The Federal Circuit

has noted that an applicant would be

‘‘foolish’’ to claim small entity status if

there is the slightest doubt about an

applicant’s entitlement to claim small

entity (DH Tech., 154 F.3d at 1343); (2)

depending on future developments in

the case law, it is possible that a patent

could be held unenforceable as a

consequence of a fraud or inequitable

conduct relating to a micro entity or

small entity certification (this was

clearly possible for small entity

certifications prior to the Federal

Circuit’s decision in Therasense, Inc. v.

Becton, Dickinson and Co., 649 F.3d

1276 (Fed. Cir. 2011) (see, e.g., Nilssen

v. Osram Sylvania, Inc., 504 F.3d 1223

(2007), and Ulead Systems, Inc. v. Lex

Computer Management Corp., 351 F.3d

1120 (Fed. Cir. 2003)), but the Federal

Circuit has not yet decided the question

of whether a false declaration of small

entity status could constitute

inequitable conduct under the

Therasense standard (see Outside the

Box Innovations, LLC v. Travel Caddy,

Inc., 695 F.3d 1285, 1294 (Fed. Cir.

2012); see also Therasense, 649 F.3d at

1299, n.6 (O’Malley, J., concurring in

part and dissenting in part)); and (3)

there can be further significant penalties

for fraud (e.g., 35 U.S.C. 257(e)

(provides that the matter shall be

referred to the Attorney General if the

Director becomes aware that a material

fraud on the Office may have been

committed in connection with a patent

that is the subject of a supplemental

examination).

Comment 25: One comment stated

that with respect to the provisions

relating to fraudulent certification

(§§ 1.29(g) through (k)), it would be

beneficial to clarify the depth of inquiry

which is considered acceptable (e.g.,

good faith attempt) for a representative

of an applicant to obtain in order to sign

a certification. The comment indicated

that it would be too burdensome on a

practitioner to expect more than

obtaining verbal affirmation from an

applicant that the applicant meets the

guidelines for obtaining micro entity

status.

Response: The depth of inquiry

required for any paper presented to the

Office, including a micro entity status

certification, is specified in § 11.18.

Specifically, § 11.18(b) provides that by

presenting to the Office or hearing

officer in a disciplinary proceeding

(whether by signing, filing, submitting,

or later advocating) any paper, the party

presenting such paper, whether a

practitioner or non-practitioner, is

making two certifications. The first

certification is that all statements made

therein of the party’s own knowledge

are true, all statements made therein on

information and belief are believed to be

true, and all statements made therein

are made with the knowledge that

whoever, in any matter within the

jurisdiction of the Office, knowingly

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and willfully falsifies, conceals, or

covers up by any trick, scheme, or

device a material fact, or knowingly and

willfully makes any false, fictitious, or

fraudulent statements or

representations, or knowingly and

willfully makes or uses any false writing

or document knowing the same to

contain any false, fictitious, or

fraudulent statement or entry, shall be

subject to the penalties set forth under

18 U.S.C. 1001 and any other applicable

criminal statute, and further that

violations of the provisions of this

section may jeopardize the probative

value of the paper. See § 11.18(b)(1).

The second certification is that to the

best of the party’s knowledge,

information and belief, formed after an

inquiry reasonable under the

circumstances: (1) The paper is not

being presented for any improper

purpose, such as to harass someone or

to cause unnecessary delay or needless

increase in the cost of any proceeding

before the Office; (2) the other legal

contentions therein are warranted by

existing law or by a nonfrivolous

argument for the extension,

modification, or reversal of existing law

or the establishment of new law; (3) the

allegations and other factual contentions

have evidentiary support or, if

specifically so identified, are likely to

have evidentiary support after a

reasonable opportunity for further

investigation or discovery; and (4) the

denials of factual contentions are

warranted on the evidence, or if

specifically so identified, are reasonably

based on a lack of information or belief.

See § 11.18(b)(2).

Comment 26: Several comments

suggested eliminating the requirement

under proposed § 1.29(k) that any

deficiency payment include an

itemization and an accounting of the

total deficiency payment. One comment

indicated that proposed § 1.29(k) should

be revised to parallel the rule that

applies to an error in paying a small

entity fee when the large entity fee

should have been paid. The comment

alternatively proposed that the rules

could be amended to require: (1) One

base fee for rectifying the failure to

correct micro entity status, and (2) an

accounting of when the change of status

occurred.

