How does licensing affect small entity status for a business concern?

This page is an FAQ based on guidance from the Manual of Patent Examining Procedure. It is provided as guidance, with links to the ground truth sources. This is information only: it is not legal advice.

Licensing can significantly impact a business concern’s eligibility for small entity status. According to MPEP 509.02:

“Rights to an invention are considered as assigned, granted, conveyed, or licensed when they are held by an entity other than the inventor, and they are not qualified for small entity status.”

This means that if a business concern has licensed rights to the invention to any person or entity that does not qualify as a small entity, it may lose its small entity status. Specifically:

• If the business has licensed rights to a large entity, it cannot claim small entity status.
• Exclusive licenses to large entities will disqualify the business from small entity status.
• Non-exclusive licenses may not affect small entity status if they are arms-length agreements.

It’s crucial for businesses to carefully consider the impact of licensing agreements on their small entity status before entering into such arrangements.