Clarification on Small Entity Status of Patent Applicants in India

I really wonder if the Indian Patent Act was already less troublesome that we needed a new set of rules, substantially increased fees, and more importantly introduction of the Small Entity Status of Applicants, which creates even more confusion on retrospectively payable fees, implications of change in status during prosecution, the timeline for submission of Form 28, qualification for foreign applicants, among many other allied issues, which would now need clarity and potentially cause issues wherein there is a deficiency of fees. Really hoping that this does not become a reason for the abandonment of the patent applications, especially when even the provision of deposit account (Rule 7(5)), although mentioned in the Patent Act, is still not in practice.

Barely 2-3 days had passed by after our sending an update on the new rules and introduction of small entity status that we started receiving queries from across law firms, corporate houses with clarifications on small entity status for foreign entities. This led to this piece to help clarify certain doubts that have been asked for and we hope there is a FAQ released by the Patent Office soon to clarify and bring on record certain obvious questions arising out this amendment.

To go back one step, as a background, Rule 2(fa) of the Amended rules contains the definition of a small entity. An entity will be a small entity if one of the two conditions is met:

(i) the enterprise is engaged in the manufacture or production of goods and has investments in plant and machinery that do not exceed ten crore rupees (approx. US$1,611,085),

(ii) the enterprise is engaged in providing or rendering services and has investments in equipment that do not exceed five crore rupees (approx. US$807,495)

The above amount limits are based on clause (a) and (b) of sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006).

1. A new Form 28 has been introduced which needs to be filed by a small entity applicant. For Indian entities, Form 28 must be accompanied by the proof of registration under The Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), whereas, for Foreign entities, Form 28 must be accompanied by any other document as proof. Such ‘any other document’ can be, for example, an executed copy of Balance Sheet/P&L, Declaration by a Govt. The entity of Respective country, among other applicable documents)
2. In case an application processed by a small entity is fully/partly transferred to a, say a large entity, the difference in the scale of a fee(s) between the fee(s) charged from a small entity and the fee(s) chargeable from the large entity in the same matter, would be paid by the new applicant along with the request for transfer. Therefore, in case the Applicant transforms from a small entity to a large entity while filing the request for examination, as it presently appears, the increased fee would need to paid retrospectively, i.e., the difference in fee as would have been taken place at the time of filing of the Application, would also need to be paid.
3. It would therefore be safer for companies to be aware of their current entity status at all times, as any change in the status, would lead to a change in the applicable fee, and as per point 4 of the public notice dated 28’th Feb 2014 having Ref. No. CG/F/Public Notice/2014/307, it has been clarified that it shall be the sole responsibility of the Applicant(s) to select the correct category of the Applicant and file all supporting documents in respect thereof while filing an application or other documents, failure of which may attract provisions of section 142(3) of the Indian Patents Act.
4. In case any Applicant believes that it is a small entity right now, they should, as soon as possible, file the executed Form 28 along with the MSME registration certificate in order to be eligible to pay the small entity fees. Even a provisional MSME registration certificate should ideally serve as acceptable evidence, but the same may be at the discretion of the Examiner/Controller.
5. Also, as the present online filing system does allow filing an application as a Small entity with no compulsion on the uploading of Form 28, any such uploading of an application without an executed Form 28 may attract provisions under Section 142(3) of the Indian Patents Act, which may severely impact the patent rights during national phase filings, and therefore in case of Form 28/Evidence thereof is not available, it’s much safer to file the Application as a normal (that is large) entity and then submit the Form 28 along with the evidence at a later date to gain benefits for subsequent activities.
6. In the case of joint applicants, as is usually the case, the highest fee category of the applicant among the joint applicants will be taken into consideration for the purposes of fee calculation.
7. Incorrect claiming of Small entity status, or non-declaration of conversion from small-entity to large-entity, may also become a ground of revocation of a patent by a third party trying to invalidation the patent in context, and therefore a careful note is to be made and stringent compliance of the amount limits should be done in case small-entity status is being claimed.