Response: The fee deficiency payment

provisions of § 1.29(k) track the small

entity fee deficiency payment

provisions of § 1.28(c). The Office needs

the itemization to properly apply the fee

deficiency payment so that the Office’s

records for the application or patent will

properly show which fees have been

paid for the application or patent and in

what amount.

Comment 27: One comment suggested

the Office establish a database of the

various certification types and permit

annual updating of applicant status,

rather than individual application

status. Another comment suggested that

§ 1.29 be amended to provide for micro

entity status certifications contained in

patent application assignments recorded

under part 3 of 37 CFR.

Response: The suggestions are not

currently feasible as inventor or

assignee names are not always stated

consistently from application to

application (either in application papers

or in assignment cover sheets). The

suggestions will be considered if the

Office moves to adopt a system under

which there are unique inventor and

applicant-assignee designations.

Comment 28: One comment indicated

that many practitioners who have

participated in the LegalCORPS

Inventor Assistance Program (a pilot

patent law pro bono program developed

with the support of the Office) have

seen first-hand that many inventors

qualifying for free legal assistance

through the program will not be able to

file applications electronically, due in

part to being unable to make electronic

payments via deposit account or credit

card. The comment suggested that the

final rule could address this issue by

providing for electronic filing of

documents along with a written

certification by the applicant that any

fees associated with that filing are being

submitted by check deposited in the

U.S. mail on the date of application

filing.

Response: Electronic filing remains a

viable filing option for micro entities,

even if the applicant does not have a

deposit account at the Office and even

if the applicant does not have sufficient

access to credit to enable payment by

credit card. Fees may be paid by

electronic funds transfer (EFT), which

requires nothing more than a checking

account. However, before making any

payments by EFT, an EFT profile must

be created at the Office ‘‘Office of

Finance On-Line Shopping Page’’ at

https://ramps.uspto.gov/eram/. To

begin, click the link titled ‘‘Create or

Modify an EFT Profile’’ on the ‘‘Office

of Finance On-Line Shopping Page.’’ It

is important that micro entities and

other applicants file their applications

electronically via EFS-Web in order to

avoid the non-electronic filing fee under

§ 1.10, which is $400 (and $200 for

small and micro entities). Additionally,

a small or micro entity that files an

application in paper (versus

electronically via EFS-Web) will not

receive the discount (currently $97.00)

available only to small entities that file

a patent application electronically.

Rulemaking Considerations

A. Regulatory Flexibility Act: For the

reasons set forth herein, the Deputy

General Counsel for General Law of the

United States Patent and Trademark

Office has certified to the Chief Counsel

for Advocacy of the Small Business

Administration that changes in this final

rule will not have a significant

economic impact on a substantial

number of small entities. See 5 U.S.C.

605(b). The Office did not receive public

comments on this certification.

This final rule revises the rules of

practice to allow a subset of small

entities—i.e., micro entities—to pay

further reduced fees, namely, a seventy-

five percent discount. This final rule

sets out procedures pertaining to

claiming micro entity status, paying

patent fees as a micro entity,

notification of loss of micro entity

status, and correction of payments of

patent fees paid erroneously in the

micro entity amount. This final rule

maintains the criteria in 35 U.S.C.

123(a) and (d) for entitlement to file a

certification of micro entity status (note

also the requirement in 37 CFR

1.29(d)(1) that an applicant claim small

entity status in compliance with 37 CFR

1.27 in order to claim micro entity

status; see also 37 CFR 1.29(h), 35

U.S.C. 123(e)). This rule also includes

clarifications under 37 CFR 1.29(a) to

refer to non-applicant inventors and

joint inventors. The micro entity

procedures in this final rule track to the

extent feasible the corresponding small

entity procedures under 37 CFR 1.27.

Thus, the burden to all entities,

including small entities, imposed by

this final rule is no greater than those

imposed by the pre-existing regulations

pertaining to claiming small entity

status: paying patent fees as a small

entity, notification of loss of small entity

status, and correction of payments of

patent fees paid erroneously in the

small entity amount.

Requiring that an applicant claim

small entity status in compliance with

37 CFR 1.27 in order to claim micro

entity status under 37 CFR 1.29(d)(1)

will not have a significant economic

impact on a substantial number of small

entities. The Office uses the Small

Business Administration business size

standard for the purpose of paying

reduced patent fees in 13 CFR 121.802

as the size standard when conducting an

analysis or making a certification under

the Regulatory Flexibility Act for patent-

related regulations. See Business Size

Standard for Purposes of United States

Patent and Trademark Office Regulatory

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Flexibility Analysis for Patent-Related

Regulations, 71 FR 67109, 67109 (Nov.

