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.