USPTO's 'small entity' clarifications are good news for federal T2

USPTO's 'small entity' clarifications are good news for federal T2

January 6, 2021

The United States Patent and Trademark Office (USPTO) has issued a final rule to clarify and expand the exceptions that permit a party to qualify for small entity status when its collaboration with the federal government results in an invention with a government use right.

These exceptions are intended to address concerns among small businesses and nonprofit organizations that their small entity status could be jeopardized by collaborating with federal laboratories, and should help to encourage such collaborations in the future.

The exceptions are a result of efforts under the Lab to Market Cross Agency Priority Goal and background information is further described in NIST Special Publication 1234 titled ‘‘Return on Investment Initiative for Unleashing American Innovation’’ (April 2019).

The rule change, published in the Federal Register on December 21, is designed to ensure that independent inventors, small business concerns, and nonprofit organizations obtain appropriately discounted fees when filing patent applications. This rulemaking is also designed to encourage collaboration with the federal government by expanding the opportunities to qualify for the small entity discount for inventions made during the course of federally-funded or federally-supported research.

The first exception covers situations when inventors are able to obtain the right from their employer to inventions they create as part of federally funded research. This also applies to federal employee inventors, who are allowed to retain title to an invention pursuant to a rights determination by a federal agency (see Executive Order 10096 and 37 CFR 501).

The second exception provides that a small business concern or nonprofit organization, which otherwise qualifies as a small entity for purposes of paying reduced patent fees under 37 CFR 1.27, is not disqualified as a small entity if they elect rights (commonly referred to as Bayh-Dole rights) in a joint invention that includes a federal employee, when rights are retained by the otherwise qualified small entity (see 35 USC 202(c)(4) and 35 USC 202(e)).

The new exceptions also address inventions that result from a Cooperative Research and Development Agreement (CRADA) with a federal laboratory and a small business or nonprofit organization, where the two parties in the CRADA have a joint invention with both a federal and a non-federal inventor. Under the new rule, if the small entity pays the full cost of filing and prosecuting patent applications on these joint inventions, they may retain their otherwise qualifying small entity status, given the government use license for the invention.

Read the final rule: