Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 67109-67112 [E6-19573]

Download as PDF Federal Register / Vol. 71, No. 223 / Monday, November 20, 2006 / Notices by facsimile to (571) 273–7735, marked to the attention of Christina T. Donnell. SUPPLEMENTARY INFORMATION: The USPTO is in this notice establishing the SBA business size standard for the purpose of paying reduced patent fees as the size standard for conducting an analysis or making a certification under the Regulatory Flexibility Act for patentrelated regulations. The USPTO is not Special Accommodations changing or proposing to change the The meeting is physically accessible definition of small entity for the to people with disabilities. Requests for purpose of paying reduced patent fees. sign language interpretation or other The patent statute provides that auxiliary aids should be directed to Ms. ‘‘[f]ees charged under [35 U.S.C. 41](a), Carolyn Porter at (503) 820–2280 at least (b) and (d)(1) shall be reduced by 50 5 days prior to the meeting date. percent with respect to their application to any small business concern as Authority: 16 U.S.C. 1801 et seq. defined under section 3 of the Small Dated: November 15, 2006. Business Act, and to any independent Tracey L. Thompson, inventor or nonprofit organization as Acting Director, Office of Sustainable defined in regulations issued by the Fisheries, National Marine Fisheries Service. Director.’’ 35 U.S.C. 41(h)(1). The SBA [FR Doc. E6–19524 Filed 11–17–06; 8:45 am] defines a small business concern for the BILLING CODE 3510–22–S purpose of paying reduced patent fees as one: ‘‘(a) Whose number of employees, including affiliates, does not DEPARTMENT OF COMMERCE exceed 500 persons; and (b) Which has not assigned, granted, conveyed, or Patent and Trademark Office licensed (and is under no obligation to [Docket No.: PTO–P–2006–0034] do so) any rights in the invention to any person who made it and could not be Business Size Standard for Purposes classified as an independent inventor, of United States Patent and Trademark or to any concern which would not Office Regulatory Flexibility Analysis qualify as a non-profit organization or a for Patent-Related Regulations small business concern under this section.’’ 13 CFR 121.802. AGENCY: United States Patent and The USPTO uses the SBA business Trademark Office, Commerce. size standard for the purpose of paying ACTION: Notice. reduced patent fees in 13 CFR 121.802 SUMMARY: The Regulatory Flexibility Act as the size standard when conducting an analysis or making a certification under permits an agency head to establish, for the Regulatory Flexibility Act for patentpurposes of Regulatory Flexibility Act related regulations. See e.g., Changes To analysis and certification, one or more definitions of ‘‘small business concern’’ Support Implementation of the United States Patent and Trademark Office 21st that are appropriate to the activities of Century Strategic Plan, 69 FR 56481, the agency. Pursuant to this authority, the United States Patent and Trademark 56530 (Sept. 21, 2004) (discussion Office (USPTO) is establishing the Small indicating that small entities for Business Administration (SBA) business purposes of the Regulatory Flexibility Act are considered a subset of the small size standard for the purpose of paying reduced patent fees as the size standard entities for purposes of paying reduced patent fees). The USPTO has no for conducting an analysis or making a business need (other than to conduct an certification under the Regulatory analysis or make a certification under Flexibility Act for patent-related the Regulatory Flexibility Act) to collect regulations. information from patentees and patent DATES: Effective Date: November 20, applicants concerning whether they are 2006. a small business concern using the business size standards set forth in 13 FOR FURTHER INFORMATION CONTACT: CFR 121.201. Thus, the USPTO uses the Christina T. Donnell, Senior Petitions SBA business size standard set forth in Attorney, Office of Petitions, Office of 13 CFR 121.802 as its size standard the Deputy Commissioner for Patent when conducting an analysis or making Examination Policy, by telephone at a certification under the Regulatory (571) 272–3211, by mail addressed to: Flexibility Act to avoid the need to Mail Stop Comments—Patents, gather data from patentees and patent Commissioner for Patents, P.O. Box applicants as to whether they are a 1450, Alexandria, VA, 22313–1450, or sroberts on PROD1PC70 with NOTICES those issues specifically listed in this document and any issues arising after publication of this document that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency. VerDate Aug<31>2005 17:10 Nov 17, 2006 Jkt 211001 PO 00000 Frm 00017 Fmt 4703 Sfmt 4703 67109 small business concern as described in 13 CFR 121.201. Comments and Responses: Pursuant to the Regulatory Flexibility Act, the USPTO consulted with SBA Advocacy and published a request for comments on the establishment of a business size standard (the business size standard set forth in 13 CFR 121.802 for the purpose of paying reduced patent fees) for the purpose of USPTO Regulatory Flexibility Analysis for patent-related regulations. See Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR 38388 (July 6, 2006), 1309 Off. Gaz. Pat. Office 37 (Aug. 1, 2006) (request for comments). SBA Advocacy convened a regulatory roundtable to discuss the USPTO’s proposed business size standard (attended by USPTO representatives) on July 19, 2006, and the USPTO received seven written comments (from SBA Advocacy, the Professional Inventors Alliance, and five individuals) in response to the request for comments. The comments and responses to the comments follow: Comment 1: SBA Advocacy commented, in pertinent part, that: On July 19, 2006, Advocacy convened a regulatory roundtable to discuss the USPTO’s proposed size standard. Participants at the roundtable included industry personnel representing the interests of small businesses and independent inventors, USPTO personnel, representatives from the SBA Office of Size Standards, and Advocacy. During the roundtable, small entity representatives expressed reservations about the proposed size standard. They indicated that the standard would exclude a significant number of small entities. Further, they were concerned that the standard would not provide an accurate estimate of the number of small entities affected by the USPTO’s regulations. Currently, patent applicants must claim small entity status by checking a box on their patent application. However, small entity representatives informed Advocacy that entities often choose not to claim small entity status for a variety of reasons. USPTO data systems track the number of patent applications that claim small entity status. The agency then uses the numbers to estimate the number of small entities affected by its rulemakings. The agency does not collect data on or count the specific entities that are submitting a patent application. As a result, the data collected by the USPTO does not provide an accurate estimate of the number of small entities affected by the agency’s rules. Since the proposed size standard only tabulates the number of applicants claiming small entity status, and not actual small entities, Advocacy does not believe that it is the appropriate size standard for [Regulatory Flexibility Act] purposes. Advocacy appreciates the USPTO’s challenge in identifying an appropriate size E:\FR\FM\20NON1.SGM 20NON1 67110 Federal Register / Vol. 71, No. 223 / Monday, November 20, 2006 / Notices sroberts on PROD1PC70 with NOTICES standard for [Regulatory Flexibility Act] purposes. We agree with the agency’s decision to request public comment on the proposed size standard. However, we urge the USPTO not to adopt a size standard that would adversely affect small entities. The proposed standard will not facilitate the USPTO’s compliance with the [Regulatory Flexibility Act] since it will not adequately estimate the small entities affected by the agency’s regulations. Advocacy suggests that the agency continue to work with our office to identify a more appropriate standard after reviewing public comments on the proposal. Another individual comment also objected to the use of the SBA business size standard in 13 CFR 121.802 as the size standard when conducting an analysis or making a certification under the Regulatory Flexibility Act for patentrelated regulations. The comment asserted that it was not unusual for a small business concern to file as a large entity to avoid the possibility of the patent being subsequently invalidated because of an improper assertion of small entity status. Additionally, the comment asserted that the number of small business concerns affected by the USPTO’s rule making is much greater than the number of small entity applicants assessed by the USPTO. Alternatively, several individual comments supported the USPTO’s definition of small business concern for Regulatory Flexibility Act purposes. Response: The USPTO does not consider the arguments that it significantly undercounts the number of small entities affected by its rule makings to be persuasive. On July 19, 2006, representatives from the USPTO attended SBA Advocacy’s roundtable and met with representatives from the SBA, SBA Advocacy, the Intellectual Property Owners Association, the Association for Competitive Technology, the American Intellectual Property Law Association, and the United Inventors Association. The USPTO received anecdotal feedback at the SBA Advocacy roundtable that the USPTO significantly undercounts the number of small entities affected by its rule makings when the USPTO relies upon the small entity data as contained in the USPTO’s Patent Application Locating and Monitoring (PALM) system. The USPTO, however, has not been provided with any data or other specific information to substantiate this anecdotal information. In addition, none of the groups whose representatives were present at the SBA Advocacy roundtable (except for SBA Advocacy) submitted a comment in response to the USPTO’s request for comments on the USPTO’s definition of small business concern for Regulatory Flexibility Act purposes. In support of the contention VerDate Aug<31>2005 17:10 Nov 17, 2006 Jkt 211001 that the small entity data in PALM significantly undercounts the number of small entities, the representatives at the SBA Advocacy roundtable and the comments asserted that small entities routinely decline to claim small entity status because: (1) Applicants must claim small entity status by checking a box on a particular USPTO form; (2) small entities consider the fifty percent reduction in patent fees negligible relative to the overall cost of obtaining a patent; and (3) there are negative legal consequences if small entity status is claimed or is claimed improperly. The small entity data contained in the PALM system is collected from patent applicants on the basis of whether the applicant claims small entity status for the purpose of paying patent fees. Section 4502(b) of the American Inventors Protection Act of 1999 (AIPA) charged the Government Accountability Office (GAO) with conducting a study of the impact of the AIPA’s eighteenmonth publication provisions, which included a study of any correlation of the status of the applicant (small entity or non-small entity) and the eighteenmonth publication of applications. See Public Law 106–113, 113 Stat. 1501, 1501A–552–53 (1999). The GAO analyzed the data in the USPTO’s PALM system and deemed it sufficiently reliable for purposes of conducting the study mandated by the AIPA. See Information about the Publication Provisions of the American Inventors Protection Act, GAO–04–603 at 14–15 (2004). The USPTO representatives indicated at the SBA Advocacy roundtable that to collect small entity data with the reliability being urged by SBA Advocacy (or of greater reliability than is currently contained in the USPTO’s PALM system) would compel the USPTO to require all patent applicants to affirmatively state whether they are or are not a small entity. No party present at the SBA Advocacy roundtable advocated the adoption of such a requirement. In addition, the SBA Advocacy comment does not suggest any viable alternative to the USPTO’s reliance upon the data on small entities contained in the USPTO’s PALM system for Regulatory Flexibility Act analysis or certification purposes. Therefore, the USPTO considers the data on small entities in the USPTO’s PALM system to be sufficiently reliable (especially in light of the absence of any viable preferable alternatives) for use in conducting an analysis or making a certification under the Regulatory Flexibility Act for patent-related regulations. PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 The statement that patent applicants must claim small entity status by checking a box on a particular USPTO form is not correct. The USPTO revised 37 CFR 1.27 in September of 2000 to provide that patent applicants may claim small entity status by: (1) Providing a written assertion of entitlement to small entity status (37 CFR 1.27(c)(1)); or (2) paying the basic filing or basic national fee in the small entity amount (37 CFR 1.27(c)(3)). See Changes to Implement the Patent Business Goals, 65 FR 64603, 54609–15, 54659–61 (Sept. 8, 2000) (final rule). The USPTO includes a box next to a written assertion of entitlement to small entity status on its application transmittal form, which patent applicants may use to claim small entity status when filing a patent application (37 CFR 1.27(c)(1)). The USPTO, however, does not require applicants to check this box on the application transmittal form (or even use the application transmittal form) to claim small entity status. Therefore, the USPTO does not believe that small entities routinely decline to claim small entity status due to the USPTO’s requirements for establishing small entity status. The argument that small entities consider the fifty percent reduction in patent fees to be negligible is likewise unpersuasive. As introduced and reported out of the House Committee on the Judiciary, the United States Patent and Trademark Fee Modernization Act of 2003 did not contain a small entity reduction for the patent search fee. See The United States Patent and Trademark Fee Modernization Act of 2003, H.R. 1561, 109th Cong., § 2 (2003). During the floor debate on the United States Patent and Trademark Fee Modernization Act, the following amendments were necessary to address small entity concerns and secure passage of this legislation by the House of Representatives: (1) A fifty percent reduction in the patent search fee for small entities; (2) a seventy-five percent reduction in the patent filing fee for small entities who file electronically; and (3) a study of the effects of patent fees on the ability of small entities to file patent applications. See United States Patent and Trademark Fee Modernization Act of 2004, 150 Cong. Rec. H793, H803 (daily ed. Mar. 3, 2004) (floor debate and passage of United States Patent and Trademark Fee Modernization Act of 2004 by the House of Representatives). The USPTO does not believe that small entities would have sought these changes to the United States Patent and Trademark Fee E:\FR\FM\20NON1.SGM 20NON1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 71, No. 223 / Monday, November 20, 2006 / Notices Modernization Act of 2004 if a substantial number of small entities considered the fifty percent reduction in patent fees to be negligible. The argument concerning negative legal consequences if small entity status is claimed or is claimed improperly is similarly not persuasive. The rules of practice provide that: ‘‘[i]f status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by § 1.27(g)(2), the error will be excused upon compliance with the [requirements of 37 CFR 1.28(c)].’’ 