| Fees and Payment of Money |
Referenced Items (116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127) |
(116) Statutory Penalties for False Assertions or Certifications
of Small and Micro Entity Status
Summary
35 U.S.C. 41(j) and 123(f) require the United States Patent and
Trademark Office (USPTO) to assess a fine of not less than three times the
amount an entity failed to appropriately pay the USPTO, when the entity is
found by the USPTO to have falsely made an assertion or certification of
small or micro entity status, unless the entity shows that the assertion or
certification was made in good faith. The USPTO will begin issuing a
combined notice of payment deficiency and order to show cause as to why a
fine should not be assessed ("combined notice and order"), when the USPTO
makes a preliminary determination that a pending patent application
("application") or patent contains a false assertion or certification that
resulted in the payment of at least one fee in an unentitled reduced
amount. The USPTO will issue a subsequent notice to provide a final
determination of whether a fine is being assessed, and the fine amount,
based on any timely response to the combined notice and order and the
record as a whole.
The statutory penalty system of 35 U.S.C. 41(j) and 123(f) promotes the
submission of compliant assertions and certifications of small and micro
entity status, reduces the revenue loss from false assertions and
certifications that would otherwise be borne by all entities, and
discourages inappropriate conduct related to making false assertions and
certifications.
Background
An entity may qualify for small entity status if the entity is a person,
a small business concern, or a nonprofit organization, including an
institution of higher education. See 37 CFR 1.27. Sections 509.02-03 of the
Manual of Patent Examining Procedure (MPEP) (9th Edition, Rev. 01.2024,
November 2024) provide guidance on when small entity status may be
appropriately asserted. The MPEP is available at www.uspto.gov/MPEP.
Some entities that qualify for small entity status can benefit from an
additional reduction of most fees charged by the USPTO if they also qualify
for micro entity status. The entity may be entitled to certify micro
entity status under either a gross income basis or a United States
institution of higher education basis. Section 509.04 of the MPEP and
www.uspto.gov/PatentMicroentity provide guidance on when micro entity
status may be appropriately certified. If an applicant, inventor, or joint
inventor has been named as the inventor or a joint inventor on more than
five prior nonprovisional applications, the applicant may be required to
establish that a certification under the gross income basis as a micro
entity is appropriate, e.g., establishing that the exceptions in
37 CFR 1.29(b) apply to a sufficient number of prior applications that the
certification was not falsely made. See MPEP section 509.04(a), subsection
I.
An entity is required to conduct an inquiry reasonable under the
circumstances prior to making the assertion or certification. See
37 CFR 11.18(b)(2).
The USPTO is a fully fee-funded agency. When entities ineligible for the
small or micro entity status fee reductions pay fees in an unentitled
reduced amount, they take improper advantage of the fees paid by other
entities. Fee payments made in an unentitled reduced amount result in
revenue loss for the USPTO, which is required to set fees to recover
aggregate costs. Entities paying fees in unentitled reduced amounts result
in the fees for all applicants being reset higher to offset this revenue
loss.
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US PATENT AND TRADEMARK OFFICE |
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Division W of the Consolidated Appropriations Act of 2023 enacted the
Unleashing American Innovators Act of 2022 and amended Title 35 of the
United States Code to provide for penalties for false assertions and
certifications under 35 U.S.C. 41(j) and 123(f), respectively. See Public
Law 117-328. In December 2024, Public Law 118-151 further amended Title 35
to provide good faith exceptions to the statutory penalty system of
35 U.S.C. 41(j) and 123(f). Consequently, 35 U.S.C. 41(j) and 123(f)
require the USPTO to assess a fine of not less than three times the amount
an entity failed to appropriately pay the USPTO, when the entity is found
by the USPTO to have falsely made an assertion or certification of small or
micro entity status that resulted in the payment of a fee in an unentitled
reduced amount, unless the entity establishes that the assertion or
certification was made in good faith.
Combined Notice and Order
At USPTO's discretion, a review may be undertaken of an entity status
claim for compliance with all relevant USPTO rules. For example, the USPTO
may review a micro entity status certification claim to determine whether
the entity is compliant with the limit of filing no more than five
nonprovisional applications. If the review leads to a preliminary
determination that an application contains a false assertion or
certification that resulted in the payment of at least one fee in an
unentitled reduced amount, the USPTO will issue to the correspondence
address of record a combined notice and order. The combined notice and
order will set forth the USPTO's basis for its preliminary determination
and provide a response period of two months, extendible under
37 CFR 1.136(a), to give the entity notice and an opportunity to respond.
Response to Combined Notice and Order
The combined notice and order will provide the following three options
for response:
I. If the assertion or certification was not falsely made, a reply
must be submitted that includes an explanation supported by
sufficient evidence to rebut the preliminary determination that the
application contains a false assertion or certification. Relying
upon the previously submitted assertion or certification or
providing a reassertion or recertification are not satisfactory
responses.
