509.04    Micro Entity Status — Definitions [R-07.2015]

35 U.S.C. 123  Micro entity defined.

  • (a) IN GENERAL.—For purposes of this title, the term "micro entity" means an applicant who makes a certification that the applicant—
    • (1) qualifies as a small entity, as defined in regulations issued by the Director;
    • (2) has not been named as an inventor on more than 4 previously filed patent applications, other than applications filed in another country, provisional applications under section 111(b), or international applications filed under the treaty defined in section 351(a)  for which the basic national fee under section 41(a)  was not paid;
    • (3) did not, in the calendar year preceding the calendar year in which the applicable fee is being paid, have a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding 3 times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census; and
    • (4) has not assigned, granted, or conveyed, and is not under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding 3 times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census.
  • (b) APPLICATIONS RESULTING FROM PRIOR EMPLOYMENT.—An applicant is not considered to be named on a previously filed application for purposes of subsection (a)(2) if the applicant has assigned, or is under an obligation by contract or law to assign, all ownership rights in the application as the result of the applicant’s previous employment.
  • (c) FOREIGN CURRENCY EXCHANGE RATE.—If an applicant’s or entity’s gross income in the preceding calendar year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during that calendar year shall be used to determine whether the applicant’s or entity’s gross income exceeds the threshold specified in paragraphs (3) or (4) of subsection (a).
  • (d) INSTITUTIONS OF HIGHER EDUCATION.—For purposes of this section, a micro entity shall include an applicant who certifies that—
    • (1) the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or
    • (2) the applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular applications to such an institution of higher education.
  • (e) DIRECTOR’S AUTHORITY.—In addition to the limits imposed by this section, the Director may, in the Director’s discretion, impose income limits, annual filing limits, or other limits on who may qualify as a micro entity pursuant to this section if the Director determines that such additional limits are reasonably necessary to avoid an undue impact on other patent applicants or owners or are otherwise reasonably necessary and appropriate. At least 3 months before any limits proposed to be imposed pursuant to this subsection take effect, the Director shall inform the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate of any such proposed limits.

Public Law 112-29, sec. 10(b), 125 Stat. 284 (September 16, 2011)( Leahy-Smith America Invents Act (AIA)) adds 35 U.S.C. 123  to define a ‘‘micro entity.’’ March 19, 2013 is the date that the 75% micro entity discount first became available, because that is the date that fees "for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents" were first set or adjusted by rulemaking under the Office’s fee setting authority. See Setting and Adjusting Patent Fees, 78 FR 4212 (January 18, 2013) which became effective in large part on March 19, 2013. January 1, 2014 is the rulemaking’s effective date for the micro entity discount as it applies to certain "filing, searching [and] examining" fees for international applications under the PCT.

The fees which are reduced by 75% for micro entities include filing fees (nonprovisional and provisional), search fees, examination fees, issue fees, and appeal fees for utility, design, plant, and reissue patent applications. Also included are patent maintenance fees including the maintenance fee grace period surcharges as well as the surcharge for a petition to accept a delayed maintenance fee payment in order to reinstate an expired patent. Included within the ambit of filing fees subject to the micro entity discount are excess claims fees, application size fees, and the surcharge required by 37 CFR 1.16(f)  if either the basic filing fee or the oath or declaration for a nonprovisional application was not present on the filing date. Included within the ambit of examination fees subject to the micro entity discount are the fees for requesting prioritized examination under 37 CFR 1.102(e), ex parte reexamination under 37 CFR 1.510  (only if the request is filed by the patent owner), and supplemental examination under 37 CFR 1.601. Included within the ambit of appeal fees subject to the micro entity discount are the fees for filing notice of appeal, forwarding an appeal to the PTAB, and requesting an oral hearing.

I.    REQUIREMENT FOR A CERTIFICATION

35 U.S.C. 123  requires a certification as a condition for an applicant to be considered a micro entity. The certification must be in writing and must be filed prior to or at the time a fee is first paid in the micro entity amount in an application or patent. Status as a micro entity in one application or patent does not affect the status of any other application or patent. The refiling of an application under 37 CFR 1.53  as a continuation or divisional, or continuation-in-part application (including a continued prosecution application under 37 CFR 1.53(d)  (design applications only)), or the filing of a reissue application, requires a new certification of entitlement to micro entity status in the continuing or reissue application. See 37 CFR 1.29(e). A fee may be paid in the micro entity amount only if it is submitted with, or subsequent to, the submission of a certification of entitlement to micro entity status. See 37 CFR 1.29(f). The micro entity provisions of 37 CFR 1.29  apply to applications filed before, on, and after March 19, 2013. A micro entity certification may be filed in pending applications, reexamination proceedings (for patent owners only, and supplemental examination proceedings at any time during prosecution and in patents prior to or concurrent with a maintenance fee payment.

Any attempt to fraudulently establish status or pay fees as a micro entity shall be considered as a fraud practiced or attempted on the Office. Improperly, and with intent to deceive, establishing status or paying fees as a micro entity shall be considered as a fraud practiced or attempted on the Office. See 37 CFR 1.29(j).

