In 1982, the Small Business Innovative Research (SBIR) grant program was launched. Since then, small technology companies have received more than $26 billion to develop and commercialize new technologies. The SBIR program is designed to spur technological innovation, satisfy Federal R&D needs, and increase commercialization of technologies derived from Federal R&D. Eleven Federal agencies, including DARPA, NASA, and the DoD, participate in the SBIR program. These agencies must spend at least a portion of their annual R&D budgets on SBIR programs.
In order to qualify as a small business, the US company must have fewer than 500 employees and meet a few other criteria. Qualified small businesses are given money in phases to develop new technologies based on their proposed solution to R&D prompts issued by participating agencies. This research and development generally leads to the development of new technologies, some of which are patentable. To find out who owns the patent rights, and what obligations a small business has under SBIR grants,
SBIR grants provide a substantial amount of money for research and development. R&D funded under SBIRs is broken into three phases. In the first two phases, up to $1,150,000 will be given to the small business to develop and commercialize the new technology. SBIR grants are controlled by government procurement contracts which use FAR provisions. FAR provisions are standard provisions created by the government which are used in a wide array of contracts between government agencies and private companies. This standardization has its advantages. Private contractors generally have a lot of experience with FAR provisions. Because of this familiarity and consistency, companies which do a lot of business with the government or subcontract with large government contractors can easily develop company policies and operations which comply with FAR contract provisions. On the other hand, FAR provisions are uniformly applied, making it harder for small contractors to negotiate specialized contracts with the government when the situation calls for it.
Since the program’s inception, more than 67,000 patents have issued on technologies developed under SBIR grants. The Bayh-Dole Act and FAR provisions included in the SBIR contracts governing the development of these technologies give the small business doing the research and development ownership of those patents! First giving the small business ownership of technologies developed under SBIR grants, rather than having the government immediately take ownership, is a departure from how the government handled patent rights before Bayh-Dole passed. Previously, the government immediately took title to patent rights for technologies developed under government contracts and the company that developed the technology had to submit paperwork requesting a license to use the technology in a private setting. These licenses were typically granted, but it added extra paperwork for the private company and delayed or completely stifled commercialization of the newly developed technology where such a delay or suppression was typically unwarranted.
Under Bayh-Dole small companies and non-profit organizations, like universities, may elect to keep the patent rights to inventions they conceive of or first actually reduce to practice (i.e. construct a working model of the invention) during the performance of work under a funding agreement, like an SBIR grant. In order to keep the patent rights, the small business must notify the government of the invention and take certain steps to protect both the government’s rights and the small business’s rights to the patented technology.
Bayh-Dole is designed to encourage commercialization of federally funded R&D therefore if a company develops a technology, patents it, but does not try to commercialize it, the government can exercise march-in rights. March-in rights allow the funding agency, on its own initiative or at the request of a third party, to grant licenses to use the invention to other companies, like the small business’s competitors! In order to avoid this, the small business must take “effective steps to achieve practical application of the…invention.” To date, no government agency has exercised march-in rights.
The specific steps required to secure patent rights for inventions developed under government funding are typically laid out in the R&D contract between the government and the small business. NASA funded SBIR contracts specify the steps required by including a FAR provision, FAR 52.227-11. Come back tomorrow for part 2, where we’ll dive into the specifics of how to retain patent rights to technologies developed under NASA SBIRs (and other R&D contracts using FAR 52.227-11), which can be used to give you a competitive advantage in the commercial application of technologies NASA gave you money to develop!