20, 2006). A small entity for purposes of

the Regulatory Flexibility Act analysis is

a small entity for purposes of paying

reduced patent fees. Therefore,

requiring in 37 CFR 1.29(d)(1) that an

entity claim small entity status in

compliance with 37 CFR 1.27 in order

to claim micro entity status will

preclude only an applicant or patentee

who is a large entity (i.e., not a small

entity) from claiming micro entity

status.

The Office estimates that a minority

percentage of small entity applications

will be filed by paying micro entity fees

under this final rule. Based upon the

data in the Office’s Patent Application

Locating and Monitoring (PALM)

system, of the approximately 2,498,000

nonprovisional patent applications

(utility, plant, design, and reissue) and

requests for continued examination filed

in total over the last five fiscal years,

small entity fees were paid in

approximately 669,000 (26.8 percent).

Thus, an average of approximately

500,000 nonprovisional patent

applications and requests for continued

examination have been filed each year

for the last five fiscal years, with small

entity fees being paid in approximately

134,000 of the nonprovisional patent

applications and requests for continued

examination filed each year.

As indicated above, this rule provides

a procedure for small entities to attain

a 75 percent reduction in fees as a micro

entity, as provided by statute. The

procedures for micro entity status track

the existing procedures for small entity

status. While the rule impacts the entire

universe of small entity applications

and patents, the rule is necessary for

implementing a further reduction in

fees, which is entirely beneficial, and no

other provision has an economic impact

on the affected small entities.

B. Executive Order 12866 (Regulatory

Planning and Review): This rulemaking

has been determined to be not

significant for purposes of Executive

Order 12866 (Sept. 30, 1993).

C. Executive Order 13563 (Improving

Regulation and Regulatory Review): The

Office has complied with Executive

Order 13563. Specifically, the Office

has, to the extent feasible and

applicable: (1) Made a reasoned

determination that the benefits justify

the costs of the rule; (2) tailored the rule

to impose the least burden on society

consistent with obtaining the regulatory

objectives; (3) selected a regulatory

approach that maximizes net benefits;

(4) specified performance objectives; (5)

identified and assessed available

alternatives; (6) involved the public in

an open exchange of information and

perspectives among experts in relevant

disciplines, affected stakeholders in the

private sector, and the public as a

whole, and provided on-line access to

the rulemaking docket; (7) attempted to

promote coordination, simplification,

and harmonization across government

agencies and identified goals designed

to promote innovation; (8) considered

approaches that reduce burdens and

maintain flexibility and freedom of

choice for the public; and (9) ensured

the objectivity of scientific and

technological information and

processes.

One comment argued that the

rulemaking fails to comply with

Executive Order 13563 on the grounds

that: (1) The Office did not conduct a

burden/benefit analysis which includes

realistic professional services fees for

patent practitioners, the time involved

in understanding and complying with

the rule, and the sanctions imposed by

rule; (2) proposed 37 CFR 1.29 fails to

consider the value to society of

university inventions, for which 35

U.S.C. 123(d) seeks to provide specific

benefits, and which imposes no limits

on how a university might seek to

exploit its rights; and (3) proposed 37

CFR 1.29 imposes significant burdens

for the affected applicants, and is thus

not tailored to impose the least burden

on society consistent with obtaining the

regulatory objectives.

The Office considered costs and

benefits to applicants claiming micro

entity status (including universities), as

well as to all other applicants and the

Office in this rulemaking. Executive

Order 13563 reaffirms Executive Order

12866. This rulemaking was deemed by

OMB as not economically significant as

that term is defined in Executive Order

12866 (Sept. 30, 1993). Therefore, the

regulatory analysis provided in section

6(a)(3)(C) of Executive Order 12866 and

OMB Circular A–4 is inapplicable to

this rulemaking. The Office, however,

did conduct the regulatory analysis

provided in section 6(a)(3)(C) and OMB

Circular A–4 for the related rulemaking

to set and adjust patent fees under

section 10 of the Leahy-Smith America

Invents Act. 37 CFR 1.29 does impose

the least burden on society consistent

with obtaining the regulatory objectives

by permitting an applicant to self-certify

entitlement to micro entity status, and

does not require any further information

or certification from the applicant

provided that the applicant remains

entitled to micro entity status. In

addition, having micro entity

procedures which track the pre-existing

small entity procedures to the extent

practicable is less burdensome than

fashioning new micro entity procedures.