II.    BASES FOR ESTABLISHING MICRO ENTITY STATUS

There are two separate bases for establishing micro entity status referred to as the "gross income basis" under 35 U.S.C. 123(a)  and the "institution of higher education basis" under 35 U.S.C. 123(d). 37 CFR 1.29(a)  implements the gross income basis for establishing micro entity status, and 37 CFR 1.29(d)  implements the institution of higher education basis for establishing micro entity status. The Office’s micro entity certification forms are form PTO/SB/15A (gross income basis)(see MPEP § 509.04(a)) and form PTO/SB/15B (institution of higher education basis)(see MPEP § 509.04(b)). No evidence such as a copy of a tax return need accompany the certification form(s). In addition, the certification form(s) need not be notarized. The certification form(s) must, however, identify the application or patent to which it pertains and it must be signed by an authorized party as set forth in MPEP § 509.04(c). For new application filings not previously assigned a patent application number, providing the first named inventor and the title of the invention at the top of the certification form(s) in the spaces provided will be sufficient to identify the application. It is strongly recommended that the following document descriptions in EFS-Web be used as appropriate:

  • • Certification of Micro Entity (Gross Income Basis)
  • • Certification of Micro Entity (Education Basis)

509.04(a)    Gross Income Basis for Micro Entity Status [R-11.2013]

35 U.S.C. 123(a)  provides that the term ‘‘micro entity’’ means an applicant who makes a certification that the applicant: (1) qualifies as a small entity as defined in 37 CFR 1.27; (2) has not been named as an inventor on more than four previously filed patent applications, other than applications filed in another country, provisional applications under 35 U.S.C. 111(b), or international applications for which the basic national fee under 35 U.S.C. 41(a)  was not paid; (3) did not, in the calendar year preceding the calendar year in which the applicable fee is being paid, have a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. 61(a)), exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census; and (4) has not assigned, granted, or conveyed, and is not under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census. 37 CFR 1.29(a)(1)-(4)  implements the requirements under 35 U.S.C. 123(a)(1)-(4)  for establishing micro entity status on the gross income basis.

The income level that is three times the median household income for the preceding calendar year, as most recently reported by the Bureau of the Census (i.e., the income threshold set forth in 35 U.S.C. 123(a)(3)  and (a)(4) ) is referred to as the "gross income limit" or the "maximum qualifying gross income." The Office’s micro entity status certification form PTO/SB/15A refers to the official Web page address providing the up-to-date maximum qualifying gross income. Each inventor and each non-inventor applicant (e.g., an assignee-applicant) must individually meet the gross income limit. The gross income limit applies to the assignee (if any) regardless of whether the assignee is identified as the applicant. Under 37 CFR 1.29(a)(4), the gross income limit applies to each party with an ownership interest in the application including any party(ies) to whom an ownership interest obligation is owed. Accordingly, each assignee, licensee, and inventor must individually meet the gross income limit.

35 U.S.C. 123(b)  provides that an applicant is not considered to be named on a previously filed application for purposes of 35 U.S.C. 123(a)(2)  if the applicant has assigned, or is under an obligation by contract or law to assign, all ownership rights in the previously filed application as the result of the applicant’s previous employment. 37 CFR 1.29(b)  implements the provisions of 35 U.S.C. 123(b).

35 U.S.C. 123(c)  provides that if an applicant’s or entity’s gross income in the preceding calendar year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during that calendar year shall be used to determine whether the applicant’s or entity’s gross income exceeds the gross income limit specified in 35 U.S.C. 123(a)(3) or (4). 37 CFR 1.29(c)  implements the provisions of 35 U.S.C. 123(c).

I.    SECTION 1.29(a) – GROSS INCOME BASIS REQUIREMENTS

37 C.F.R. 1.29  Micro entity status.

  • (a) To establish micro entity status under this paragraph, the applicant must certify that:
    • (1) The applicant qualifies as a small entity as defined in § 1.27;
    • (2) Neither the applicant nor the inventor nor a joint inventor has been named as the inventor or a joint inventor on more than four previously filed patent applications, other than applications filed in another country, provisional applications under 35 U.S.C. 111(b), or international applications for which the basic national fee under 35 U.S.C. 41(a)  was not paid;
    • (3) Neither the applicant nor the inventor nor a joint inventor, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. 61(a)), exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census; and
    • (4) Neither the applicant nor the inventor nor a joint inventor has assigned, granted, or conveyed, nor is under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the applicable fee is being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding three times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census.

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37 CFR 1.29(a)(1)-(4)  sets forth the requirements for establishing micro entity status on the gross income basis. If an application names more than one inventor, each inventor must meet the requirements of 37 CFR 1.29(a)(1)-(4)  to file a micro entity certification on the gross income basis in the application. If the applicant is other than the inventor(s) (e.g., an assignee-applicant), then each such non-inventor applicant as well as each inventor must meet the requirements of 37 CFR 1.29(a)(1)-(4)  to file a micro entity certification on the gross income basis in the application. If there is any assignee or licensee that received "ownership rights" from any inventor or non-inventor applicant, then the party(ies) with the "ownership interest" must also meet the gross income limit requirement.

Because each inventor and each non-inventor applicant (e.g., assignee-applicant) must separately meet the requirements under 37 CFR 1.29(a)(1)-(4), it would not be appropriate to file a micro entity certification under 37 CFR 1.29(a)  for the application if there were more than one applicant or inventor and not all of the applicants and inventors qualified as micro entities under 35 U.S.C. 123(a): e.g., (1) an applicant or inventor exceeded the gross income limit; (2) an applicant or inventor had more than four other nonprovisional applications; or (3) an applicant or inventor had assigned, granted, or conveyed the application or was under an obligation to do so, to an entity that exceeds the gross income limit. Additionally, the gross income limit under 35 U.S.C. 123(a)(3)  applies to each applicant’s and inventor’s income separately (i.e., the combined gross income of all of the applicants and inventors need not be below the income level in 35 U.S.C. 123(a)(3) ). Further, the assignment requirement in 37 CFR 1.29(a)(4)  applies to each applicant and inventor (i.e., if an applicant or inventor assigns or is obligated to assign the invention to more than one assignee (e.g., half interest in the invention to two assignees), each of the assignees must meet the income limit specified in 37 CFR 1.29(a)(4) ). Note also that in this context an inventor ordinarily should qualify as a small entity under 37 CFR 1.29(a)(1)  and 1.27(a)(1). Under 37 CFR 1.27(a)(1), an inventor generally is a small entity and retains such status even if the inventor assigns some rights to another small entity. Similarly, to obtain micro entity status, 37 CFR 1.29(h)  requires that any non-applicant assignee be a small entity.

