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Four (4) Tasks for Tech Transfer: Micro-Entity Status


By
Smith & Hopen PA

Effective March 19, 2013, patent applicants and owners that qualify as micro-entities pay only 25% of the standard USPTO fees.  The two main paths to micro-entity status are: (1) independent inventors making less than $150,162 (in 2012) with less than five (5) patents to their name; or (2) for employees, assignors, and licensors to universities (institutions of higher education….or “IHE”).  

University Task List

Micro entity status is a tantalizing opportunity for cash-strapped universities but it must be approached with caution, transparency and full understanding of the requirements.  The first step is to establish that the university does include meet the requirement of an institution of higher education.  Five requirements must be met:

  1. Admissions: My institution only admits high school or GED graduates.
  2. Degrees Awarded: My 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.
  3. Public/Non-Profit: My institution is a public or other nonprofit institution.
  4. State Authorized: My institution is authorized in my State to provide a program beyond secondary education.
  5. Accreditation: My institution is accredited by a nationally recognized accrediting agency or association (or has pre-accreditation status).

 

Task #1 – Get your Letter from General Counsel

But who should confirm this?  In virtually all cases it should come from the university’s general counsel.  See our sample template for general counsel to establish the university as an institution of higher education.   We recommend this be issued annually at the start of each fiscal year for the institution.

Task #2 – Separate Legal Possibilities from Procedural Realities

Typically the inventor at a university qualifies for micro-entity status via two pathways: (1) he/she derives most of her income from the university; or (2) has an obligation to assign, license, grant, etc…. to the university.

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Both of these options seem simple enough in concept until one considers this procedurally.  If the inventor has already assigned to the universities that fact will not change from the time of filing, through patent prosecution, or through the 20 year patent term. 

In contradistinction, if the university relies on the income source for the inventor, that would need verification at the time of the provisional filing, non-provisional filing, RCE filings, issue fees, maintenance fees, etc….  What if there are six inventors?  What if the inventors go on sabbatical, leave for another institution, retire or pass away?  Clearly we do not want to keep going back to the inventors at each fee payment juncture to find out where their income is coming from.  We recommend universities rely on obligation to assign as the basis for micro-entity qualification….not source of income.

Task #3 – Determine your Assignee

Some universities require their faculty to automatically assign rights to inventions to the university itself.  Other universities require assignment of inventions to a direct support organization (DSO) such as a non-profit research foundation.

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If the faculty assign directly to the university qualified as an IHE by general counsel then the process is fairly simple…the individual inventors must execute the lower portion of Form PTO/SB/15B.

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The drawback to this situation is that the individual inventors are the “Applicants for Patent” instead of the university itself.  That means the the university cannot avail itself of certain procedural options when an inventor cannot be found or refuses to sign onto a patent application. 

 

Assigning to Research Institutions

If the inventors assign to a non-profit research foundation then there is another option available previously discussed in this article.   In this case, the faculty inventor assigns to the research foundation but then the research foundation grants an education/research license back to the university.  

Recommendation:  Have the research institution execute a blanket non-exclusive license back to the university to use any invention assigned to previously or going forward.  This way a new license is not required by 37 CFR 1.27 each time a patent application is filed because an obligation to license is already “on the books.”  Then the patent attorney can execute the certification directly provided he/she has been provided a copy of the blanket license.

The USPTO recognized this procedure as a option and cautions against “sham” assignments in its rule making.  However, it also notes that the rules require the patent applicant (e.g., the research foundation) to be a small entity.  In the author’s opinion, this is clearly not a “sham” license because the research foundation is a DSO of the university and would almost always grant a research/educational use license to very university that spawned the invention it seeks to commercialize. 

An advantage of the research foundation assignment is that the foundation can be the patent applicant which is procedurally superior to what the university could do if the faculty assigned to it directly (in such case the individual inventors must be the applicants). 

Recommendation: record both the assignment to the research institution along with the license back to the university to provide complete transparency in the process.  It is suggested that the license-back to the university be integrated into the assignment from the faculty to the research institution.

Task #4 – Get your certification signed now

If your are maintaining a substantial patent portfolio, now is the time to have your inventors sign the micro-entity certification forms for all the patents they are on.  Once you have all the inventors’ certifications you may now qualify for micro entity status.  If the patents were all assigned to a non-profit research foundation, it should be easy enough to have an authorized person execute a license back to the university.  

Recommendation: gather these certifications now before the inventors disperse and are difficult to locate.

 

Conclusion

Universities lobbied hard for the micro-entity provision and should take advantage of it whenever reasonably possible.  DSO research foundations should execute a retroactive and forward-looking blanket license back to their university for non-commercial research and education use.  This obligation to license qualifies them for micro-entity status.






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