Just before the New Year, President Joe Biden signed into law the Unleashing American Innovators Act of 2022 with the goal of addressing disparities in the U.S. patent system and expanding access to patents among underrepresented communities.

The Act modifies the responsibilities of the USPTO to maintain and establish satellite offices, requires the USPTO to set up community outreach offices, updates the USPTO patent pro bono programs, demands the USPTO establish a pilot program to assist first-time prospective patent applicants in assessing the viability of a potential patent, and reduces fees for small and micro entities.

With respect to the fee reductions for small and micro entities, small entities are now entitled to a 60% discount (previously 50%) and micro entities are entitled to an 80% discount (previously 75%). However, these increased discounts are not without risk, as the Act includes language modifying when penalties are imposed on entities who wrongly classify themselves as small or micro entities.

Previously it was the case that, “[a]ny attempt to fraudulently establish status as a small entity, or pay fees as a small entity, shall be considered as a fraud practiced or attempted on the office.” This meant that applicants attempting to claim small entity status or pay fees as a small entity “improperly, and with intent to deceive” were practicing fraud. On the flip side, applicants who inadvertently classified themselves as a small entity in good faith were permitted to correct such an error by informing the USPTO of the mistake and paying whatever fees would have been due had the entity been correctly classified in the first instance.

The new language makes no such allowance for mistaken classifications. This is because the Unleashing American Innovators Act added a new section to 35 U.S.C. § 41 stating that “[i]n addition to any other penalty available under law, an entity that is found to have falsely asserted entitlement to a fee reduction under this section shall be subject to a fine, to be determined by the Director, the amount of which shall not be less than 3 times the amount that the entity failed to pay as a result of the false assertion, whether the Director discovers the false assertion before or after the date on which a patent has been issued.”

The distinction between “fraudulently” and “falsely” is significant. The new language penalizes any false assertion of entitlement to a small or micro entity reduced fee, without regard to whether the assertion was inadvertent or fraudulent, and increases the penalty for such an assertion to at least three times the amount the entity would have been required to pay had they been properly classified in the first instance. No more are the days where an entity could merely inform the USPTO of an error and pay the difference due, as now the amount due to the USPTO under similar circumstances will be trebled, at a minimum. The increased costs of correcting entity status places a new burden on applicants, attorneys, and patent agents to investigate an entity’s status prior to making filings.

These penalties should be on the radar of any applicant, attorney, and patent agent claiming small or micro entity status, as entity status is generally a matter of self-certification. The USPTO sets out the standards for when an entity qualifies as a small or micro entity, and it is the applicant’s responsibility to classify themselves accordingly.

Jake Goldsmith is an associate attorney with the law firm of Heslin, Rothenberg, Farley & Mesiti. His experience includes patent prosecution, copyrights, technology transfer and startup counseling.