CERTIFICATION FORM – GROSS INCOME BASIS

The Office’s form PTO/SB/15A contains the certifications under 37 CFR 1.29(a)(1)-(4)  that are required to establish micro entity status on the gross income basis. The form refers to the certification requirements as: (1) Small Entity Requirement, (2) Application Filing Limit, (3) Gross Income Limit on Applicants and Inventors, and (4) Gross Income Limit on Parties with an "Ownership Interest."

Certification of Micro Entity Status (Gross Income Basis)
Privacy Act Statement

A.    Small Entity Requirement

In order to meet the small entity requirement, every party holding rights in the application must qualify as a small entity under 37 CFR 1.27. If any rights in the application are assigned, granted, conveyed, or licensed to a party that does not qualify as a small entity under 37 CFR 1.27, the applicant cannot qualify for any patent fee discount. An obligation to assign, grant, convey, or license rights in the application to a party that does not qualify for small entity status would also disqualify the applicant from receiving any patent fee discount. In order to qualify for small entity status, and in order to meet the small entity requirement for micro entity status, there can be no party holding rights or obligated rights in the application that does not qualify as a small entity. See MPEP § 509.02 for a discussion of the requirements for small entity status.

B.    Application Filing Limit

For purposes of establishing micro entity status under the "gross income" basis, the application filing limit as set forth in 37 CFR 1.29(a)(2)  includes: (i) previously filed U.S. nonprovisional applications (e.g., utility, design, plant, continuation, and divisional applications), (ii) previously filed U.S. reissue applications, and (iii) previously filed U.S. national stage applications under the Patent Cooperation Treaty (PCT). All such applications naming the inventor or a joint inventor are counted toward the application filing limit, whether the applications were filed before, on, or after March 19, 2013. Further, it does not matter whether the previously filed applications are pending, patented, or abandoned; they are still included when counting to determine whether the application filing limit has been reached.

The application filing limit does not include: (i) foreign applications; (ii) international (PCT) applications for which the basic U.S. national stage filing fee was not paid; and (iii) provisional applications. In addition, where an applicant, inventor, or joint inventor has assigned, or is under an obligation by contract or law to assign, all ownership rights in the application as the result of the applicant’s, inventor’s, or joint inventor’s previous employment the applicant, inventor or joint inventor is not considered to be named on the prior filed application for purposes of determining micro entity status. See 37 CFR 1.29(b).

Because the four application limit is a limit on previously filed U.S. nonprovisional applications, reissues applications, and national stage applications, the maximum number of applications in which fees can be paid at the micro entity discount rate can vary from 0 to 5 for any given inventor. For example, consider a person named as a sole inventor in five previously filed U.S. nonprovisional patent applications in which all ownership rights have remained with the sole inventor (i.e., no assignment or licensing of patent rights ever occurred). This person was not named as an inventor in any other application. Because all five applications count against the application filing limit, this person cannot be named as an inventor in any future-filed application entitled to micro entity status on the "gross income" basis under 37 CFR 1.29(a). (However, the filing of a future sixth application will not jeopardize entitlement to micro entity status in any of the five applications already filed.) If the first two of the inventor’s five applications went abandoned prior to March 19, 2013, then the inventor would not have had the opportunity to pay fees at the micro entity discount rate in those two applications. (The micro entity discount became available for the first time on March 19, 2013.) However if the third-filed application issued as a patent, then for purposes of paying maintenance fees, the applicant-turned-patentee (the sole inventor in this example) may establish entitlement to micro entity status on the "gross income" basis if all 4 requirements under 37 CFR 1.29(a)  are met. If the fourth and fifth filed applications are still pending, then similarly, the inventor may establish entitlement to micro entity status on the "gross income" basis if the four requirements under 37 CFR 1.29(a)  are met.

C.    Gross Income Limit on Applicants and Inventors

For purposes of qualifying for micro-entity status under 37 CFR 1.29(a)  and paying fees at the micro entity discount, it is required that no inventor had a gross income exceeding the gross income limit in the calendar year preceding the time of fee payment. This gross income level requirement also applies to any applicant who is not an inventor (e.g., an assignee-applicant). 35 U.S.C. 123(a)(3)  and 37 CFR 1.29(a)(3)  define the gross income limit as "three times median household income for [the] preceding calendar year, as most recently as reported by the Bureau of the Census." Based on that definition, the gross income limit is reported on the USPTO website at www.uspto.gov/patent/laws-and-regulations/ micro-entity-status-gross-income-limit  as the "maximum qualifying gross income." At the time any fee is to be paid in the micro entity amount, it is required that no inventor and no non-inventor applicant (if any) have a preceding calendar year’s gross income exceeding the "maximum qualifying gross income" posted on the USPTO website.

It should be noted that "gross income" means total income. "Gross income" and "adjusted gross income" are not the same thing. Adjusted gross income is defined as gross income minus adjustments to income. For purposes of micro entity status it is "gross income" – not "adjusted gross income" that matters. Section 61(a) of the Internal Revenue Code of 1986 (26 U.S.C. 61(a)) provides that: "[e]xcept as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Alimony and separate maintenance payments; (9) Annuities; (10) Income from life insurance and endowment contracts; (11) Pensions; (12) Income from discharge of indebtedness; (13) Distributive share of partnership gross income; (14) Income in respect of a decedent; and (15) Income from an interest in an estate or trust."