37 CFR 1.28(c). In the mid-1990s, there were District Court decisions in which a patentee faced negative legal consequences for erroneously or improperly claiming small entity status. See Haden Schweitzer Corp. v. Arthur B. Myr Industries, Inc., 901 F. Supp. 1235, 36 U.S.P.Q.2d 1020 (E.D. Mich. 1995) (failure to pay maintenance fee in the correct amount results in intervening rights under 35 U.S.C. 41(c)(2)); and (2) DH Technology, Inc. v. Synergstex International, Inc., 937 F. Supp. 902, 40 U.S.P.Q.2d 1754 (N.D. Cal. 1996) (failure to timely pay issue fee in the correct amount results in patent lapse under 35 U.S.C. 151); but see Jewish Hospital of St. Louis v. Idexx Laboratories, 951 F. Supp 1, 42 U.S.P.Q.2d 1720 (D. Me. 1996) (correction of improper small entity fee payment in compliance with 37 CFR 1.28 does not result in patent lapse). In light of the uncertainty that existed in the mid-1990s concerning the consequences of erroneously claiming small entity status, the Office advised applicants and patentees at that time that they could avoid this uncertainty by not claiming small entity status unless it is absolutely certain that the applicant or patentee is entitled to small entity status (i.e., resolving any doubt, uncertainty, or lack of information in favor of payment of the full fee). See Changes to Patent Practice and Procedure, 62 FR 53131, 53135 (Oct. 10, 1997); see also DH Technology, 937 F. Supp. at 910, 40 U.S.P.Q.2d at 1761 (‘‘where there is the slightest doubt about an applicant’s entitlement to claim small entity status, the applicant would be foolish not to pay the full * * * fee’’). The U.S. Court of Appeals for the Federal Circuit (Federal Circuit), however, reversed the District Court’s decision in DH Technology and held that an applicant may correct an VerDate Aug<31>2005 17:10 Nov 17, 2006 Jkt 211001 erroneous payment of patent fees in the small entity amount under 37 CFR 1.28 without penalty, such as patent lapse, as long as small entity status was established in good faith and the small entity fees were paid in good faith. See DH Tech. v. Synergystex Int’l, 154 F.3d 1333, 1343, 47 U.S.P.Q.2d 1865, 1872 (Fed. Cir. 1998). Thus, subsequent to the Federal Circuit’s decision in DH Technology, the only patent applicants or patentees who face negative legal consequences from claiming or erroneously claiming small entity status are those applicants who have no basis for making a good faith claim to small entity status. Therefore, the USPTO does not believe that a significant number of small entities currently decline to claim small entity status to avoid negative legal consequences (i.e., the patent being invalidated) due to the applicant claiming or erroneously claiming small entity status. Finally, no party to the SBA Advocacy roundtable or other comment suggested that the USPTO should use the business size standards set forth in 13 CFR 121.201 for purposes of conducting an analysis or making a certification under the Regulatory Flexibility Act for patent-related regulations. Comment 2: One comment requested clarification as to whether a license to a non-small entity that arises only impliedly negates small entity status for an applicant or patentee. The comment stated that the situation of an implied license to a non-small entity frequently occurs when the invention is embodied in software, and the software is massmarketed under a standard shrink-wrap license. The comment asserted that a shrink-wrap agreement typically grants a ‘‘license’’ without indicating the intellectual property rights for which the ‘‘license’’ is granted. The comment contended that frequently the licensee cannot use the software without using the patented invention and that the law often implies a license under these circumstances. Additionally, the comment asserted that the current definition of small business concern excludes any small entity that licensed the invention to a non-small entity; however, the definition does not limit the exclusion to only those small business concerns that explicitly licensed the invention. Therefore, the comment suggested that the USPTO adopt the following language: ‘‘(b) which has not assigned, granted, conveyed, or explicitly licensed (and is under no obligation to do so) any rights in the invention * * * .’’ Lastly, the comment averred that some practitioners do not claim small entity PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 67111 status for software-embodied inventions, even though the applicant or patentee is entitled to the benefit of small entity status, because the applicant or patentee is usually unaware if or when the mass-market software production is licensed by a non-small entity. Response: The scope of the term ‘‘license’’ in the context of entitlement to small entity status was previously discussed in the SBA rule making to define small entity for purposes of a reduction in patent fees for such a small entity. Specifically, the SBA responded as follows: Two comments raised questions about the intended scope of the term ‘‘license.’’ It was suggested that clarification is needed as to what is included within the scope of the term. One comment suggested that, ‘‘[a]t the very least, the record should reflect that the definition is not intended to reach implied licenses to use and resell patented articles purchased from a small business.’’ The comment is correct insofar as it suggests that such ‘‘implied licenses’’ are not intended to be included within the scope of the term. Likewise, an order by the applicant to a firm to build a proto-type machine or product for the applicant’s own use is not considered to constitute a license for purposes of the definition. Another suggestion was that the regulation be reworded to deny small business status where revenue above a certain dollar amount was received from licensing rights under the invention to a concern which could not qualify as a small entity. It was also suggested that the term ‘‘exclusive license of any of the rights in the invention’’ be used instead of the term ‘‘license.’’ The latter two suggestions have not been adopted. Adoption of these suggestions would cause the regulation to become more complicated, and does not appear necessary to aid small concerns in accord with the purposes of the legislation. In addition, it could substantially broaden the number of concerns which could qualify with a resulting excessive loss of revenue to the Patent and Trademark Office. It is not seen likely that the restriction on licensing would unduly or adversely affect the ability of the small business concern to participate in the patent system. Definition of Small Business for Paying Reduced Patent Fees Under Title 35, United States Code, 47 FR 43272 (Sept. 30, 1982) (final rule). The USPTO did not propose to change the definition of a small business concern for the purpose of paying reduced patent fees. Rather, the USPTO was inviting public comment on the establishment of the SBA business size standard in 13 CFR 121.802 as the size standard when conducting an analysis or making a certification under the Regulatory Flexibility Act for patent-related regulations. Therefore, the suggested change is not adopted. E:\FR\FM\20NON1.SGM 20NON1 67112 Federal Register / Vol. 71, No. 223 / Monday, November 20, 2006 / Notices sroberts on PROD1PC70 with NOTICES Comment 3: One comment suggested that part (b) of the SBA’s definition of a small business concern, specifying an entity ‘‘which has not assigned, granted, conveyed or licensed * * * any rights in the invention’’ to a large entity should be deleted from the definition as being inappropriate. The comment stated that a license or other agreement between a small entity and a large entity does not typically result in substantial income to the small entity. The comment further asserted that in most cases the small entity retains the financial responsibility to pay the patent prosecution and maintenance fees, without any additional income from the large entity. The comment contended that if the license or other agreement is later terminated, the termination agreement often allows the large entity to retain some rights without further payment. Additionally, the termination agreement may be so complex that the small entity may not be able to overcome a charge of inequitable conduct by a third party. Alternatively, one of the comments stated that the adopted size standard does not unfairly burden small entities because a large entity typically pays the cost of patent prosecution when a small entity licenses its technology to the large entity. Response: 13 CFR 121.802 is the substantive provision for determining whether an entity is a small business concern for purposes of paying reduced patent fees. The USPTO did not propose to change the definition of a small business concern for the purpose of paying reduced patent fees. Rather, the USPTO was inviting public comment on the establishment of the SBA business size standard in 13 CFR 121.802 as the size standard when conducting an analysis or making a certification under the Regulatory Flexibility Act for patentrelated regulations. Moreover, the suggestion was previously considered and rejected in the rule making to implement the reduction in patent fees for small entities. Specifically, a past comment suggested that 37 CFR 1.27 should be corrected to indicate that a small business concern would be entitled to pay reduced patent fees even though the small business concern may grant a nonexclusive or an exclusive license to a non-small entity. The USPTO responded as follows: Section 1.27 requires that the concern qualify as a small business concern as defined in § 1.9(d). Section 1.9(d) defines a small business concern by incorporating 13 CFR 121.3–18, which in turn defines a small business concern as one not exceeding a particular size ‘‘which has not assigned, VerDate Aug<31>2005 17:10 Nov 17, 2006 Jkt 211001 granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey or license, any rights in the invention to any person who could not be classified as an independent inventor if that person had made the invention, or to any concern which would not qualify as a small business concern or a nonprofit organization under this section.’’ The intent of both 13 CFR 121.3–18 and 37 CFR 1.9(d) and 1.27(c) is to limit the payment of reduced fees under section 41(a) and (b) of Title 35, United States Code, to those situations in which all of the rights in the invention are owned by small entities, i.e., independent inventors, small business concerns, or nonprofit organizations. To do otherwise would be clearly contrary to the intended purpose of the legislation which contains no indication that fees are to be reduced in circumstances where rights are owned by non-small entities. Adopting the suggestion might, for example, permit a non-small entity to transfer patent rights to a small business concern which would pay the reduced fees and grant an exclusive license to the non-small entity. Revision of Patent and Trademark Fees, 47 FR 43273 (Sept. 30, 1982) (final rule). Therefore, the suggested change is not adopted. Comment 4: One comment noted an error in the following text: ‘‘The SBA Advocacy, however, has questioned whether the USPTO’s size standard is under-inclusive because it excludes any business concern that has assigned, granted, conveyed, or licensed (and is under no obligation to do so).’’ The comment suggested the following correction: ‘‘The SBA Advocacy, however, has questioned whether the USPTO’s size standard is underinclusive because it excludes any business concern that has assigned, granted, conveyed, or licensed (or is under an obligation to do so).’’ Response: The USPTO notes that the text at issue should have read: ‘‘The SBA Advocacy, however, has questioned whether the USPTO’s size standard is under-inclusive because it excludes any business concern that has assigned, granted, conveyed, or licensed (or is under an obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under [13 CFR 1.802].’’ Establishment of a Definition of ‘‘Small Business Concern’’ for Purposes of the USPTO Conducting an Analysis or Making a Certification under the Regulatory Flexibility Act for PatentRelated Regulations: The Regulatory Flexibility Act permits an agency head to establish, for purposes of Regulatory Flexibility Act analysis and certification, one or more definitions of PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 ‘‘small business concern’’ that are appropriate to the activities of the agency, after consultation with the Office of Advocacy of the Small Business Administration and opportunity for public comment. See 5 U.S.C. 601(3) and 13 CFR 121.903(c). The USPTO consulted with SBA Advocacy and published a request for comments on the establishment of a business size standard (the SBA business size standard set forth in 13 CFR 121.802 for the purpose of paying reduced patent fees) for USPTO Regulatory Flexibility Analysis for patent-related regulations. See Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR at 38388–89, 1309 Off. Gaz. Pat. Office at 37–38. Therefore, the USPTO is establishing the following definition of small business concern for purposes of the USPTO conducting an analysis or making a certification under the Regulatory Flexibility Act for patentrelated regulations: A small business concern for Regulatory Flexibility Act purposes for patent-related regulations is a business or other concern that: (1) Meets the SBA’s definition of a ‘‘business concern or concern’’ set forth in 13 CFR 121.105; and (2) meets the size standards set forth in 13 CFR 121.802 for the purpose of paying reduced patent fees, namely, an entity: (a) Whose number of employees, including affiliates, does not exceed 500 persons; and (b) which has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under this definition. Dated: November 9, 2006. Jon W. Dudas, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. [FR Doc. E6–19573 Filed 11–17–06; 8:45 am] BILLING CODE 3510–16–P DEPARTMENT OF DEFENSE Office of the Secretary Office of the Secretary of Defense (Health Affairs)/TRICARE Management Activity Department of Defense. Notice of a TRICARE demonstration project for the State of Alaska AGENCY: ACTION: E:\FR\FM\20NON1.SGM 20NON1

