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Micro-Entity Status–Research Foundation as Applicant


By
Smith & Hopen PA

(Please note….this article includes proposed methods of achieve micro-entity status.  The rule-making is still quite new.  This article is intended for peer-review and should not be relied upon alone as a recommended procedure).

Can research foundations that support universities (institutions of higher education) qualify for micro-entity status?  According to the USPTO, the answer is “no.”  However, there may still be some options. 

Rule Making Commentary and Response

In the final rule making CFR, the USPTO published the following comment regarding this issue:

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).

The response by the USPTO:

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 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).

The Double-Assignment, License Back Approach

What if your faculty assigns directly to your university?  The problem with this approach is that the faculty are going to have to be the applicants to qualify for micro-entity fees.   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.

This was a great development for universities as the faculty inventors only need sign a declaration, oath and assignment (which could be combined into a single document).  However, with the AIA implementation of micro entity fees some universities are rolling back to the pre-September 16, 2012 method of inventors as applicants.  There may be a solution:

  1. Faculty inventors assign to university (per employment contract);
  2. Universities assigns to research foundation (non-profit); and
  3. Research foundation grants a license back to universities for limited use.

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Under this scheme, the research foundation qualifies for micro-entity status under 35 U.S.C. 123(d)(2):

(d) INSTITUTIONS OF HIGHER EDUCATION.--For purposes of this section, a micro entity shall include an applicant (research foundation) who certifies that—

… (2) the applicant (research foundation) 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 (university) [as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a))].

In this manner, the research foundation can now act as the applicant instead of the inventors. 

Single Assignment, License Back Approach

Some institutions require the faculty to assign directly to a research foundation which is almost always a non-profit entity.  These are often referred to as DSOs (direct support organizations).  This makes the micro-entity status even easier:

  1. Faculty inventors assign to research foundation (per employment contract); and
  2. Research foundation grants a license back to universities for limited use.

Here, the faculty were not obligated to assign to an institution of higher education but to a research foundation acting as a DSO to that institution.  Some institutions decided they could not qualify for micro-entity status because they did not meet this first prong of 35 U.S.C. 123(d)(2).  However, if the research foundation licenses back to the institution of higher education they should qualify as a micro-entity.

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As noted above, this is currently a theory and has not been tested by application to the USPTO or by any court or administrative body. 






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