With the coming of each new year, the "preceding calendar year" advances, and anyone’s preceding calendar year’s gross income may change as a result. Therefore, if the prosecution of an application under micro entity status extends across multiple calendar years, each applicant, inventor, and joint inventor must verify that the gross income limit for the requisite calendar year is met to maintain eligibility for the micro entity discount. If the gross income limit is no longer met, then a notification of loss of entitlement to micro entity status must be filed in the application to remove micro entity status. On the other hand, it is possible a small entity applicant not meeting the gross income limits specified in 37 CFR 1.29(a)(3)  and (4)  in the calendar year in which the application was filed could meet the 37 CFR 1.29(a)(3)  and (4)  gross income limits in the calendar year in which the issue fee is paid, for example, due to a reduction in income. However, the applicant must still be a small entity at the time of issue fee payment, and the applicant must have met the application filing limit under 37 CFR 1.29(a)(2)  when the application was filed.

The applicable "maximum qualifying gross income" that is reported on the USPTO website at www.uspto.gov/patent/laws-and- regulations/micro-entity-status-gross-income-limit  is anticipated to change (increase or decrease) in September or October of each year. If the reported "maximum qualifying gross income" increases, then parties that met the gross income limit earlier that calendar year will continue to meet the gross income limit for the rest of the calendar year. There may also be additional parties that meet the gross income limit. If the reported "maximum qualifying gross income" decreases, however, some parties that met (e.g., barely met) the gross income limit earlier that calendar year might no longer meet the gross income limit for the remainder of the calendar year. In that event a notification of loss of entitlement to micro entity status must be filed as fees could not be paid in the micro entity amount in the relevant patent application or patent for the remainder of that calendar year.

For inventors who file tax returns jointly with their spouse, for example, determining the inventor’s gross income may not be readily apparent from the preceding calendar year’s joint tax return. Regardless of whether any inventor, or any person who is a non-inventor applicant (e.g., assignee-applicant), or any person with an "ownership interest" under 37 CFR 1.29(a)(4)  actually filed a joint tax return rather than a separate tax return in the preceding calendar year, the gross income limit applies to the amount of income the person would have reported as gross income if that person were filing a separate tax return, which includes for example, properly accounting for that person’s portion of interest, dividends, and capital gains from joint bank or brokerage accounts.

For filings on behalf of deceased inventors, gross income from the deceased inventor’s estate or trust does not count toward the gross income limit because the trust or decedent’s estate is considered a separate legal entity. However, the deceased inventor’s legal representative acting on behalf of the deceased inventor under 37 CFR 1.43  is an "applicant" in terms of 37 CFR 1.29(a). Therefore the legal representative’s gross income in the preceding calendar year cannot exceed the gross income limit under 37 CFR 1.29(a)(3)  in order to qualify for micro entity status. For example, if the deceased inventor has a surviving spouse who is named on the Application Data Sheet (ADS) as an applicant by virtue of being the legal representative of the deceased inventor, the surviving spouse’s gross income in the preceding calendar year cannot exceed the gross income limit in order to qualify for micro entity status. On the other hand, if the deceased inventor had assigned all rights in the application (or if subsequent to the inventor’s death, the legal representative assigned all rights in the application) AND the assignee that received all rights was named as an applicant (or the applicant), then it would be the assignee that would have to meet the gross income limit (under 37 CFR 1.29(a)(4) ) and not the legal representative. In any event, each other joint inventor, assignee, and licensee (if any) would also have to meet the gross income limit in order to qualify for micro entity status.

D.    Gross Income Limit on Parties With an "Ownership Interest"

Pursuant to 37 CFR 1.29(a)(4), the gross income limit extends to any party with an "ownership interest" from any applicant or inventor. Accordingly, for each inventor, applicant, and party with an "ownership interest," gross income in the calendar year preceding the time of fee payment must not exceed the "maximum qualifying gross income." Thus, the gross income limit applies to the assignee regardless of whether the assignee is identified as the applicant. For micro entity status, 37 CFR 1.29(a)(4)  requires that the gross income limit be met by each assignee and licensee (if any) as well as by each inventor.

An applicant is disqualified from micro entity status on the gross income basis if an inventor or an assignee-applicant transfers, or is obligated to transfer, any ownership interest in the patent application to an entity that exceeds the gross income limit. For example, consider a patent application with a sole inventor who does not exceed the gross income limit. If the inventor assigns, or is obligated to assign, all rights in the patent application to an employer that is, for example, a corporation having several million dollars in annual receipts, there can be no micro entity discount of patent fees. Depending on the size of the corporation, the small entity discount may be unavailable as well. If the corporation transfers all of its rights back to the inventor, or transfers all of its rights to some other person who does not exceed the gross income limit, such a retransfer will not result in qualification for micro entity status. The 37 CFR 1.29(a)(4)  certification requirement is that no ownership interest "has" been transferred, or is obligated to be transferred, to an assignee or licensee that exceeds the gross income limit. Once an assignee or licensee exceeding the gross income limit receives the ownership interest, the 37 CFR 1.29(a)(4)  certification requirement can no longer be met – even if the assignee or licensee retransfers rights and no longer holds any ownership interest in the application.

If prosecution of an application that is under 37 CFR 1.29(a)  micro entity status extends into a new year, it is important to verify that no inventor, no non-inventor applicant, and no party with a 37 CFR 1.29(a)(4)  "ownership interest," had a gross income in the new preceding calendar year that exceeds the "maximum qualifying gross income" reported on the USPTO website. If the coming of a new year results in the gross income limit not being met by any inventor, applicant or party with a 37 CFR 1.29(a)(4)  "ownership interest," then a notification of loss of entitlement to micro entity status under 37 CFR 1.29(i)  must be filed in the application to remove micro entity status.

II.    SECTION 1.29(b) – PREVIOUSLY FILED PATENT APPLICATION EXCLUSION

  

37 C.F.R.   § 1.29 Micro entity status.

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  • (b) An applicant, inventor, or joint inventor is not considered to be named on a previously filed application for purposes of paragraph (a)(2) of this section if the applicant, inventor, or joint inventor has assigned, or is under an obligation by contract or law to assign, all ownership rights in the application as the result of the applicant’s, inventor’s, or joint inventor’s previous employment.