Agencies

[Federal Register Volume 71, Number 223 (Monday, November 20, 2006)]
[Notices]
[Pages 67109-67112]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19573]


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DEPARTMENT OF COMMERCE

 Patent and Trademark Office

[Docket No.: PTO-P-2006-0034]


Business Size Standard for Purposes of United States Patent and 
Trademark Office Regulatory Flexibility Analysis for Patent-Related 
Regulations

AGENCY: United States Patent and Trademark Office, Commerce.

ACTION: Notice.

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SUMMARY: The Regulatory Flexibility Act permits an agency head to 
establish, for purposes of Regulatory Flexibility Act analysis and 
certification, one or more definitions of ``small business concern'' 
that are appropriate to the activities of the agency. Pursuant to this 
authority, the United States Patent and Trademark Office (USPTO) is 
establishing the Small Business Administration (SBA) business size 
standard for the purpose of paying reduced patent fees as the size 
standard for conducting an analysis or making a certification under the 
Regulatory Flexibility Act for patent-related regulations.

DATES: Effective Date: November 20, 2006.

FOR FURTHER INFORMATION CONTACT: Christina T. Donnell, Senior Petitions 
Attorney, Office of Petitions, Office of the Deputy Commissioner for 
Patent Examination Policy, by telephone at (571) 272-3211, by mail 
addressed to: Mail Stop Comments--Patents, Commissioner for Patents, 
P.O. Box 1450, Alexandria, VA, 22313-1450, or by facsimile to (571) 
273-7735, marked to the attention of Christina T. Donnell.

SUPPLEMENTARY INFORMATION: The USPTO is in this notice establishing the 
SBA business size standard for the purpose of paying reduced patent 
fees as the size standard for conducting an analysis or making a 
certification under the Regulatory Flexibility Act for patent-related 
regulations. The USPTO is not changing or proposing to change the 
definition of small entity for the purpose of paying reduced patent 
fees.
    The patent statute provides that ``[f]ees charged under [35 U.S.C. 
41](a), (b) and (d)(1) shall be reduced by 50 percent with respect to 
their application to any small business concern as defined under 
section 3 of the Small Business Act, and to any independent inventor or 
nonprofit organization as defined in regulations issued by the 
Director.'' 35 U.S.C. 41(h)(1). The SBA defines a small business 
concern for the purpose of paying reduced patent fees as one: ``(a) 
Whose number of employees, including affiliates, does not exceed 500 
persons; and (b) Which has not assigned, granted, conveyed, or licensed 
(and is under no obligation to do so) any rights in the invention to 
any person who made it and could not be classified as an independent 
inventor, or to any concern which would not qualify as a non-profit 
organization or a small business concern under this section.'' 13 CFR 
121.802.
    The USPTO uses the SBA business size standard for the purpose of 
paying reduced patent fees in 13 CFR 121.802 as the size standard when 
conducting an analysis or making a certification under the Regulatory 
Flexibility Act for patent-related regulations. See e.g., Changes To 
Support Implementation of the United States Patent and Trademark Office 
21st Century Strategic Plan, 69 FR 56481, 56530 (Sept. 21, 2004) 
(discussion indicating that small entities for purposes of the 
Regulatory Flexibility Act are considered a subset of the small 
entities for purposes of paying reduced patent fees). The USPTO has no 
business need (other than to conduct an analysis or make a 
certification under the Regulatory Flexibility Act) to collect 
information from patentees and patent applicants concerning whether 
they are a small business concern using the business size standards set 
forth in 13 CFR 121.201. Thus, the USPTO uses the SBA business size 
standard set forth in 13 CFR 121.802 as its size standard when 
conducting an analysis or making a certification under the Regulatory 
Flexibility Act to avoid the need to gather data from patentees and 
patent applicants as to whether they are a small business concern as 
described in 13 CFR 121.201.
    Comments and Responses: Pursuant to the Regulatory Flexibility Act, 
the USPTO consulted with SBA Advocacy and published a request for 
comments on the establishment of a business size standard (the business 
size standard set forth in 13 CFR 121.802 for the purpose of paying 
reduced patent fees) for the purpose of USPTO Regulatory Flexibility 
Analysis for patent-related regulations. See Size Standard for Purposes 
of United States Patent and Trademark Office Regulatory Flexibility 
Analysis for Patent-Related Regulations, 71 FR 38388 (July 6, 2006), 
1309 Off. Gaz. Pat. Office 37 (Aug. 1, 2006) (request for comments). 
SBA Advocacy convened a regulatory roundtable to discuss the USPTO's 
proposed business size standard (attended by USPTO representatives) on 
July 19, 2006, and the USPTO received seven written comments (from SBA 
Advocacy, the Professional Inventors Alliance, and five individuals) in 
response to the request for comments. The comments and responses to the 
comments follow:
    Comment 1: SBA Advocacy commented, in pertinent part, that:

    On July 19, 2006, Advocacy convened a regulatory roundtable to 
discuss the USPTO's proposed size standard. Participants at the 
roundtable included industry personnel representing the interests of 
small businesses and independent inventors, USPTO personnel, 
representatives from the SBA Office of Size Standards, and Advocacy. 
During the roundtable, small entity representatives expressed 
reservations about the proposed size standard. They indicated that 
the standard would exclude a significant number of small entities. 
Further, they were concerned that the standard would not provide an 
accurate estimate of the number of small entities affected by the 
USPTO's regulations.
    Currently, patent applicants must claim small entity status by 
checking a box on their patent application. However, small entity 
representatives informed Advocacy that entities often choose not to 
claim small entity status for a variety of reasons. USPTO data 
systems track the number of patent applications that claim small 
entity status. The agency then uses the numbers to estimate the 
number of small entities affected by its rulemakings. The agency 
does not collect data on or count the specific entities that are 
submitting a patent application. As a result, the data collected by 
the USPTO does not provide an accurate estimate of the number of 
small entities affected by the agency's rules. Since the proposed 
size standard only tabulates the number of applicants claiming small 
entity status, and not actual small entities, Advocacy does not 
believe that it is the appropriate size standard for [Regulatory 
Flexibility Act] purposes.
    Advocacy appreciates the USPTO's challenge in identifying an 
appropriate size

[[Page 67110]]

standard for [Regulatory Flexibility Act] purposes. We agree with 
the agency's decision to request public comment on the proposed size 
standard. However, we urge the USPTO not to adopt a size standard 
that would adversely affect small entities. The proposed standard 
will not facilitate the USPTO's compliance with the [Regulatory 
Flexibility Act] since it will not adequately estimate the small 
entities affected by the agency's regulations. Advocacy suggests 
that the agency continue to work with our office to identify a more 
appropriate standard after reviewing public comments on the 
proposal.

