Blog Tag: startup
The U.S. Patent and Trademark Office (USPTO) allows a patent applicant to pay reduced fees if it qualifies as a “small entity.” Many types of filing fees are reduced by 50%. These savings can be important for companies on a tight budget, and can add up where applicants have multiple filings. For example, the savings on filing fees per non-provisional patent application are currently more than 900 USD, and the current savings on the 11.5 year maintenance fee for an issued patent are a whopping 3,850 USD!
Many startups can qualify as a small entity and reap the savings. However, in some situations, even a tiny startup may need to pay the large, undiscounted entity fees. It is important to make sure you truly qualify as a small entity, because in some situations, incorrectly filing as a “small entity” can be seen as a “fraud” on the USPTO, which can result in your patent being declared “unenforceable.”
A “small entity” for purposes of paying reduced USPTO fees is defined in 37 CFR 1.27(a) as a person, a small business concern, or a nonprofit organization. The USPTO Director has the authority to establish regulations defining independent inventors and nonprofit organizations. The U.S. Small Business Administration (SBA), a United States government agency, was given authority to establish the definition of a small business concern.
For small business concerns, most U.S. patent practitioners are familiar with the basic “small entity” requirements: i) have no more than 500 employees, and ii) not be obligated to assign the patent application to an entity that is not a small entity. However, startups and other small companies should be aware that the first requirement actually states the following: “A concern eligible for reduced patent fees is one: (a) Whose number of employees, including affiliates, does not exceed 500 persons.” (emphasis added).
So, what is an “affiliate”? Is an investor an affiliate? What if that investor is a large strategic medical device company? The answer is important, but may not be straightforward.
The SBA regulations state that two entities may be “affiliates” where one has the “power to control” the other. The regulation states, in part, “[i]t does not matter whether control is exercised, so long as the power to control exists.” The control may be “affirmative or negative,” or “indirect.” Further, the SBA will “consider the totality of the circumstances,” including various factors “such as ownership, management, previous relationships with or ties to another concern, and contractual relationships.”
This is just an overview – various other issues are considered as well, and various other scenarios may also land you in large entity territory. For example, the SBA may find “affiliation” based on stock ownership, where a “person owns or controls, or has the power to control, 50% or more of the concern’s voting stock.” Further, such a situation “is a non-rebuttable basis for finding affiliation.” (emphasis added). There are other scenarios as well.
Determination of “entity size” is an individualized issue, dependent on various factors.
NeuroTronik, a North Carolina based subsidiary of NeuroTronik LTD of Dublin, announced that it recently closed a $23.1 million Series B funding round. The press release noted that the round was led by contributions from Boston Scientific, Synergy Life Science Partners, and several venture capital firms. NeuroTronik was quoted in the release as aiming to improve patient outcomes, shorten hospital stays, and reduce hospital recidivism rates.
According to NeuroTronik, the therapy, known as CANS Therapy, utilizes a neuromodulation device designed to stimulate the cardiac autonomic nerve via a catheter. NeuroTronik describes the device as less invasive than currently used implantable defibrillators, providing an alternative to drug-based treatments. According to the company, NeuroCatheterTM is temporarily placed in a vein just above the heart and is controlled via an external NeuroModulatorTM that can be positioned bedside.
“Physicians need better therapy tools to treat Acute Heart Failure in the hospital. With the achievement of our Series A milestones and through subsequent work, our team has demonstrated that NeuroTronik CANS Therapy™ holds considerable promise to be a unique and valuable tool for physicians for use in this clinical setting,” said Fred McCoy, CEO and Director, NeuroTronik LTD in a prepared statement.
NeuroTronik stated that it plans to use the Series B funding to obtain regulatory approval to market its CANS Therapy device in Europe. After obtaining European approval, NeuroTronik plans to bring the treatment to the United States.
Previous news sources state that NeuroTronik closed a $13.1 million Series A round in May of 2013, and was spun out of a medical technology incubator called Synecor in 2012.