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37 CFR 1.29(b)  implements the provisions of 35 U.S.C. 123(b). 37 CFR 1.29(b)  provides that an applicant, inventor, or joint inventor is not considered to be named on a previously filed application for purposes of 37 CFR 1.29(a)(2)  if the applicant, inventor, or joint inventor has assigned, or is under an obligation by contract or law to assign, all ownership rights in the application as the result of the applicant’s, inventor’s, or joint inventor's previous employment.

III.    SECTION 1.29(c) – GROSS INCOME DETERMINED BY CURRENCY EXCHANGE RATE

37 C.F.R.   § 1.29 Micro entity status.

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  • (c) If an applicant’s, inventor’s, joint inventor’s, or entity’s gross income in the preceding calendar year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during that calendar year shall be used to determine whether the applicant’s, inventor’s, joint inventor’s, or entity’s gross income exceeds the threshold specified in paragraph (a)(3) or (4) of this section.

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Section 1.29(c)  implements the provisions of 35 U.S.C. 123(c). Section 1.29(c)  provides that if an applicant’s, inventor’s, joint inventor’s, or entity’s gross income in the preceding calendar year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during that calendar year shall be used to determine whether the applicant’s, inventor’s, joint inventor’s, or entity’s gross income exceeds the threshold specified in 37 CFR 1.29(a)(3)  or (a)(4). The Internal Revenue Service reports the average currency exchange rate (Yearly Average Currency Exchange Rates) on its Internet website (www.irs.gov/Individuals/International-Taxpayers/ Yearly-Average-Currency-Exchange-Rates ).

For an applicant or entity whose previous calendar year’s gross income was received partially in U.S. dollars and partially in non-United States currency, the gross income amount in non-United States currency must be converted into U.S. dollars in accordance with 37 CFR 1.29(c)  and then added to the gross income amount in U.S. dollars to determine whether the applicant or entity meets the gross income requirement of 37 CFR 1.29(a)(3).

509.04(b)    Institution of Higher Education Basis for Micro Entity Status [R-11.2013]

37 C.F.R. 1.29  Micro entity status.

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  • (d) To establish micro entity status under this paragraph, the applicant must certify that:
    • (1) The applicant qualifies as a small entity as defined in § 1.27; and
    • (2)
      • (i) The applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or
      • (ii) The applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular application to such an institution of higher education.

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35 U.S.C. 123(a)  provides a gross income basis under which an applicant may establish micro entity status. See MPEP § 509.04(a). 35 U.S.C. 123  provides that a micro entity shall also include an applicant who certifies that: (1) The applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or (2) the applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular application to such an institution of higher education. 37 CFR 1.29(d)  implements the provisions of 35 U.S.C. 123(d).

To the extent that 35 U.S.C. 123(d)  (unlike 35 U.S.C. 123(a) ) does not expressly require that an applicant qualify as a small entity under 37 CFR 1.27, the Office has invoked its authority under 35 U.S.C. 123(e)  to "…impose… other limits on who may qualify as a micro entity…" in order to expressly require that a party claiming micro entity status via 35 U.S.C. 123(d)  qualify as a small entity under 37 CFR 1.27. Accordingly, 37 CFR 1.29(d)(1)  requires that an applicant claiming micro entity status on the institution of higher education basis must certify that the "applicant qualifies as a small entity as defined in § 1.27 " in addition to certifying that the other requirements set forth in 35 U.S.C. 123(d)(1) or (2)  are met. See MPEP § 509.02 for a discussion of the requirements for small entity status.

I.    REQUIREMENTS

An applicant for micro entity status under the "institution of higher education" basis set forth in 37 CFR 1.29(d)  must satisfy two requirements. First, the applicant must certify that the applicant qualifies as a small entity as defined in 37 CFR 1.27. Second, the applicant must certify that either (i) the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or (ii) the applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular application to such an institution of higher education.

A.    Small Entity Requirement

In order to meet the small entity requirement, every party holding rights in the application must qualify as a small entity under 37 CFR 1.27. If any rights in the application are assigned, granted, conveyed, or licensed to a party that does not qualify as a small entity under 37 CFR 1.27, the applicant cannot qualify for any patent fee discount. An obligation to assign, grant, convey, or license rights in the application to a party that does not qualify for small entity status would also disqualify the applicant from receiving any patent fee discount. In order to qualify for small entity status, and in order to meet the small entity requirement for micro entity status, there can be no party holding rights or obligated rights in the application that does not qualify as a small entity. See MPEP § 509.02 for a discussion of the requirements for small entity status.

B.    Section 1.29(d)(2) Requirement

Under 37 CFR 1.29(d)(2)(i)  the applicant must certify that the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education. Because only a person can have an "employer," the applicant certifying under 37 CFR 1.29(d)(2)(i)  must be a person or persons, which in most cases, means the inventor(s).

Under 37 CFR 1.29(d)(2)(ii)  the applicant must certify that the applicant has assigned, granted, or conveyed a license or other ownership interest in the subject application (or is obligated to do so) to such an institution of higher education. An attempt to obtain micro entity status by merely seeking to transfer a de minimus interest to an institution of higher education could be considered a sham transaction. Although the Office considers it highly unlikely that institutions of higher education would be party to such transactions, the Office plans to closely monitor the percentage of applicants claiming micro entity status under 35 U.S.C. 123(d)  to ensure that applicants are not engaging in such transactions in order to obtain micro entity status.

