A more thorough explanation:

Small entity is a term used in U.S. patent law to describe an applicant who qualifies for reduced fees when applying for a patent. To be considered a small entity, the applicant must meet one of the following criteria:

• An individual investor
• A small for-profit business concern (company) with no more than 500 employees or affiliates
• A university
• A non-profit organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. section 501(c)(3))

Small entity status allows the applicant to pay reduced application, issuance, and maintenance fees. This can be a significant cost savings for individuals and small businesses.

For example, if a small business with 200 employees applies for a patent and qualifies as a small entity, they would pay reduced fees compared to a large corporation with thousands of employees.

Another example would be a non-profit organization that qualifies as a small entity. They would be able to save money on patent fees, allowing them to allocate more resources towards their charitable mission.