    Another individual comment also objected to the use of the SBA 
business size standard in 13 CFR 121.802 as the size standard when 
conducting an analysis or making a certification under the Regulatory 
Flexibility Act for patent-related regulations. The comment asserted 
that it was not unusual for a small business concern to file as a large 
entity to avoid the possibility of the patent being subsequently 
invalidated because of an improper assertion of small entity status. 
Additionally, the comment asserted that the number of small business 
concerns affected by the USPTO's rule making is much greater than the 
number of small entity applicants assessed by the USPTO. Alternatively, 
several individual comments supported the USPTO's definition of small 
business concern for Regulatory Flexibility Act purposes.
    Response: The USPTO does not consider the arguments that it 
significantly undercounts the number of small entities affected by its 
rule makings to be persuasive. On July 19, 2006, representatives from 
the USPTO attended SBA Advocacy's roundtable and met with 
representatives from the SBA, SBA Advocacy, the Intellectual Property 
Owners Association, the Association for Competitive Technology, the 
American Intellectual Property Law Association, and the United 
Inventors Association. The USPTO received anecdotal feedback at the SBA 
Advocacy roundtable that the USPTO significantly undercounts the number 
of small entities affected by its rule makings when the USPTO relies 
upon the small entity data as contained in the USPTO's Patent 
Application Locating and Monitoring (PALM) system. The USPTO, however, 
has not been provided with any data or other specific information to 
substantiate this anecdotal information. In addition, none of the 
groups whose representatives were present at the SBA Advocacy 
roundtable (except for SBA Advocacy) submitted a comment in response to 
the USPTO's request for comments on the USPTO's definition of small 
business concern for Regulatory Flexibility Act purposes. In support of 
the contention that the small entity data in PALM significantly 
undercounts the number of small entities, the representatives at the 
SBA Advocacy roundtable and the comments asserted that small entities 
routinely decline to claim small entity status because: (1) Applicants 
must claim small entity status by checking a box on a particular USPTO 
form; (2) small entities consider the fifty percent reduction in patent 
fees negligible relative to the overall cost of obtaining a patent; and 
(3) there are negative legal consequences if small entity status is 
claimed or is claimed improperly.
    The small entity data contained in the PALM system is collected 
from patent applicants on the basis of whether the applicant claims 
small entity status for the purpose of paying patent fees. Section 
4502(b) of the American Inventors Protection Act of 1999 (AIPA) charged 
the Government Accountability Office (GAO) with conducting a study of 
the impact of the AIPA's eighteen-month publication provisions, which 
included a study of any correlation of the status of the applicant 
(small entity or non-small entity) and the eighteen-month publication 
of applications. See Public Law 106-113, 113 Stat. 1501, 1501A-552-53 
(1999). The GAO analyzed the data in the USPTO's PALM system and deemed 
it sufficiently reliable for purposes of conducting the study mandated 
by the AIPA. See Information about the Publication Provisions of the 
American Inventors Protection Act, GAO-04-603 at 14-15 (2004).
    The USPTO representatives indicated at the SBA Advocacy roundtable 
that to collect small entity data with the reliability being urged by 
SBA Advocacy (or of greater reliability than is currently contained in 
the USPTO's PALM system) would compel the USPTO to require all patent 
applicants to affirmatively state whether they are or are not a small 
entity. No party present at the SBA Advocacy roundtable advocated the 
adoption of such a requirement. In addition, the SBA Advocacy comment 
does not suggest any viable alternative to the USPTO's reliance upon 
the data on small entities contained in the USPTO's PALM system for 
Regulatory Flexibility Act analysis or certification purposes. 
Therefore, the USPTO considers the data on small entities in the 
USPTO's PALM system to be sufficiently reliable (especially in light of 
the absence of any viable preferable alternatives) for use in 
conducting an analysis or making a certification under the Regulatory 
Flexibility Act for patent-related regulations.
    The statement that patent applicants must claim small entity status 
by checking a box on a particular USPTO form is not correct. The USPTO 
revised 37 CFR 1.27 in September of 2000 to provide that patent 
applicants may claim small entity status by: (1) Providing a written 
assertion of entitlement to small entity status (37 CFR 1.27(c)(1)); or 
(2) paying the basic filing or basic national fee in the small entity 
amount (37 CFR 1.27(c)(3)). See Changes to Implement the Patent 
Business Goals, 65 FR 64603, 54609-15, 54659-61 (Sept. 8, 2000) (final 
rule). The USPTO includes a box next to a written assertion of 
entitlement to small entity status on its application transmittal form, 
which patent applicants may use to claim small entity status when 
filing a patent application (37 CFR 1.27(c)(1)). The USPTO, however, 
does not require applicants to check this box on the application 
transmittal form (or even use the application transmittal form) to 
claim small entity status. Therefore, the USPTO does not believe that 
small entities routinely decline to claim small entity status due to 
the USPTO's requirements for establishing small entity status.
    The argument that small entities consider the fifty percent 
reduction in patent fees to be negligible is likewise unpersuasive. As 
introduced and reported out of the House Committee on the Judiciary, 
the United States Patent and Trademark Fee Modernization Act of 2003 
did not contain a small entity reduction for the patent search fee. See 
The United States Patent and Trademark Fee Modernization Act of 2003, 
H.R. 1561, 109th Cong., Sec.  2 (2003). During the floor debate on the 
United States Patent and Trademark Fee Modernization Act, the following 
amendments were necessary to address small entity concerns and secure 
passage of this legislation by the House of Representatives: (1) A 
fifty percent reduction in the patent search fee for small entities; 
(2) a seventy-five percent reduction in the patent filing fee for small 
entities who file electronically; and (3) a study of the effects of 
patent fees on the ability of small entities to file patent 
applications. See United States Patent and Trademark Fee Modernization 
Act of 2004, 150 Cong. Rec. H793, H803 (daily ed. Mar. 3, 2004) (floor 
debate and passage of United States Patent and Trademark Fee 
Modernization Act of 2004 by the House of Representatives). The USPTO 
does not believe that small entities would have sought these changes to 
the United States Patent and Trademark Fee

[[Page 67111]]