II.    MEANING OF "INSTITUTION OF HIGHER EDUCATION"

Section 101(a) of the Higher Education Act of 1965 defines what is meant by "institution of higher education" in the context of 37 CFR 1.29(d). See 20 U.S.C. 1001. Section 101(a) of the Higher Education Act states that the term "institution of higher education" means:

an educational institution in any State that—

  • 1. admits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such a certificate, or persons who meet the requirements of section 1091(d)(3) of this title;
  • 2. is legally authorized within such State to provide a program of education beyond secondary education;
  • 3. provides an educational program for which the institution awards a bachelor’s degree or provides not less than a 2-year program that is acceptable for full credit toward such a degree, or awards a degree that is acceptable for admission to a graduate or professional degree program, subject to review and approval by the Secretary;
  • 4. is a public or other nonprofit institution; and
  • 5. is accredited by a nationally recognized accrediting agency or association, or if not so accredited, is an institution that has been granted pre-accreditation status by such an agency or association that has been recognized by the Secretary for the granting of pre-accreditation status, and the Secretary has determined that there is satisfactory assurance that the institution will meet the accreditation standards of such an agency or association within a reasonable time.’

Additionally, section 103 of the Higher Education Act of 1965 provides that the term "State" means the 50 States of the United States as well as "the Commonwealth of Puerto Rico, the District of Columbia, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Freely Associated States’’ and that the Freely Associated States means the ‘‘Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau.’’ See 20 U.S.C. 1003.

Based upon these definitions, public or non-profit institutions located in one of the 50 States or U.S. territories offering certain undergraduate educational programs credited toward a bachelor’s degree or educational programs awarding "a degree that is acceptable for admission to a graduate or professional degree program" are eligible as an "institution of higher education" for purposes of establishing micro entity status under 37 CFR 1.29(d). Except for universities or other institutions of higher education located outside the United States, any university or other U.S. institution of higher education that qualifies for small entity status by virtue of being a nonprofit organization under 37 CFR 1.27(a)(3)  meets the criteria of an "institution of higher education" for micro entity status purposes.

An institution such as a non-profit research foundation, technology transfer organization, or Federal Government research laboratory does not qualify as an "institution of higher education" under the definition of "institution of higher education" set forth in the Higher Education Act of 1965 for purposes of establishing micro entity status.

A.    Universities and Colleges that Do Not Qualify as Institutions of Higher Education

One of the requirements for an "institution of higher education" under section 101(a) of the Higher Education Act of 1965 is that the institution be non-profit. Therefore, for-profit universities and colleges do not qualify as an "institution of higher education" for purposes of establishing micro entity status. As previously stated, foreign universities do not qualify as an "institution of higher education" for purposes of establishing micro entity status. A foreign university may offer an on-line educational program in the United States, however, on-line classes offered in the United States would not qualify the foreign university as an "institution of higher education" for purposes of establishing micro entity status. That’s because the university must be located "in any State" in the context of what "in any State" meant in 1965 – the year of the Higher Education Act of 1965. In addition, institutions that only grant graduate degrees do not qualify as an "institution of higher education" for purposes of establishing micro entity status because section 101(a) of the Higher Education Act of 1965 is limited to an institution that "provides an educational program for which the institution awards a bachelor’s degree or provides not less than a 2-year program that is acceptable for full credit toward such a degree, or awards a degree that is acceptable for admission to a graduate or professional degree program…"

B.    The University Cannot be the Micro Entity Applicant

Although the 37 CFR 1.29(d)  basis for qualifying for micro entity status is referred to as the "institution of higher education" basis, it is not the institution of higher education that can qualify for micro entity status, but rather inventors who are employees of an institution of higher education (see 37 CFR 1.29(d)(2)(i) ) or inventors or applicants who have conveyed ownership rights to an institution of higher education (see 37 CFR 1.29(d)(2)(ii) ). The institution (university) logically cannot make the certifications required under 37 CFR 1.29(d)(2)(i)  and (d)(2)(ii)  (that the employer from which the university obtains the majority of its income is an institution of higher education as defined by section 101(a) of the Higher Education Act of 1965, or that the university itself has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular application).

C.    CERTIFICATION FORM – INSTITUTION OF HIGHER EDUCATION BASIS

The Office’s form PTO/SB/15B contains the certifications under 37 CFR 1.29(d)  that are required to establish micro entity status on the institution of higher education basis. There are 2 signature blocks reflecting that in addition to the small entity requirement under 37 CFR 1.29(d)(1), there are two alternative requirements under 37 CFR 1.29(d)(2). The first signature block is for certifying under 37 CFR 1.29(d)(2)(i)  that the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education. The second signature block is for certifying under 37 CFR 1.29(d)(2)(ii)  that the applicant has assigned, granted, or conveyed a license or other ownership interest in the subject application (or is obligated to do so) to such an institution of higher education.

Certification of Micro Entity Status (Higher Education Basis)
Privacy Act Statement

509.04(c)    Parties Who Can Sign the Micro Entity Certification [R-11.2013]

A certification of micro entity status, on either the gross income basis or the institution of higher education basis, can be signed only by an authorized party as set forth in 37 CFR 1.33(b), which includes:

  • (1) A patent practitioner of record;
  • (2) A patent practitioner not of record who acts in a representative capacity under the provisions of 37 CFR 1.34; or
  • (3) The applicant (37 CFR 1.42 ). Unless otherwise specified, all papers submitted on behalf of a juristic entity must be signed by a patent practitioner.

For joint inventor applicants, each joint inventor should sign a separate copy of the relevant micro entity certification form. However, if one joint inventor is appointed to prosecute the application on behalf of all the other joint inventors, then only that one joint inventor need sign the micro entity certification form. See USPTO form PTO/AIA/81, titled "Power Of Attorney To One Or More Of The Joint Inventors And Change Of Correspondence Address", available on the USPTO forms Web page at www.uspto.gov/patent/patent-forms.

