Blog Tag: USPTO

Is your funded medical device startup actually a “large entity” according to the USPTO?

Is your funded medical device startup actually a “large entity” according to the USPTO?

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. 

Strategies for Protecting Intellectual Property (IP) on a Reduced Budget

Shutdown orders due to the COVID-19 virus pandemic have created economic disruption, causing companies to scale back on intellectual property (IP) expense. This creates an opportunity to move ahead of the competition. This is especially true because the U.S. patent system, and many others around the world, reward the first inventor to file.

Below are some suggestions for protecting your IP on a reduced budget. This is not an exhaustive list. It is also not right for everyone. You should consult with legal counsel about your IP and what is right for your company.

Further, obtaining the best protection for your IP may involve filing for a utility patent, which is a long process. It involves, for example, understanding the client’s business and its goals; studying the technology; meeting with the inventors; discussing the invention, its genesis, and design alternatives; identifying target concepts to protect; meticulously drafting the claims and the written description; preparing the figures; and reviewing and revising the draft documents many times until they are right, among many other tasks.

By most measures, a pandemic is not an ideal time for many things, including companies trying to protect their IP. Consider discussing the following options with IP counsel to see if any of these might be right for you. For fuller discussion of these and other techniques, see this webinar presented to the Association of Corporate Counsel.

1. Get your place in line – On a reduced budget

The U.S. and many non-U.S. patent systems reward the first inventor to file. It is therefore important to stake your place in line before the competition. Below are some suggestions for reserving your place in line – your “priority date” – while keeping expenses down.

A. Consider a U.S. provisional patent application filing.

A U.S. provisional patent application holds your place in line at the Patent Office for up to one year. The government filing fee is currently 280 USD (potentially discounted for “small entities” or “micro entities”).

Provisional applications do not require the same level of formality as a non-provisional application. For example, a sketch, a slide deck, or an informal set of notes from an inventor can be filed as a provisional application. While you will only get credit, for priority purposes, for the amount of detail you file, it may be beneficial to file something rather than nothing.

Within one year of the first provisional application filing, you can supplement it with one or more “follow-on” provisional filings. This may be useful, for example, to file a follow-on later when IP budgets are subsequently increased.

All of the filed provisional applications within that one year can then be “rolled up” into a single non-provisional application. If you ultimately decide to do nothing with the one or more filed provisional applications, they will never publish.

B. Consider “coaching” preparation of the patent application.

While ideally a patent attorney will draft your application, this involves additional expense. One option may be to have your attorney “coach” you through the preparation process.

USPTO Medical Device Technology Fair

The United States Patent and Trademark Office (“USPTO”) is hosting a Medical Tech Fair & Medical Device Partnership Meeting on June 2-3, 2015.  According to the USPTO, the event, which is sponsored by Technology Center 3700, brings “industry stakeholders and patent examiners and directors from Technology Center 3700 (TC 3700) together to share ideas, experiences, and insights on best practices in advancing prosecution and provide a forum for discussion on how the agency can improve and expand its relationship with the medical device technology community.”  The agenda for the program includes an open forum discussion on topics such as compact prosecution, after final practice, the America Invents Act, and new quality initiatives at the USPTO.  There will also be a presentation on 35 U.S.C. § 101 and its effects in the medical technology area.  The last event of this kind was held in January 2013.

Participation in the event can be in person or via WebEx.  Registration information can be found here.

Medical Device Manufacturer’s Association Submits Comments on USPTO’s Proposed Rule to Require Identification of Attributable Ownership

(April 24, 2014)  The Medical Device Manufacturer’s Association (MDMA) announced that it submitted comments to the United States Patent and Trademark Office (USPTO) in regard to the USPTO’s Notice of Proposed Rulemaking Proposing Changes to Require Identification of Attributable Ownership.  The proposed rule, published in the Federal Register at 79 Fed. Reg. 9677 on February 20, 2014, would require more transparent identification of the patent owner. In particular, the proposed rule would require that the attributable owner, including the ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent.  Specifically, the attributable owner would need to be identified on the filing of an application (or shortly thereafter), when there is a change in the attributable owner during the pendency of an application, at the time of issue fee and maintenance fee payments, and when a patent is involved in supplemental examination, ex parte reexamination, or a trial proceeding before the Patent Trial and Appeal Board (PTAB).

According to the announcement, the comments by the MDMA expressed concern over proposed changes that “would require identification of attributable ownership, which would be extremely costly and burdensome for innovative and entrepreneurial medical technology companies.”  The MDMA states that their position on patent reform is “supportive of efforts to curb abusive practices of patent assertion entities (PAEs) or ‘patent trolls’ but not while making it more costly and burdensome for innovators when defending or asserting their intellectual property rights.”

Several other organizations expressed similar concerns to the proposed rule; two public hearings were conducted in March. Final rulemaking is scheduled for later this month.