The America Invents Act and the individual inventor

commentary Much has been said about how the newly passed patent reform legislation, the Leahy-Smith America Invents Act, benefits large corporations. While that argument certainly can be made, Congress did not forget the individual inventor entirely. The creation of a "micro entity" encourages the individual inventor to get back into the patent game by reducing the fees required for filing an application.

Jerome Lemelson is considered by some to be one of the most prolific inventors of all time. With more the 600 patents to his name, Lemelson was able to generate over a billion dollars in licensing revenue. He worked as an independent inventor from the late 1950s until the end of his life in 1997, and his patents were related to many technological areas. For example, Lemelson had claims that covered aspects of industrial robots, cordless telephones, fax machines, videocassette recorders, camcorders, and magnetic tape drives. He was also an advocate for the rights of independent inventors, though he preferred the first-to-invent system over to a first-to-file system.

The United States patent system has not witnessed a single inventor amassing a patent portfolio of Lemelson's size and value in recent years . President Obama's signature on the new patent reform may change this trend. The new "micro entity" may just be the key to finding the next Lemelson.

To qualify as a micro entity, the Patent Reform Act requires the patent applicant to:

1. be a small entity (which is also a defined term);
2. not be named as an inventor on more than four previously filed patent applications (provisional and first filed foreign applications are excluded from the count);
3. have a gross income less than three times the median household income for the year proceeding the year of application; and
4. file an application that has not been assigned to and is not under an obligation to be assigned to an entity that does not meet the above-mentioned income guidelines.

It is hard to conceive of an individual inventor that does not qualify as a small entity. The key to qualifying as a micro entity lies in the other requirements.

You may be asking yourself, what if I were an inventor on a number of applications that I assigned to my former employers? Well, you are in luck. An applicant is not considered named on a previously filed application if all ownership rights in it were transferred to some other entity as the result of an obligation of employment. Thus, do not let your previous applications or patents that are now owned by your employer prevent you from starting out on your own.

For 2010, the median household income is reported as $49,445. Therefore, any applicant with a gross income of less than $148,335 is in the running to qualify as a micro entity.

Now that you know what it takes to qualify as a micro entity, you are probably asking what is the reward for qualifying? The answer--substantially reduced filing fees. In fact, micro entities are entitled to save 75 percent off certain Patent Office official fees. According to the new legislation, the discount applies to the filing fee, the search fee, the examination fee, the issue fee, appeal fees, and maintenance fees.

That might not seem all that impressive, but if you run the numbers, you might think differently. Assuming an application is filed with 3 or fewer independent claims and less than 20 total, does not endure the appeal process, and is maintained for the patent's full term, the following table highlights the cost-savings benefit to being a micro entity.

The cost to get a utility application on file, searched, and examined is now only $272.50 for a micro entity. This is a substantial savings off the $1,090 it would cost most companies to file the same application. Assuming an inventor took full advantage and filed four applications that ultimately issued, the inventor stands to save over $30,000 in official fees over the life of the four patents. This savings could be used to fund other aspects of the budding entrepreneur's new enterprise.

While a four-patent application limit is a far cry from the size of the portfolio that Lemelson assumed over the years, the number is nothing to sneeze at in this day and age. One patent can be worth a small fortune. The headlines these days are full of damages awards in the multimillion dollar range based on infringement of a single claim of a single patent. Or consider the $4.5 billion that Nortel Networks just snagged by selling a big bundle of patents (approximately 6,000) to a consortium that includes Apple, Microsoft, and Research in Motion, as the high-tech sector goes through a convulsive period of patent litigation.

And at these reduced filing fees, maybe it's time to put to work some of those ideas you've been kicking around.

If you're excited and want to take advantage of this new status, Congress gave the individual inventor an early holiday present: the new status became effective September 16, 2011, the date of the enactment of the Act.