A Brief Discussion on Small Entity Fee Reduction for Patent Application in Canada

A Brief Discussion on Small Entity Fee Reduction for Patent Application in Canada

In Canada, patent applicants may enjoy small entity fee reductions under the Canadian Patent Act in the following two circumstances:

• In the case of a regular non-PCT application, the Canadian filing date, the date on which the applicant qualified as a small entity at the time of the application; or
• In the case of a PCT international application, the date on which the PCT international application enters the Canadian national phase;

At the same time, the applicant needs to provide a statement to prove that it meets the small entity status stipulated in the Canadian Patent Act. According to the Canadian Patent Act, "small entity" is defined as:

• (a) with respect to a patent application, other than a PCT national phase application or divisional application, where, as of the applicant’s filing date, an entity has fewer than 100 employees or is a university, except
  • (i) an entity that is directly or indirectly controlled by an entity other than the University and has 100 or more employees, or
  • (ii) an entity that has assigned, licensed, or is under an obligation to assign or license any right or interest in the claimed invention to an entity other than a university with 100 or more employees;
• (b) in the case of a PCT international application, the applicant on the date of national phase entry of that application was an employee of an entity, other than an entity referred to in subparagraph (a)(i), which had fewer than 100 members on that date, or a university; or

Subsequent patent applicants who meet the small entity standards do not have the right to continue to enjoy small entity status unless the original applicant also obtained small entity status when filing the application (non-PCT cases) or entering the country (PCT cases).

Therefore, under the above provisions, if a patent or patent application is transferred from a large entity to a small entity, the transferred patent owner must continue to pay the standard large entity fees throughout the life of the patent.

For patent applications paid after June 2, 2007, if the fees of a small entity are incorrectly paid "in good faith", they can submit a request to CIPO to correct the fees in a timely manner after discovering the incorrect payment information. However, fees paid before June 2, 2007 cannot be corrected.

Therefore, we recommend that you avoid applying for patents in Canada as a small entity. Because the applicable small entity standards are vague and subject to court review under current legal provisions. The following situations may be rejected by CIPO as a small entity:

• The applicant's number of employees includes part-time employees, employees of associated companies or employees on leave; or
• Whether the grant of a general security agreement will be considered a “contingent obligation” or an actual “assignment of obligations” right, depending on the specific language of the agreement; or
• In the case of a software company, the sale of a software license to a large commercial entity would be considered to constitute a transfer of rights in the invention.

In addition, CIPO does not have a clear definition of what constitutes a “good faith” but incorrectly paid small entity fee, or what constitutes “undue delay,” and therefore an applicant’s request to correct the small entity fee may be denied.