Modernization Act of 2004 if a substantial number of small entities 
considered the fifty percent reduction in patent fees to be negligible.
    The argument concerning negative legal consequences if small entity 
status is claimed or is claimed improperly is similarly not persuasive. 
The rules of practice provide that: ``[i]f status as a small entity is 
established in good faith, and fees as a small entity are paid in good 
faith, in any application or patent, and it is later discovered that 
such status as a small entity was established in error, or that through 
error the Office was not notified of a loss of entitlement to small 
entity status as required by Sec.  1.27(g)(2), the error will be 
excused upon compliance with the [requirements of 37 CFR 1.28(c)].'' 37 
CFR 1.28(c). In the mid-1990s, there were District Court decisions in 
which a patentee faced negative legal consequences for erroneously or 
improperly claiming small entity status. See Haden Schweitzer Corp. v. 
Arthur B. Myr Industries, Inc., 901 F. Supp. 1235, 36 U.S.P.Q.2d 1020 
(E.D. Mich. 1995) (failure to pay maintenance fee in the correct amount 
results in intervening rights under 35 U.S.C. 41(c)(2)); and (2) DH 
Technology, Inc. v. Synergstex International, Inc., 937 F. Supp. 902, 
40 U.S.P.Q.2d 1754 (N.D. Cal. 1996) (failure to timely pay issue fee in 
the correct amount results in patent lapse under 35 U.S.C. 151); but 
see Jewish Hospital of St. Louis v. Idexx Laboratories, 951 F. Supp 1, 
42 U.S.P.Q.2d 1720 (D. Me. 1996) (correction of improper small entity 
fee payment in compliance with 37 CFR 1.28 does not result in patent 
lapse). In light of the uncertainty that existed in the mid-1990s 
concerning the consequences of erroneously claiming small entity 
status, the Office advised applicants and patentees at that time that 
they could avoid this uncertainty by not claiming small entity status 
unless it is absolutely certain that the applicant or patentee is 
entitled to small entity status (i.e., resolving any doubt, 
uncertainty, or lack of information in favor of payment of the full 
fee). See Changes to Patent Practice and Procedure, 62 FR 53131, 53135 
(Oct. 10, 1997); see also DH Technology, 937 F. Supp. at 910, 40 
U.S.P.Q.2d at 1761 (``where there is the slightest doubt about an 
applicant's entitlement to claim small entity status, the applicant 
would be foolish not to pay the full * * * fee'').
    The U.S. Court of Appeals for the Federal Circuit (Federal 
Circuit), however, reversed the District Court's decision in DH 
Technology and held that an applicant may correct an erroneous payment 
of patent fees in the small entity amount under 37 CFR 1.28 without 
penalty, such as patent lapse, as long as small entity status was 
established in good faith and the small entity fees were paid in good 
faith. See DH Tech. v. Synergystex Int'l, 154 F.3d 1333, 1343, 47 
U.S.P.Q.2d 1865, 1872 (Fed. Cir. 1998). Thus, subsequent to the Federal 
Circuit's decision in DH Technology, the only patent applicants or 
patentees who face negative legal consequences from claiming or 
erroneously claiming small entity status are those applicants who have 
no basis for making a good faith claim to small entity status. 
Therefore, the USPTO does not believe that a significant number of 
small entities currently decline to claim small entity status to avoid 
negative legal consequences (i.e., the patent being invalidated) due to 
the applicant claiming or erroneously claiming small entity status.
    Finally, no party to the SBA Advocacy roundtable or other comment 
suggested that the USPTO should use the business size standards set 
forth in 13 CFR 121.201 for purposes of conducting an analysis or 
making a certification under the Regulatory Flexibility Act for patent-
related regulations.
    Comment 2: One comment requested clarification as to whether a 
license to a non-small entity that arises only impliedly negates small 
entity status for an applicant or patentee. The comment stated that the 
situation of an implied license to a non-small entity frequently occurs 
when the invention is embodied in software, and the software is mass-
marketed under a standard shrink-wrap license. The comment asserted 
that a shrink-wrap agreement typically grants a ``license'' without 
indicating the intellectual property rights for which the ``license'' 
is granted. The comment contended that frequently the licensee cannot 
use the software without using the patented invention and that the law 
often implies a license under these circumstances. Additionally, the 
comment asserted that the current definition of small business concern 
excludes any small entity that licensed the invention to a non-small 
entity; however, the definition does not limit the exclusion to only 
those small business concerns that explicitly licensed the invention. 
Therefore, the comment suggested that the USPTO adopt the following 
language: ``(b) which has not assigned, granted, conveyed, or 
explicitly licensed (and is under no obligation to do so) any rights in 
the invention * * * .'' Lastly, the comment averred that some 
practitioners do not claim small entity status for software-embodied 
inventions, even though the applicant or patentee is entitled to the 
benefit of small entity status, because the applicant or patentee is 
usually unaware if or when the mass-market software production is 
licensed by a non-small entity.
    Response: The scope of the term ``license'' in the context of 
entitlement to small entity status was previously discussed in the SBA 
rule making to define small entity for purposes of a reduction in 
patent fees for such a small entity. Specifically, the SBA responded as 
follows:

    Two comments raised questions about the intended scope of the 
term ``license.'' It was suggested that clarification is needed as 
to what is included within the scope of the term. One comment 
suggested that, ``[a]t the very least, the record should reflect 
that the definition is not intended to reach implied licenses to use 
and resell patented articles purchased from a small business.'' The 
comment is correct insofar as it suggests that such ``implied 
licenses'' are not intended to be included within the scope of the 
term. Likewise, an order by the applicant to a firm to build a 
proto-type machine or product for the applicant's own use is not 
considered to constitute a license for purposes of the definition.
    Another suggestion was that the regulation be reworded to deny 
small business status where revenue above a certain dollar amount 
was received from licensing rights under the invention to a concern 
which could not qualify as a small entity. It was also suggested 
that the term ``exclusive license of any of the rights in the 
invention'' be used instead of the term ``license.'' The latter two 
suggestions have not been adopted. Adoption of these suggestions 
would cause the regulation to become more complicated, and does not 
appear necessary to aid small concerns in accord with the purposes 
of the legislation. In addition, it could substantially broaden the 
number of concerns which could qualify with a resulting excessive 
loss of revenue to the Patent and Trademark Office. It is not seen 
likely that the restriction on licensing would unduly or adversely 
affect the ability of the small business concern to participate in 
the patent system.

    Definition of Small Business for Paying Reduced Patent Fees Under 
Title 35, United States Code, 47 FR 43272 (Sept. 30, 1982) (final 
rule). The USPTO did not propose to change the definition of a small 
business concern for the purpose of paying reduced patent fees. Rather, 
the USPTO was inviting public comment on the establishment of the SBA 
business size standard in 13 CFR 121.802 as the size standard when 
conducting an analysis or making a certification under the Regulatory 
Flexibility Act for patent-related regulations. Therefore, the 
suggested change is not adopted.

