Micro entity status

2. Gross income basis

2.1 Requirements of the gross income basis

To qualify for micro entity status on the gross income basis under 37 CFR 1.29(a)-(c) in a particular patent application or patent, a micro entity certification must be completed with sufficient application identifying information (i.e., must identify the application to which it pertains) and authorized signature(s). For new application filings that have not been previously assigned a patent application number, the first named inventor and the title of the invention must be provided at the top of the certification form(s) in the spaces provided to sufficiently identify the application. See MPEP section 509.04(II) for more information. 

It must be certified that the following criteria are met:

• Small entity requirement - The applicant(s), each inventor, and any other party with an ownership interest in the invention (e.g., assignees, licensees and obligated assignees or licensees) qualify under 37 CFR 1.27 as: (1) a small business concern as defined in 37 CFR 1.27(a)(2) which, including affiliates, has fewer than 500 employees, (2) a nonprofit organization as defined in 37 CFR 1.27(a)(3), or (3) an individual who has not assigned, licensed or otherwise conveyed or promised to convey an interest in the invention to a non-small entity;
• Application filing limit - Neither the applicant nor the inventor nor a joint inventor has been named as an inventor on more than four previously filed applications as explained in MPEP section 509.01(I)(B) with certain conditions and exceptions. See also section 2.2;
• Gross income limit on applicants and inventors - Neither the applicant nor the inventor nor a joint inventor had a gross income in the previous year from when the fee(s) is paid of more than the "maximum qualifying gross income" limit, which is three times the median household income in the United States; and 
• Gross income limit on parties with an “ownership interest” - Neither the applicant nor the inventor nor a joint inventor has assigned, granted, or conveyed, nor is under an obligation to assign, grant, or convey, a license or other ownership interest to another entity that does not meet the same "maximum qualifying gross income" limit.

Note: The requirements with respect to parties with ownership interests apply even if the party or parties are not named as applicants or assignees on the application or patent, and even if no ownership documents are recorded with the USPTO.

See MPEP section 509.04(a) for more information on the Gross Income Basis for Micro Entity Status and MPEP sections 509.02-509.04 for more information on small and micro entities. 

2.2 Application filing limit

Normally, the maximum number of U.S. patent applications in which fees can be paid by an applicant or inventor(s) at the micro entity discount rate on the gross income basis is five. This would be only the first five patent applications filed by an applicant, inventor, or joint inventor unless an exception applies to the five-application limit. See sections 2.2.1 and 2.2.2 for more information about which applications count, or do not count, toward the application filing limit.

Once a person has reached the filing limit, no future-filed application naming that person as an inventor or applicant can qualify for micro entity status under the gross income basis, even if the future-filed application is of a type that is not itself counted toward the limit. For example, assume inventor A has reached the filing limit by filing five design applications, and now wants to file a provisional application. Although provisional applications do not count toward the application filing limit, that fact does not matter here because inventor A already reached that limit by filing the design applications. Thus, inventor A cannot be entitled to micro entity status on the gross income basis in the provisional application. 

Each inventor and any person named as an applicant must individually meet the application filing limit.

2.2.1 Applications that count toward the application filing limit

For purposes of establishing micro entity status under the gross income basis, the application filing limit as set forth in 37 CFR 1.29(a)(2) includes: (i) previously filed U.S. nonprovisional applications (e.g., utility, design, plant, continuation, and divisional applications), (ii) previously filed U.S. reissue applications, (iii) previously filed U.S. national stage applications under the Patent Cooperation Treaty (PCT), and (iv) previously filed international design applications under the Hague agreement that designate the U.S.

It does not matter how long ago the previous applications were filed or whether the previously filed applications are pending, patented, or abandoned; they are still included when counting to determine whether the application filing limit has been reached. It also does not matter whether the previous applications asserted entitlement to micro entity status; they are still included even if they did not claim any discounts (i.e., paid the undiscounted fee amounts).

All such applications naming the inventor or a joint inventor are counted toward the application filing limit. Any non-inventor applicant(s) who is a person rather than a corporation or other type of juristic entity, must also meet the application filing limit. Note however the section 1.29(b) exception based on prior employment.

2.2.2 Applications excluded from the application filing limit 

The application filing limit does not include: (i) foreign applications; (ii) international (PCT) applications for which the basic U.S. national stage filing fee was not paid; and (iii) provisional applications.

