Small Business Innovation Research (SBIR) and Intellectual Property

The Small Business Innovation Research (SBIR) program is a federal program open to small businesses. SBIR encourages domestic small businesses to engage in research and development with the potential for commercialization through a competitive awards-based program. The program is structured with multiple phases and funding tiers.

While the overall program is administered by the Small Business Administration, the awards are overseen by individual federal agencies. The award will include a funding agreement (a contract, grant, or cooperative agreement) entered into between the participating federal agency and the business for the performance of research, experimental, or developmental work. Each award can vary somewhat in the specific rights and requirements.

The SBIR program requires participants to be for-profit businesses, with a place of business in the United States. The business must have more than 50% ownership by US citizens or permanent resident aliens or another small business (controlled by citizens/permanent resident aliens) and have no more than 500 employees.

For more information about eligibility, please see the SBIR Eligibility Guide (https://www.sbir.gov/sites/default/files/elig_size_compliance_guide.pdf)

Under the terms of the SBIR program, businesses own their own data and intellectual property. The government does not take an equity stake for the grant. The SBIR contract affords businesses certain rights to intellectual property, data, and software produced under the SBIR agreement, but there are steps that businesses need to take under the SBIR contract to perfect their rights.

Rights in technical data, including software, developed under the terms of the SBIR contract generally remain with the business.

The government obtains a royalty-free license to use such technical data for government purposes during the period commencing with the contract award and ending (at least) four years after completion of the project under which the data were generated.

Upon expiration of the four-year restrictive license, the government may have rights in the SBIR data to use, modify, reproduce, release, display, or disclose the data.

Also, during the period of the restrictive license, the Government may not release or disclose SBIR data to any person other than its support services contractor unless it is for evaluation purposes. Expressly permitted by the business. Or a use, release, or disclosure of information that is necessary for emergency repair or overhaul of items operated by the government.

Inventions produced under the SBIR program may be patented. However, it is important to check the terms of the contract to determine the business’ specific rights and obligations. The government will not make public any information disclosing the inventions, which allow businesses time to file a patent application.

Businesses may retain the principal worldwide patent rights to any invention developed with government support.

The government, however, receives a royalty-free license for its use, reserves the right to require the patent holder to license others in certain limited circumstances, and requires that anyone exclusively licensed to sell the invention in the United States must manufacture it domestically.

Generally, under the SBIR contract, businesses must disclose all inventions developed in the performance of the contract to the granting agency within two months of being informed of the invention by the inventor.

Many federal agencies request that businesses report inventions to the agency through the Edison Invention Reporting Systems at www.iedison.gov. Once disclosed, the business has up to two years to decide whether to elect title and file a patent application.

If the business fails to do so within the two-year time period, the government may have the right to obtain title.

Additionally, any data given to the government that the business wishes to retain rights in must be marked that it is subject to restriction. The required marking includes information about the award and a notice indicating that rights remain in the deliverable. This marking should be placed on both physically printed material and digitally transmitted material.

Finally, when filing a patent application, businesses must include a statement about government license rights to contractor owned inventions in the patent application’s specification.

The SBIR program can be an incredible opportunity for small businesses to receive government funding. However, businesses should be aware of the additional obligations on awardees of SBIR contracts/grants, particularly regarding intellectual property rights. Deciding whether to patent or what to patent can be complicated. We recommend speaking with a patent attorney to help you weigh your options when protecting your business’ intellectual property.

At Wang Hardoon P.C., we take the time to learn your technology and business objectives to obtain valuable intellectual property. Schedule a free consultation with David Hardoon, a Patent Attorney at Wang Hardoon (wanghardoon.com) to discuss your business strategy and inventions.

The SBIR program is a federal initiative for small businesses. It encourages domestic small businesses to engage in research and development. The program provides competitive, awards-based funding with potential for commercialization. The Small Business Administration administers the program, while individual federal agencies oversee the awards.

Eligible participants must be for-profit businesses located in the United States. They must be more than 50% owned by US citizens or permanent resident aliens, or by another small business controlled by them. The business must also have no more than 500 employees.

Businesses own their data and intellectual property generated under an SBIR contract. The government does not take an equity stake. Rights in technical data, including software, generally remain with the business. However, businesses must take steps to perfect these rights.

The government obtains a royalty-free license to use technical data for government purposes. This license starts with the award and lasts at least four years after project completion. For inventions, the government also receives a royalty-free license for its use. It can require the patent holder to license others in limited circumstances.

The single most useful fact about the SBIR programme is that the small business retains ownership of the intellectual property it develops. The government does not take title. What it takes is a licence — specifically, SBIR data rights, a protected licence that limits how the agency may use, disclose and share the technical data and software you deliver.

Confusion arises because a licence and ownership feel similar when the government is the only customer. They are not. You may patent, license, sell and commercialise the technology freely. The agency may use the delivered data for government purposes under defined constraints during the protection period, and more broadly after it lapses.

Caption: the four rights categories a small business encounters across SBIR Phase I, II and III deliverables.

SBIR data rights run for a defined protection period that begins when the award is complete and, under the current policy directive, extends 20 years from the date of the award for data generated under that award. Data generated under a later award starts its own clock. When the period lapses, the government's licence broadens to government purpose rights — it still does not become public domain and you still own the underlying IP and any patents.

Phase II and Phase III programmes usually fail on execution rather than paperwork: the technology works in a lab but is not manufacturable at the volume or cost the transition partner needs. That is a design problem, and it is what our product development consulting and design for manufacturing teams work on alongside SBIR recipients. Early rapid prototyping keeps the technical risk visible while the award still has budget to address it.

SBIR data rights are lost administratively far more often than they are lost in a dispute. Technical data delivered without the SBIR data rights legend can be treated as unlimited-rights data, and reconstructing the record after delivery is expensive.

Build the legend into report templates, drawing title blocks, source-code headers and test-data exports before the first deliverable leaves the building, and keep a delivery log recording what was sent, on what date, under which contract line item.

The SBIR data protection period runs for a defined term from award, and recent policy has extended and standardized that clock across agencies. The exact term and any extension conditions are set by the agency clause in the specific contract, so read the clause rather than relying on a summary.

When the period expires, properly marked SBIR data converts to government purpose rights - the government can use it and share it with contractors for government purposes, but not for commercial exploitation.

Patent protection runs on an independent clock, which is why hardware teams file before publication and before the protection period lapses. Teams still preparing an application can start with our SBIR Phase I concept design and prototyping support.

The small business does. Ownership of inventions, patents, technical data and software stays with the awardee. The government receives a licence — SBIR data rights — to use the delivered data for government purposes, subject to the protection period and marking requirements.

Under the current SBIR policy directive the protection period runs 20 years from the date of the award that produced the data. Afterwards the government's licence converts to government purpose rights; your ownership and any patents are unaffected.

Unmarked or improperly marked data can be treated as delivered with unlimited rights, which would let the agency disclose it freely, including to potential competitors. Correct legends on every page and file are the cheapest protection in the entire programme.

Yes — commercialisation is the point of the programme. You may sell, license or manufacture the technology in commercial markets while the government holds only its licence to the delivered data. Phase III sales to the government can also be made sole-source on that basis.

Not if it is asserted properly. Background IP and data developed at private expense should be listed in the assertions table at award and marked with limited or restricted rights legends on delivery.