II. If the assertion or certification was falsely made, but in good
faith, an itemization of the total deficiency owed must be provided
under 37 CFR 1.28(c)(2) or 1.29(k)(1), as appropriate, along with
payment for the total deficiency under 37 CFR 1.28(c)(2) or
1.29(k)(2), as appropriate, and include an explanation supported by
sufficient evidence that the assertion or certification was made in
good faith.
III. If the assertion or certification was falsely made and a good faith
explanation is not submitted, an itemization of the total
deficiency owed and payment for the total deficiency must be
provided, along with, as appropriate, an offer to pay any fine once
assessed.
The USPTO will evaluate any response to the combined notice and order on
a case-by-case basis before issuing a final determination. For example, if
the response includes an explanation supported by evidence that the false
assertion or certification was made in good faith, the USPTO will take into
consideration the reasonableness of any steps taken to avoid the false
assertion or certification (i.e., an inquiry reasonable under 37 C.F.R.
11.18(b)(2)) and whether the entity, e.g., applicant or practitioner, has
exhibited a pattern of making false assertions or certifications.
Subsequent Notice from the USPTO
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Following a response to the combined notice and order, or after the
expiration of the time period for response, the USPTO will generally issue
a subsequent notice that will contain a final determination, based on the
record as a whole, of whether the application contains a false assertion or
certification that resulted in the payment of at least one fee in an
unentitled reduced amount. The subsequent notice will also set forth the
fine amount, if any, being assessed. In certain situations, where the facts
warrant, the USPTO may require additional information prior to the final
determination.
In addition, the USPTO may issue sanctions under 37 CFR 11.18(c) for
an entity's conduct before the USPTO regarding a false assertion or
certification. Practitioners remain subject to the USPTO Rules of
Professional Conduct and sanctions under 37 CFR 11.15, 11.19, and 11.20 for
violations thereof. See 37 CFR 11.101 et seq.
Impact on Prosecution Status and Patent Term Adjustment
When the USPTO issues a combined notice and order, the USPTO will remove
the application from examination pending resolution of the preliminary
determination that the application contains a false assertion or
certification. The USPTO will not return the application to examination
until both the fee deficiency and fine are resolved.
In the event that the USPTO makes a final determination that the
application contains a false assertion or certification that resulted in
the payment of at least one fee in an unentitled reduced amount, there will
be a patent term adjustment (PTA) impact for the application.
Under 37 CFR 1.704(c), circumstances that constitute a failure of the
applicant to engage in reasonable efforts to conclude processing or
examination of an application may result in the reduction of the period of
adjustment set forth in 37 CFR 1.703. There will be a delay in prosecution
corresponding to the USPTO removing an application from examination,
pending the resolution of the false assertion or certification in the
application. Because the delay is the result of a false assertion or
certification, the delay is a failure to engage in reasonable efforts to
conclude processing or examination of the application, starting on the date
the USPTO issues the combined notice and order and ending on the date all
appropriate fee deficiencies and any assessed fine are paid in full.
Additional Information
An entity is subject to the penalty provisions of 35 U.S.C. 41(j) and
123(f) only when inappropriately discounted fees were paid on or after
December 29, 2022. The filing date of the application is not relevant to
whether the fee payment could result in a penalty.
Once a fine has been assessed, the fine is a debt owed to the United
States Government, unless the USPTO determines that the assessment was in
error in response to a request for further review. Payment of only the fee
deficiency amount after the penalty has been assessed does not obviate the
fine owed to the United States Government, and a collection process will be
initiated to collect the fine owed. The fine must be paid even if the
application is abandoned or if the patent has expired. Additionally,
failure to pay the fine amount within the time period for its payment may
result in sanctions under 37 CFR 11.18, including termination of the
proceedings. Payment of only the fine amount and not the fee deficiency
will, after expiration of the time period to pay the fee deficiency, result
in abandonment of the application.
Contact information
Inquiries concerning the statutory penalty system of 35 U.S.C. 41(j) and
123(f) may be directed to Joseph F. Weiss Jr., Senior Legal Advisor, Office
of Patent Legal Administration, at 571-270-0629. Inquiries concerning
patent term adjustment may be directed to Kery Fries, Senior Legal Advisor,
Office of Patent Legal Administration, at 571-272-7757.
June 6, 2025 COKE MORGAN STEWART
Acting Under Secretary of Commerce for Intellectual Property and
Acting Director of the United States Patent and Trademark Office
[1536 OG 204]