There is also an exception set forth in 37 CFR 1.29(b) that excludes some application from the application filing limit. In order for this exception to apply to a previously filed application, a person named as an inventor in the previously filed application must have assigned, or be under an obligation by contract or law to assign, all ownership rights in that application as the result of previous employment to a former employer. In MPEP section 509.04(a)(II), the exception is explained as follows:

In order for 37 CFR 1.29(b) to apply, not only must all ownership rights have been assigned, or be under an existing obligation by contract or law to be assigned, the assignment or obligation to assign must have resulted from employment with a previous employer. This requires that the applicant, inventor, or joint inventor was a former employee of the previous employer, and that the assignment or obligation to assign was the result of such previous employment as opposed to the applicant’s, inventor’s, or joint inventor’s own enterprise.

If the section 1.29(b) exception does apply to a previously filed application, that previously filed application is not counted toward the application filing limit for the person meeting the requirements of the section 1.29(b) exception.

2.3 Maximum qualifying gross income

The "maximum qualifying gross income" for purposes of paying any eligible fee at the micro entity discount rate under the gross income basis is currently $241,830. This amount changes based on a report by the Census Bureau that is typically released in September of each year. See section 2.3.3 for amount sent in prior periods.

 In order to pay a fee in the micro entity amount, every applicant, inventor, and any other party with an ownership interest in the invention must have had a gross income in the preceding calendar year that was equal to, or less than, the current "maximum qualifying gross income". For example, to pay a fee in the micro entity amount in January 2023, the applicant needs to verify that every applicant, inventor, and any other party with an ownership interest in the invention had a gross income in 2022 that was equal to, or less than, the "maximum qualifying gross income" in effect on the January 2023 fee payment date.

Note: The requirements with respect to parties with ownership interests apply even if the party or parties are not named as applicants or assignees on the application or patent, and even if no ownership documents are recorded with the USPTO.

If a person or entity is a U.S. taxpayer, they should use the “gross income” (also called “total income”) they reported, or will report, to the Internal Revenue Service on their applicable U.S. tax return for purposes of determining whether they exceed the "maximum qualifying gross income" limit. For more information about where this amount is shown on tax returns, see section 2.3.1.

If a person or entity is not a U.S. taxpayer, they should compute their “gross income” using the definition in section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. 61(a)) as if they were filing a U.S. tax return for the applicable year. If any of this income is not or is partially not in U.S. dollars, please use the conversion table found on the Internal Revenue Service webpage titled "Yearly Average Currency Exchange Rates Translating foreign currency into U.S. dollars" to quantify your preceding calendar year's gross income in U.S. dollars.

2.3.1  “Gross income” is reported on U.S. tax returns as “total income”

As explained in MPEP 509.04(a), “gross income” is defined in section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. 61(a)) and is typically referred to by the IRS as “total gross income” or “total income.”

If you are an individual, your “gross income” is reported on the U.S. Individual Income Tax Return (IRS Form 1040) as “total income”. For example, for tax year 2022, your “gross income” is the amount reported on the 2022 IRS Form 1040 on line 9 (which is labeled “total income”). If you are an applicant or inventor who files a tax return jointly with your spouse, the gross income limit applies to the amount of income you would have reported as gross income if you were filing a separate tax return.

Gross income for juristic entities such as limited liability companies (LLCs) is also reported on U.S. tax returns as “total income.” For example, for tax year 2022, the “gross income” for entities filing taxes as a partnership is the amount reported on the 2022 IRS Form 1065 on line 8 (which is labeled “total income”), and the “gross income” for entities filing taxes as a corporation is the amount reported on the 2022 IRS Form 1120 on line 11 (which is labeled “total income”).

2.3.2 The income limit changes every year

The applicable "maximum qualifying gross income" is anticipated to change (increase or decrease) in September or October of each year, after the Bureau of the Census reports the median household income for the preceding calendar year. This change occurs because the law sets the income limit using a formula that is based on "three times median household income for [the] preceding calendar year, as most recently as reported by the Bureau of the Census."

In addition, with the coming of each new calendar year, the "preceding calendar year" advances, and anyone’s preceding calendar year’s gross income may change as a result. Therefore, if the prosecution of an application under micro entity status extends across multiple calendar years, each applicant, inventor, and joint inventor must verify that the gross income limit for the requisite calendar year is met to maintain eligibility for the micro entity discount.

If the gross income limit is no longer met, then a notification of loss of entitlement to micro entity status must be filed in the application to remove micro entity status. For more information about loss of entitlement to micro entity status, see section 1.3.

2.3.3 Prior income limits by fee payment date

** $241,830 is the current “maximum qualifying gross income.”

3.  Institution of higher education basis

3.1 Requirements of the institution of higher education basis

To qualify for micro entity status in a patent application or patent on the institution of higher education basis under 37 CFR 1.29(d), a micro entity certification must be completed with sufficient application identifying information (i.e., must identify the application to which it pertains) and authorized signature(s). For new application filings that have not been previously assigned a patent application number, the first named inventor and the title of the invention must be provided at the top of the certification form(s) in the spaces provided to sufficiently identify the application. See MPEP section 509.04(II) for more information. 

