Patent Rights and Obligations under SBIR Grants, Part 2 of 2

In 2011, NASA used the SBIR program to funnel over $150 million to small business to carry out research and development. Phase I grants of up to $150,000, Phase II grants of up to $1,000,000, and follow on Phase III grants are available to qualified companies. Since 1982, nearly 18,000 companies have participated in the SBIR program and over 67,500 patents have issued on SBIR-funded technologies. SBIR grants represent a great way for small aerospace companies to receive research and development dollars. Many of the technologies NASA wishes to develop through SBIR grants are directly in line with or closely related to the development paths of commercial spaceflight companies. Because these technologies are closely related to technologies small commercial spaceflight and space services companies wish to develop, ideally companies participating in the SBIR program will retain patent rights or a license to utilize the technologies they have developed under an SBIR grant. Luckily, NASA’s SBIR contracts include the contract provision FAR 52.227-11, which provides a clear path for retaining IP rights in SBIR funded technologies.

Every journey begins with a single step and the journey of securing patent rights for SBIR-funded technologies begins with invention. If an invention was originally conceived of or actual reduced to practice in connection with the SBIR grant, we have to follow the contract provision. “Originally conceived of” means that an invention was thought up during the course of performance of the SBIR contract. For example, if you think of a new combustion chamber design while performing R& D under a NASA SBIR contract for developing new engine designs, the new combustion chamber invention was conceived of in connection with the SBIR grant. Actual reduction to practice occurs when you build a prototype of an invention in connection with the performance of an SBIR contract. This is the more traditional route: generally companies develop an idea and look to SBIR grants to fund the actual construction.

Within two months

After an invention has been conceived of or reduced to practice, someone within the company should be notified of it, in order to determine what appropriate next steps should be taken. Once this inventor’s report has been made, the company has two months to report the invention to NASA. NASA allows this report to be made in any format but they prefer companies to use the New Technology Reporting website. Once this report has been made, congratulations are in order because a non-exclusive worldwide license to use the technology has been secured! The company is free to use the technology however they see fit, regardless of their later decision to secure patent protection on the SBIR-funded technology.
A word of warning: failure to disclose the invention within two months of the company’s patent staff receiving a report of it is a violation of FAR 52.227-11. This violation can result in the company losing all rights to patent or use the invention!

Within ten months to two years

The decision to pursue patent protection of an SBIR-funded invention must happen within as little as ten months if details of the invention have been published, the invention has been publicly used, or offered for sale. The patent application must also be filed within this window, in order to avoid legal bars to patenting.
If the invention has been kept confidential, the company may ponder its decision to secure patent protection for up to two years from notification. NASA must be notified in writing of the company’s decision about patent protection. If the company decides to secure patent protection, it must file the necessary application(s) within one year and NASA will retain a nonexclusive license to use the invention or have others use it on their behalf. If the company decides to forego patent protection, NASA may file a patent on the invention. In this instance, the company still has a license to use the technology itself, but NASA has the added ability to license the technology to third parties (i.e. competitors!).

Who pays?

In some instances, SBIR funds can be used to pay for filing a patent application. Some patent practitioners, including myself, will provide an upfront estimate of the cost of securing a patent on a given invention and will charge a set, flat-fee for drafting a patent application. Including this established cost in an SBIR funding proposal can help ensure that SBIR funds can be used to pay for patent protection.

Happy creating!

NASA SBIR proposal request information and solicitations can be found on this website.