Finally, while having no requirements

would arguably impose the least burden

on an entity seeking the benefit of micro

(or small) entity status, it would not

impose the least burden on society

overall and would not obtain the

regulatory objectives of creating the

beneficial option of micro entity status

with a seventy-five percent fee

reduction as provided by statute.

Revising the regulations as suggested

by the comment would expand the

scope of micro entity status beyond

what the statute allows. It also would

not meet the regulatory objectives of

ensuring that a for-profit, large entity

applicant not become a ‘‘micro entity’’

(and thus obtaining a seventy-five

percent discount) merely by licensing or

assigning some interest (nominal or

otherwise) to an institution of higher

education. The Office received

comments (including in response to the

section 10 rulemaking) in support of the

Office imposing additional requirements

under 35 U.S.C. 123(e) to avoid sham

licensing agreements for the purpose of

improperly claiming micro entity status

(as improper micro entity claims would

result in higher fees for other

applicants). Thus, the narrow

requirements imposed by the Office

under 35 U.S.C. 123(e) are necessary to

avoid abuses of micro entity status, and

simply eliminating them in the name of

reducing burden would not impose the

least burden on society overall and

would not obtain the regulatory

objectives.

D. Executive Order 13132

(Federalism): This rulemaking does not

contain policies with federalism

implications sufficient to warrant

preparation of a Federalism Assessment

under Executive Order 13132 (Aug. 4,

1999).

E. Executive Order 13175 (Tribal

Consultation): This rulemaking will not:

(1) Have substantial direct effects on one

or more Indian tribes; (2) impose

substantial direct compliance costs on

Indian tribal governments; or (3)

preempt tribal law. Therefore, a tribal

summary impact statement is not

required under Executive Order 13175

(Nov. 6, 2000).

F. Executive Order 13211 (Energy

Effects): This rulemaking is not a

significant energy action under

Executive Order 13211 because this

rulemaking is not likely to have a

significant adverse effect on the supply,

distribution, or use of energy. Therefore,

a Statement of Energy Effects is not

required under Executive Order 13211

(May 18, 2001).

G. Executive Order 12988 (Civil

Justice Reform): This rulemaking meets

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applicable standards to minimize

litigation, eliminate ambiguity, and

reduce burden as set forth in sections

3(a) and 3(b)(2) of Executive Order

12988 (Feb. 5, 1996).

H. Executive Order 13045 (Protection

of Children): This rulemaking does not

concern an environmental risk to health

or safety that may disproportionately

affect children under Executive Order

13045 (Apr. 21, 1997).

I. Executive Order 12630 (Taking of

Private Property): This rulemaking will

not effect a taking of private property or

otherwise have taking implications

under Executive Order 12630 (Mar. 15,

1988).

J. Congressional Review Act: Under

the Congressional Review Act

provisions of the Small Business

Regulatory Enforcement Fairness Act of

1996 (5 U.S.C. 801 et seq.), the United

States Patent and Trademark Office will

submit a report containing this final rule

and other required information to the

United States Senate, the United States

House of Representatives, and the

Comptroller General of the Government

Accountability Office. In addition, the

United States Patent and Trademark

Office will inform the Committee on the

Judiciary of the House of

Representatives and the Committee on

the Judiciary of the Senate of any

proposed limits under 35 U.S.C. 123(e)

at least three months before any limits

proposed to be implemented pursuant

to 35 U.S.C. 123(e) take effect.

The changes in this final rule are not

expected to result in an annual effect on

the economy of 100 million dollars or

more, a major increase in costs or prices,

or significant adverse effects on

competition, employment, investment,

productivity, innovation, or the ability

of United States-based enterprises to

compete with foreign-based enterprises

in domestic and export markets.

Therefore, this final rule is not a ‘‘major

rule’’ as defined in 5 U.S.C. 804(2).

K. Unfunded Mandates Reform Act of

1995: The changes set forth in this

rulemaking do not involve a Federal

intergovernmental mandate that will

result in the expenditure by State, local,

and tribal governments, in the aggregate,

of 100 million dollars (as adjusted) or

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