The Euro-PCT Application Procedure
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The European Patent Office has announced a new 30% reduction on many official fees from 1 April 2024, for European patent applications of microenterprises (micro-entities), for up to 5 patent applications in a 5-year period. Official fees make up a large part of the cost of obtaining a European patent and so this fee reduction will be welcomed by individuals and organisations who can take advantage of it, but there are some detailed eligibility rules which may limit its relevance. As with the discounts for small entities and micro-entities in the United States, entitlement to the discount is not always straightforward to determine which can lead to risk.
The timing of this new discount is significant in that it coincides with the European Patent Office increasing most official fees by about 4%, but also increasing the renewal fees for the third and fourth years by 30%. Accordingly, we expect that many applications to claim this discount will be filed over the next few months.
What fees does the discount apply to?
The discount applies to many of the larger fees that are routinely paid by applicants. These include the filing fee, search fees, examination fee, designation fee, grant fee and renewal fees which are paid annually for European patent applications during the application procedure. An existing discount on the appeal fee (which extends to SMEs) remains. The changes do not affect post-grant renewal fees. It relates to both directly filed European patent applications and to Euro-PCT applications, derived from PCT applications.
Who may claim the discount?
Subject to the exceptions discussed below, the discount will be available to;
1. Natural persons (i.e. private individuals).
2. Microenterprises.
3. Non-profit organisations, universities and public research organisations.
Microenterprises are defined with reference to Article 2 of the 2003 European Commission recommendation concerning the definition of micro, small and medium-sized enterprises. This Article refers to enterprises, based anywhere in the world, that have fewer than 10 employees and which have one or both of an annual turnover and balance sheet value below EUR 2,000,000. However, we have checked with the EPO and understand that the definition of a microenterprise will be interpreted according to Article 3 of the 2003 EC recommendation, which also considers whether an enterprise is an autonomous enterprise and whether it has partner enterprises or is linked to other enterprises. This will exclude many businesses that do meet the employee, turnover and balance sheet conditions. Guidance on the EC definition can be found online.
"Non-profit organisations" are organisations which, by virtue of their legal form or statutes, are not permitted under the relevant law to be a source of income, profit or other financial gain for their owners, or, where they are permitted to make a profit, there is a legal or statutory obligation to reinvest the profits made in the interest of the organisation. "Universities" are "classic" universities, i.e. higher education and research institutions as defined by the relevant legislation. However, comparable institutions, such as secondary or higher education establishments, are considered to be universities. "Public research organisations" are entities such as universities or research institutes that are organised under public law and which, irrespective of the way they are financed, have as their primary goal the conduct of fundamental research, industrial research or experimental development and the dissemination of the results by way of teaching, publication or technology transfer. All profits must be reinvested in carrying out these activities, in the dissemination of the results or in teaching.
How does the 5 application limit work?
Any organisation (or individual applicant) who is entitled to the discount may obtain it on their first 5 patent applications in a five year period (they must have filed no more than 4 previously in the five year period). This 5-application limit applies whatever the status of the earlier applications (whether they are granted, abandoned etc.) and whether or not the discount was requested for those cases. This means that applicants cannot choose to which cases the discount applies.
Direct European patent applications, applications to enter the European regional phase of the PCT and divisional applications all count towards the 5-application limit. When interpreting the 5-year rule for applications to enter the European regional phase of the PCT, their national phase entry date is the date which is considered. For divisional applications, the relevant date is the date when they are lodged. If multiple cases are filed on the same day, breaching the 5 application limit, the discount can be obtained on the earlier numbered applications, up to the 5 application limit.
The 5-application limit means that the discount will be very useful to individuals and early-stage companies who are relatively new to the patent system. However, it means that the discount will often not be available to established users of the patent system, including many universities and public research organisations who frequently file European patent applications.
What if there are multiple applicants?
If there are multiple applicants, the discount may only be claimed if all of the applicants are one of the three categories set out above (microenterprises, natural persons, non-profit organisations, universities and public research organisations). Furthermore, each applicant must fulfil the criteria of no more than 5 applications in 5 years limit.
How is the discount claimed?
The discount can be claimed by making a suitable declaration indicating whether the applicant is a microenterprise, a natural person, or a non-profit organisation, university or public research organisation. For new applications, this will simply require the ticking of a box on the application form. For existing applications, or where there is a change in the status, an official form can be filed. The declaration must be filed at the latest on the day when the applicable fee is paid.
What if the discount no longer applies?
If the discount no longer applies, the declaration should be revoked.
What if the patent application is assigned?
If a patent application is transferred, then it is treated as belonging to the new applicant(s) for the purposes of entitlement to the microenterprise discount and for calculating the 5-application limit. Fees paid before the transfer is recorded are unaffected. If the transfer leads to a change in eligibility this should be recorded.
What penalties may apply if a wrong declaration of entitlement to the reduced fee rate is made?
If the reduced fee was paid but the 5 application cap has been breached then the applicant is set a 2-month period to pay the difference. Otherwise, if it is found that a fee, other than a renewal fee, should have been paid at the regular rate and that it was not, the application will be deemed withdrawn. This is not fatal to an application as the deficiency can be remedied within a set time limit, as of right. However, if it is found that a renewal fee was incorrectly paid at the regular rate, it is deemed that the renewal fee was not properly paid. Provided that this occurs within the 6-month renewal fee grace period, it should be possible to remedy the deficiency by correctly paying the renewal fee and grace period surcharge. It is currently unclear what would happen if it was found that a renewal fee was incorrectly paid sufficiently far in the past that it is no longer in the grace period. In this case, loss of the application seems likely. This means that there is a risk of permanent loss of rights if a wrong declaration is made and so care is required.
Will the EPO check entitlement?
The European Patent Office have indicated that they will diligently check the rule limiting an individual applicant to using the discount on 5 applications in 5 years. However, they will otherwise carry out random checks and, where there are doubts, they may ask for evidence of entitlement. An incorrect claim is not however a ground for an opposition by a third party.
How does this interact with other discounts?
The EPO does have a number of other discount schemes which will be applicable in some circumstances. There is an existing language-related discount scheme for small entities of EPC contracting states that do not have English, French or German as an official language, and which file a European patent application or request for examination in an official language of that state other than English, French or German. There is also a reduction in the fees payable on entry into the European regional phase of a PCT application. Where multiple discount schemes are available, the discounts are to be multiplied together.
Are there any other fee changes?
On 1 April 2024, the EPO is also raising many fees by 4% - as mentioned above the first two renewal fees are going up by 30%. This means that any applicant, other than a microenterprise that claims the new discount, will have an unexpected increase in these renewal fees at short notice. The EPO has justified this on grounds that it is processing applications more quickly than it was and so the EPO collected renewal fees for fewer years. Some rarely used fees are also being removed.
Although the EPO has advertised that this development simplifies the fee structure, it appears to us to make it more complex. The new discount will be very helpful for businesses who are clearly entitled to the discount, but there will be borderline cases where entitlement will be unclear who may face additional costs in checking the applicability of the rules, and risks if they take up the discount in error.
If you have any questions on this topic, please do not hesitate to contact us.