Additionally, if any applicant is an assignee or other party under 37 CFR 1.46, and the assignee or other party is a corporation or organization rather than a person, a registered practitioner must sign the certification of micro entity status. An officer of the assignee corporation, for example, is not authorized to sign a certification of micro entity status.

509.04(d)    Continued Obligation to Determine Micro Entity Qualification [R-11.2013]

37 C.F.R. 1.29  Micro entity status.

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  • (g) A certification of entitlement to micro entity status need only be filed once in an application or patent. Micro entity status, once established, remains in effect until changed pursuant to paragraph (i) of this section. However, a fee may be paid in the micro entity amount only if status as a micro entity as defined in paragraph (a) or (d) of this section is appropriate on the date the fee is being paid. Where an assignment of rights or an obligation to assign rights to other parties who are micro entities occurs subsequent to the filing of a certification of entitlement to micro entity status, a second certification of entitlement to micro entity status is not required.
  • (h) Prior to submitting a certification of entitlement to micro entity status in an application, including a related, continuing, or reissue application, a determination of such entitlement should be made pursuant to the requirements of this section. It should be determined that each applicant qualifies for micro entity status under paragraph (a) or (d) of this section, and that any other party holding rights in the invention qualifies for small entity status under § 1.27. The Office will generally not question certification of entitlement to micro entity status that is made in accordance with the requirements of this section.

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An applicant is not required to provide a certification of micro entity status with each fee payment once micro entity status has been established by filing a certification in an application. While an applicant is not required to provide such a certification with each fee payment, the applicant must still be entitled to micro entity status to pay a fee in the micro entity amount at the time of all payments of fees in the micro entity amount. Thus it must be determined whether the requirements for micro entity status exist at the time each fee payment is made. If any requirement for micro entity status is no longer met, then the applicant must notify the Office of loss of micro entity status and pay the required fee in the small entity or undiscounted amount, as appropriate.

For micro entity status on the gross income basis under 37 CFR 1.29(a), the applicant must determine that the applicant and each inventor or joint inventor still meet the applicable conditions of 37 CFR 1.29(a)  to claim micro entity status. For example, the applicant must determine that neither the applicant nor inventor nor joint inventor has had a change in gross income that exceeds the "maximum qualifying gross income" as reported on the USPTO website (a new determination must be made each year because gross income may change from year to year, and micro entity status is based upon gross income in the calendar year preceding the calendar year in which the applicable fee is being paid). In addition, the applicant must determine that neither the applicant nor inventor nor joint inventor has made, or is obligated by contract or law to make, an assignment, grant, or conveyance to an entity exceeding the "maximum qualifying gross income," and that no new inventor or joint inventor has been named in the application who does not meet the conditions specified in 37 CFR 1.29(a). See MPEP § 509.04(a), subsection I, for additional information.

For micro entity status under 35 U.S.C. 123(d), the applicant must determine that each applicant still complies with 37 CFR 1.29(d)  (e.g., still obtains the majority of his or her income from an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)). 37 CFR 1.29(g)  also provides that where an assignment of rights or an obligation to assign rights to other parties who are micro entities occurs subsequent to the filing of a certification of entitlement to micro entity status, a second certification of entitlement to micro entity status is not required.

509.04(e)    Notification of Loss of Entitlement to Micro Entity Status [R-11.2013]

37 C.F.R. 1.29  Micro entity status.

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  • (i) Notification of a loss of entitlement to micro entity status must be filed in the application or patent prior to paying, or at the time of paying, any fee after the date on which status as a micro entity as defined in paragraph (a) or (d) of this section is no longer appropriate. The notification that micro entity status is no longer appropriate must be signed by a party identified in § 1.33(b). Payment of a fee in other than the micro entity amount is not sufficient notification that micro entity status is no longer appropriate. A notification that micro entity status is no longer appropriate will not be treated as a notification that small entity status is also no longer appropriate unless it also contains a notification of loss of entitlement to small entity status under § 1.27(f)(2) [§ 1.27(g)(2) ]. Once a notification of a loss of entitlement to micro entity status is filed in the application or patent, a new certification of entitlement to micro entity status is required to again obtain micro entity status.

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37 CFR 1.29(i)  contains provisions for a micro entity that correspond to the provisions of 37 CFR 1.27(g)(2)  for a small entity. 37 CFR 1.29(i)  provides that notification of a loss of entitlement to micro entity status must be filed in the application or patent prior to paying, or at the time of paying, any fee after the date on which status as a micro entity as defined in 37 CFR 1.29(a)  or 1.29(d)  is no longer appropriate. The notification that micro entity status is no longer appropriate must be signed by a party identified in 37 CFR 1.33(b). Payment of a fee in other than the micro entity amount is not sufficient notification that micro entity status is no longer appropriate. An applicant can make a simple statement that the applicant is no longer eligible for micro entity status without identifying the particular reason(s) for loss of entitlement to micro entity status.

37 CFR 1.29(i)  further provides that a notification that micro entity status is no longer appropriate will not be treated as a notification that small entity status is also no longer appropriate unless it also provides notification of loss of entitlement to small entity status under 37 CFR 1.27(g)(2). Thus, an applicant or patentee who files a notification that micro entity status is no longer appropriate will be treated as a small entity by default. For applications under micro entity status, regular unreduced fee status will result from: (1) a notification of loss of entitlement to micro entity status accompanied by regular unreduced fees or some other indication of loss of entitlement to small entity status; or (2) a notification of loss of entitlement to small entity status by itself.