It must be certified that the following criteria are met:

• Small entity requirement- The applicant(s), each inventor, and any other party with an ownership interest in the invention (e.g., assignees, licensees and obligated assignees or licensees) qualify under 37 CFR 1.27 as: (1) a small business concern as defined in 37 CFR 1.27(a)(2) which, including affiliates, has fewer than 500 employees, (2) a nonprofit organization as defined in 37 CFR 1.27(a)(3), or (3) an individual who has not assigned, licensed or otherwise conveyed or promised to convey an interest in the invention to a non-small entity; and
• Either:
  • The applicant’s employer from which the applicant obtains the majority of the applicant’s income is a United States institution of higher education as defined in section 101(a) of the Higher Education Act (20 U.S.C. 1001(a)); or
  • The applicant has assigned, granted, or conveyed, or is under an obligation by contract or law to assign, grant, or convey an ownership interest in the application to such a United States institution of higher education.

Note: The requirements with respect to parties with ownership interests apply even if the party or parties are not named as applicants or assignees on the application or patent, and even if no ownership documents are recorded with the USPTO.

See MPEP section 509.04(b) for more information on the Institution of Higher Education Basis for Micro Entity Status, and MPEP sections 509.02-509.04 for more information on small and micro entities.

3.2 The institution cannot be the micro entity applicant

Although the 37 CFR 1.29(d) basis for qualifying for micro entity status is referred to as the “institution of higher education” basis, it is not the institution of higher education that can qualify for micro entity status, but rather inventors who are employees of an institution of higher education (see 37 CFR 1.29(d)(2)(i)) or inventors or applicants who have conveyed (or are obliged to convey) ownership rights to an institution of higher education (see 37 CFR 1.29(d)(2)(ii)). The institution (university) logically cannot make the certifications required under 37 CFR 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).

3.3 The institution must be in the United States

The “institution of higher education” must be physically located in a “State” of the United States, which is defined in Section 103 of the Higher Education Act of 1965 (20 U.S.C. 1003) as including:

• The 50 states of the United States;
• The Commonwealth of Puerto Rico, the District of Columbia, Guam, American Samoa, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands; and
• The “Freely Associated States,” which means the “Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau.”

Thus, foreign entities, whether universities or other institutions, do not qualify as an “institution of higher education” for purposes of establishing micro entity status. A foreign university may offer an online educational program in the United States, however, online classes offered in the United States would not qualify the foreign university as an “institution of higher education” for purposes of establishing micro entity status. That’s because the university must be located “in any State” in the context of what “in any State” meant in 1965 – the year of the Higher Education Act of 1965.

3.4  Meaning of “institution of higher education”

Section 101(a) of the Higher Education Act of 1965 defines what is meant by “institution of higher education” in the context of 37 CFR 1.29(d). See 20 U.S.C. 1001. Section 101(a) of the Higher Education Act states that 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.”

As explained in section 3.3, the reference to "State" in the definition also requires the institution to be in the United States.

3.4.1. Entities that qualify as institutions of higher learning

Based upon these definitions, public or non-profit institutions located in a "State" of the United States and that offers certain undergraduate educational programs credited toward a bachelor’s degree or educational programs awarding “a degree that is acceptable for admission to a graduate or professional degree program” are eligible as an “institution of higher education” for purposes of establishing micro entity status under 37 CFR 1.29(d).

Except for universities or other institutions of higher education located outside the United States, any university or other U.S. institution of higher education that qualifies for small entity status by virtue of being a nonprofit organization under 37 CFR 1.27(a)(3) meets the criteria of an “institution of higher education” for micro entity status purposes.

3.4.2.  Entities that do not qualify as institutions of higher learning

An institution such as a non-profit research foundation, technology transfer organization, or federal government research laboratory does not qualify as an “institution of higher education” under the definition of “institution of higher education” set forth in the Higher Education Act of 1965 for purposes of establishing micro entity status.

For-profit universities and colleges do not qualify as an “institution of higher education” for purposes of establishing micro entity status. This is because one of the requirements for an “institution of higher education” under section 101(a) of the Higher Education Act of 1965 is that the institution be non-profit. 

Foreign entities cannot qualify as an “institution of higher education” for purposes of establishing micro entity status, because they are not located in the United States. See section 3.3 for more information. 

In addition, institutions that only grant graduate degrees do not qualify as an “institution of higher education” for purposes of establishing micro entity status because section 101(a) of the Higher Education Act of 1965 is limited to an institution that “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…”