[[Page 67112]]

    Comment 3: One comment suggested that part (b) of the SBA's 
definition of a small business concern, specifying an entity ``which 
has not assigned, granted, conveyed or licensed * * * any rights in the 
invention'' to a large entity should be deleted from the definition as 
being inappropriate. The comment stated that a license or other 
agreement between a small entity and a large entity does not typically 
result in substantial income to the small entity. The comment further 
asserted that in most cases the small entity retains the financial 
responsibility to pay the patent prosecution and maintenance fees, 
without any additional income from the large entity. The comment 
contended that if the license or other agreement is later terminated, 
the termination agreement often allows the large entity to retain some 
rights without further payment. Additionally, the termination agreement 
may be so complex that the small entity may not be able to overcome a 
charge of inequitable conduct by a third party. Alternatively, one of 
the comments stated that the adopted size standard does not unfairly 
burden small entities because a large entity typically pays the cost of 
patent prosecution when a small entity licenses its technology to the 
large entity.
    Response: 13 CFR 121.802 is the substantive provision for 
determining whether an entity is a small business concern for purposes 
of paying reduced patent fees. The USPTO did not propose to change the 
definition of a small business concern for the purpose of paying 
reduced patent fees. Rather, the USPTO was inviting public comment on 
the establishment of the SBA business size standard in 13 CFR 121.802 
as the size standard when conducting an analysis or making a 
certification under the Regulatory Flexibility Act for patent-related 
regulations.
    Moreover, the suggestion was previously considered and rejected in 
the rule making to implement the reduction in patent fees for small 
entities. Specifically, a past comment suggested that 37 CFR 1.27 
should be corrected to indicate that a small business concern would be 
entitled to pay reduced patent fees even though the small business 
concern may grant a non-exclusive or an exclusive license to a non-
small entity. The USPTO responded as follows:

    Section 1.27 requires that the concern qualify as a small 
business concern as defined in Sec.  1.9(d). Section 1.9(d) defines 
a small business concern by incorporating 13 CFR 121.3-18, which in 
turn defines a small business concern as one not exceeding a 
particular size ``which has not assigned, granted, conveyed, or 
licensed, and is under no obligation under contract or law to 
assign, grant, convey or license, any rights in the invention to any 
person who could not be classified as an independent inventor if 
that person had made the invention, or to any concern which would 
not qualify as a small business concern or a nonprofit organization 
under this section.'' The intent of both 13 CFR 121.3-18 and 37 CFR 
1.9(d) and 1.27(c) is to limit the payment of reduced fees under 
section 41(a) and (b) of Title 35, United States Code, to those 
situations in which all of the rights in the invention are owned by 
small entities, i.e., independent inventors, small business 
concerns, or nonprofit organizations. To do otherwise would be 
clearly contrary to the intended purpose of the legislation which 
contains no indication that fees are to be reduced in circumstances 
where rights are owned by non-small entities. Adopting the 
suggestion might, for example, permit a non-small entity to transfer 
patent rights to a small business concern which would pay the 
reduced fees and grant an exclusive license to the non-small entity.

    Revision of Patent and Trademark Fees, 47 FR 43273 (Sept. 30, 1982) 
(final rule). Therefore, the suggested change is not adopted.
    Comment 4: One comment noted an error in the following text: ``The 
SBA Advocacy, however, has questioned whether the USPTO's size standard 
is under-inclusive because it excludes any business concern that has 
assigned, granted, conveyed, or licensed (and is under no obligation to 
do so).'' The comment suggested the following correction: ``The SBA 
Advocacy, however, has questioned whether the USPTO's size standard is 
under-inclusive because it excludes any business concern that has 
assigned, granted, conveyed, or licensed (or is under an obligation to 
do so).''
    Response: The USPTO notes that the text at issue should have read: 
``The SBA Advocacy, however, has questioned whether the USPTO's size 
standard is under-inclusive because it excludes any business concern 
that has assigned, granted, conveyed, or licensed (or is under an 
obligation to do so) any rights in the invention to any person who made 
it and could not be classified as an independent inventor, or to any 
concern which would not qualify as a non-profit organization or a small 
business concern under [13 CFR 1.802].''
    Establishment of a Definition of ``Small Business Concern'' for 
Purposes of the USPTO Conducting an Analysis or Making a Certification 
under the Regulatory Flexibility Act for Patent-Related Regulations: 
The Regulatory Flexibility Act permits an agency head to establish, for 
purposes of Regulatory Flexibility Act analysis and certification, one 
or more definitions of ``small business concern'' that are appropriate 
to the activities of the agency, after consultation with the Office of 
Advocacy of the Small Business Administration and opportunity for 
public comment. See 5 U.S.C. 601(3) and 13 CFR 121.903(c). The USPTO 
consulted with SBA Advocacy and published a request for comments on the 
establishment of a business size standard (the SBA business size 
standard set forth in 13 CFR 121.802 for the purpose of paying reduced 
patent fees) for USPTO Regulatory Flexibility Analysis for patent-
related regulations. See Size Standard for Purposes of United States 
Patent and Trademark Office Regulatory Flexibility Analysis for Patent-
Related Regulations, 71 FR at 38388-89, 1309 Off. Gaz. Pat. Office at 
37-38. Therefore, the USPTO is establishing the following definition of 
small business concern for purposes of the USPTO conducting an analysis 
or making a certification under the Regulatory Flexibility Act for 
patent-related regulations: A small business concern for Regulatory 
Flexibility Act purposes for patent-related regulations is a business 
or other concern that: (1) Meets the SBA's definition of a ``business 
concern or concern'' set forth in 13 CFR 121.105; and (2) meets the 
size standards set forth in 13 CFR 121.802 for the purpose of paying 
reduced patent fees, namely, an entity: (a) Whose number of employees, 
including affiliates, does not exceed 500 persons; and (b) which has 
not assigned, granted, conveyed, or licensed (and is under no 
obligation to do so) any rights in the invention to any person who made 
it and could not be classified as an independent inventor, or to any 
concern which would not qualify as a non-profit organization or a small 
business concern under this definition.

    Dated: November 9, 2006.
Jon W. Dudas,
Under Secretary of Commerce for Intellectual Property and Director of 
the United States Patent and Trademark Office.
[FR Doc. E6-19573 Filed 11-17-06; 8:45 am]
BILLING CODE 3510-16-P