USPTO Increases Enforcement of False Small and Micro Entity Status Claims

By Mikhael Mikhalev

In June of 2025, the USPTO began implementing statutory penalties for falsely made assertions of small and micro entity status. In particular, the USPTO issued a memo entitled Statutory Penalties for False Assertions or Certifications of Small and Micro Entity Status that implements amendments made to 35 U.S.C. § §41(j) and 123(f) by the 2022 Unleashing American Innovators Act of 2022. Importantly, the changes provide for penalties for false assertions and certifications of small or micro entity status.

35 U.S.C. §§41(j) and 123(f) now requires 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 to have falsely made an assertion of entity status that resulted in the payment of a fee in a reduced amount. A 2023 amendment to 35 U.S.C. §§41(j) and 123(f) added a good faith exception to this penalty.

This policy is a continuation of the USPTO’s emphasis to combat fraud and threats to the U.S. patent system. False certifications to receive discounted fee status unjustly diminish the resources of the USPTO and thereby impedes the examination of other applications. The USPTO indicates that it has experienced a significant increase in applications claiming micro-entity status. A significant number of such applications have included false micro entity certifications filed by applicants who are not eligible for micro-entity status. Even prior to the memo, the USPTO disciplined practitioners for violating the USPTO Rules of Professional Conduct based on a failure to comply with § 11.18. However, the memo now sets forth a framework to apply the additional financial penalties set forth in the statute.

Framework for Enforcement

Under the USPTO’s new framework, the first step is for the USPTO to conduct a review of entity status to ensure compliance. Although the memo does not describe how the USPTO will review entity status claims, it is likely that the USPTO will flag micro entity claims for inventors or applicants that have filed more than five applications. Another potential option to flag improper entity status claims would be to evaluate recorded assignments to identify assignments to known large entities when the Applicant continues to pay small or micro entity fees. Such processes could be automated to identify problematic status claims that can then be evaluated by USPTO personnel.

Once a potentially improper entity status claim is identified, the USPTO will issue a combined notice of payment deficiency and order to show cause to the correspondence address of record, similar to other notices provided by the USPTO during prosecution. The notice will set forth the USPTO’s basis for its determination of improper entity status and provide an extendible response period of two months for the Applicant to respond. In response, the Applicant may assert one of the following: 1) the entity status was proper 2) the entity status was improper, but made in good faith 3) the entity status was improper without the good faith exception.

In the first circumstance, the reply needs to include an explanation supported by sufficient evidence to rebut the USPTO’s determination. In the second circumstance, the Applicant will need to provide payment for the deficiency owed, and include an explanation supported by sufficient evidence that the entity status assertion was made in good faith. In the third circumstance, the Applicant will need to provide an explanation of the circumstances and payment for the deficiency owed, which will also likely result in the USPTO applying the fine.

After the USPTO receives the response, 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 the response to the notice and the record as a whole.

Importantly, the notice-and-order framework described above will remove the applications from examination pending resolution and can result in examination delays and patent term adjustment reductions, in addition to any fines assessed.

Best Practices for Patent Attorneys

According to 37 CFR 1l.18(b )(2), an “entity is required to conduct an inquiry reasonable under the circumstances prior to making the assertion or certification.” This obligation extends to applicants’ attorneys and attorneys should communicate this requirement to their clients when necessary. The determination between small and large entity Applicants is typically straightforward. For micro entity certification, attorneys should conduct a search to confirm that the inventors/applicants have not exceeded the five-application limit. Attorneys should also check USPTO assignment records to confirm that the application has not been assigned to an unqualifying entity. Performing these steps could be persuasive evidence of good faith in case the entity size is not correct.

Once small entity status has been obtained, it will remain effective until the issue fee is due. When the issue fee is due, small entity status must be reviewed and re-asserted if the requirements are still met. In contrast, micro entity status must be reevaluated every time a fee is paid. If at any time the application no longer qualifies as a micro entity, the USPTO must be notified.

If status as a micro entity is established in good faith, and fees as a micro entity are paid in good faith, and it is later discovered that such micro entity status either was established in error, or that the USPTO was not notified of a loss of entitlement to micro entity status through error, the error can excused by informing the USPTO, and itemizing and paying the fee deficiency, as set forth in 37 CFR 1.29(k)(1) and 37 CFR 1.29(k)(2).

The USPTO’s “Notification of Loss of Entitlement to Micro Entity Status” form (Form SB/460) may be used to notify the USPTO of loss of entitlement to micro entity status, and to submit the required itemization and deficiency payments. Additional information about how to correct micro entity status that was established by mistake is set forth in MPEP section 509.04(f).

Mikhael Mikhalev

Mikhael is a partner in Maschoff Brennan’s Park City office. His practice focuses on patent prosecution and strategic IP portfolio development for clients ranging from startups to established industry leaders. Mikhael guides clients through the full patent lifecycle—from invention disclosure and patentability analysis to drafting, filing, and prosecution before the U.S. Patent and Trademark Office (USPTO) and international patent offices. In addition to domestic prosecution, he regularly manages global portfolios under the Patent Cooperation Treaty (PCT) and coordinates with foreign counsel in key markets.

About Maschoff Brennan

Maschoff Brennan provides legal counsel and representation to some of the world’s most innovative companies. With 50 attorneys and offices in the technology-focused regions of Utah, California, and New York, our attorneys are known for having the breadth of experience and the forward-thinking insight needed to handle complex technological and business issues across all industries and geographic boundaries. In addition, we have extensive experience representing clients before the ITC, PTAB, TTAB, and other administrative agencies in Washington D.C.