37 CFR 1.29(i)  finally provides that once a notification of a loss of entitlement to micro entity status is filed in the application or patent, a new certification of entitlement to micro entity status is required to again obtain micro entity status. It is strongly recommended that the following document descriptions in EFS-Web be used as appropriate:

  • • Notification of loss of entitlement to small entity status
  • • Notification of loss of entitlement to micro entity status

509.04(f)    Correcting Errors in Micro Entity Status [R-07.2015]

37 C.F.R. 1.29  Micro entity status.

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  • (k) If status as a micro entity is established in good faith in an application or patent, and fees as a micro entity are paid in good faith in the application or patent, and it is later discovered that such micro entity status either was established in error, or that the Office was not notified of a loss of entitlement to micro entity status as required by paragraph (i) of this section through error, the error will be excused upon compliance with the separate submission and itemization requirements of paragraph (k)(1) of this section and the deficiency payment requirement of paragraph (k)(2) of this section.
    • (l) Any paper submitted under this paragraph must be limited to the deficiency payment (all fees paid in error) required for a single application or patent. Where more than one application or patent is involved, separate submissions of deficiency payments are required for each application or patent (see § 1.4(b) ). The paper must contain an itemization of the total deficiency payment for the single application or patent and include the following information:
      • (i) Each particular type of fee that was erroneously paid as a micro entity, (e.g., basic statutory filing fee, two-month extension of time fee) along with the current fee amount for a small or nonsmall entity, as applicable;
      • (ii) The micro entity fee actually paid, and the date on which it was paid;
      • (iii) The deficiency owed amount (for each fee erroneously paid); and
      • (iv) The total deficiency payment owed, which is the sum or total of the individual deficiency owed amounts as set forth in paragraph (k)(2) of this section.
    • (2) The deficiency owed, resulting from the previous erroneous payment of micro entity fees, must be paid. The deficiency owed for each previous fee erroneously paid as a micro entity is the difference between the current fee amount for a small entity or non-small entity, as applicable, on the date the deficiency is paid in full and the amount of the previous erroneous micro entity fee payment. The total deficiency payment owed is the sum of the individual deficiency owed amounts for each fee amount previously and erroneously paid as a micro entity.
    • (3) If the requirements of paragraphs (k)(1) and (2) of this section are not complied with, such failure will either be treated at the option of the Office as an authorization for the Office to process the deficiency payment and charge the processing fee set forth in § 1.17(i), or result in a requirement for compliance within a one-month time period that is not extendable under § 1.136(a)  to avoid the return of the fee deficiency payment.
    • (4) Any deficiency payment (based on a previous erroneous payment of a micro entity fee) submitted under this paragraph will be treated as a notification of a loss of entitlement to micro entity status under paragraph (i) of this section.

37 CFR 1.29(k)  contains provisions for a micro entity that correspond to the provisions of 37 CFR 1.28(c)  for a small entity. 37 CFR 1.28(c)  permits an applicant or patentee to correct the erroneous payment of a patent fee in the small entity amount if status as a small entity was established in good faith, and fees as a small entity were paid in good faith. See DH Tech. Inc. v. Synergystex Int’l Inc., 154 F.3d 1333 (Fed. Cir. 1998). 37 CFR 1.29(k)  provides that if: (i) an applicant or patentee establishes micro entity status in an application or patent in good faith; (ii) the applicant or patentee pays fees as a micro entity in the application or patent in good faith; and (iii) applicant or patentee later discovers that such micro entity status either was established in error, or that the Office was not notified of a loss of entitlement to micro entity status as required by 37 CFR 1.29(i)  through error, the error will be excused upon compliance with the separate submission and itemization requirements of 37 CFR 1.29(k)(1)  and the deficiency payment requirement of 37 CFR 1.29(k)(2).

37 CFR 1.29(k)(1)  provides that any paper submitted under 37 CFR 1.29(k)  must be limited to the deficiency payment (all fees paid in error) required for a single application or patent. 37 CFR 1.29(k)(1)  provides that where more than one application or patent is involved, separate submissions of deficiency payments (e.g., checks) and itemizations are required for each application or patent. 37 CFR 1.29(k)(1)  also provides that the paper must contain an itemization of the total deficiency payment and include the following information: (1) each particular type of fee that was erroneously paid as a micro entity, (e.g., basic statutory filing fee, two-month extension of time fee) along with the current fee amount for a small or non-small entity; (2) the micro entity fee actually paid, and the date on which it was paid; (3) the deficiency owed amount (for each fee erroneously paid); and (4) the total deficiency payment owed, which is the sum or total of the individual deficiency owed amounts as set forth in 37 CFR 1.29(k)(2).

37 CFR 1.29(k)(2)  provides that the deficiency owed, resulting from the previous erroneous payment of micro entity fees, must be paid. The deficiency owed for each previous fee erroneously paid as a micro entity is the difference between the current fee amount for a small entity or non-small entity, as applicable, on the date the deficiency is paid in full and the amount of the previous erroneous micro entity fee payment. The total deficiency payment owed is the sum of the individual deficiency owed amounts for each fee amount previously and erroneously paid as a micro entity. This corresponds to the procedure for fee deficiency payments based upon the previous erroneous payment of patent fees in the small entity amount. See 37 CFR 1.28(c)(2)(i)  ("[t]he deficiency owed for each previous fee erroneously paid as a small entity is the difference between the current full fee amount (for non-small entity) on the date the deficiency is paid in full and the amount of the previous erroneous (small entity) fee payment").

37 CFR 1.29(k)(3)  provides that if the requirements of 37 CFR 1.29(k)(1)  and (k)(2)  are not complied with, such failure will either be treated at the option of the Office as an authorization for the Office to process the deficiency payment and charge the processing fee set forth in 37 CFR 1.17(i), or result in a requirement for compliance within a one-month nonextendable time period under 37 CFR 1.136(a)  to avoid the return of the fee deficiency payment.

37 CFR 1.29(k)(4)  provides that any deficiency payment (based on a previous erroneous payment of a micro entity fee) submitted under 37 CFR 1.29(k)  will be treated as a notification of a loss of entitlement to micro entity status under 37 CFR 1.29(i).