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IP Protection Before, During and After an SBIR Grant

If you are a small business (generally, less than 500 employees) and do any sort of technology development, you need to be aware of the federal SBIR grant program. Various agencies of the U.S. Government provide research grants for high-risk research projects that solve technological problems for the agency. The Small Business Act requires part of that research funding to go to small businesses and allows the small businesses to retain intellectual property (“IP”) rights in patents, copyrights, data, trademarks, and trade secrets created or developed under a funding contract from the relevant federal agency.

SBIR grants provide a spectacular benefit for small businesses, and the Indiana Economic Development Corporation provides wonderful matching programs for grant recipients. However, many steps must be taken by the small business to optimize their patent, copyright, and data rights in the research and inventions they develop under the grant. Small businesses must prepare before the SBIR contract period, be diligent during the contract period, and follow up after the contract period in order to maximize their results from SBIR and related work.

I. Copyright

Businesses can typically claim copyright in their creative works of authorship generated under a grant only after obtaining permission from the granting Agency. If the work is a scientific or technical article, and it is being submitted to a journal or like publication, then no permission is needed. Otherwise, any claim to copyright requires Agency permission. In either case, the government gets a nonexclusive, royalty-free, worldwide license. Small businesses may only include copyrighted material from non-grant-related work in submissions to the government if (1) it is identified as copyrighted material, and (2) the government is granted a license co-extensive with its rights in copyrightable material generated under the SBIR contract.

II. Proprietary Rights

An SBIR grantee can also retain proprietary rights in confidential data that is generated during the SBIR contract period. These “data rights” require certain marking and reporting, and prevent the government from revealing confidential data to anyone outside the review process, even to put out requests for proposals. This confidentiality restriction cannot be coerced away from a small business during negotiation of the SBIR contract, and must be maintained by the government until some years after delivery of the small business’ last SBIR deliverable.

III. Patents

The SBIR patent policy is somewhat more complex, but clearly defines the types of inventions it covers: they must be “conceived or first actually reduced to practice [i.e., made] in the performance of work under a Government funding agreement,” or “Subject Inventions.” This policy is designed to “promote utilization of inventions arising from [the grants],” “encourage maximum participation of small business firms,” “promote collaboration between commercial and non-profit organizations,” “promote free competition and enterprise,” “promote commercialization and availability of inventions,” and “prevent the unreasonable use of inventions.”

Even before the SBIR contract period, small businesses should begin to maintain admissible records of invention activity and file patent applications as appropriate. An invention review committee, forms, and process should be instituted so that potential inventors (i.e., employees or contractors in a position to develop inventions) and management are prepared to do what they need to do during the SBIR contract period to maintain their company’s patent rights. Patent applications should be filed before the invention becomes public (i.e., the first public use, public disclosure, sale, or offer for sale), typically before submitting an SBIR proposal, and certainly before the effective period of an SBIR funding contract.

During the contract period, inventors must promptly disclose their inventions to the small business, and the small business must notify the contracting Agency within two months of the inventor’s notice. This notice to the Agency requires significant detail about the invention and identification of events and dates that might be relevant to patentability. Then, within two years of the invention notice, the small business must notify the Agency of its election whether or not it wishes to retain the related patent rights. That period of time may be shortened if there is a statutory bar date under patent law. The small business must file a patent application either within one year of the election or before the statutory bar date, whichever comes first. The small business must file in foreign jurisdictions within ten months after the initial application and must give the Agency 30 days’ notice before ending its efforts in relation to any application or jurisdiction. These requirements support the policy of allowing the federal government to step in and pursue patents if the small business chooses to let them go.

When the small business obtains patent rights in a Subject Invention, the government retains a worldwide, non-exclusive, royalty-free license to make and use the invention and have it made by contractors. If the federal government takes over an application or patent, the small business retains a non-exclusive, royalty-free license to use the invention wherever the U.S. Government has rights. The small business’s domestic license to make and use the invention may be revoked, but only in a field of use or geographical area in which it has not achieved practical application or fails to make the benefits of the invention reasonably accessible to the public. As a result, diligent post-grant work toward commercialization of an invention is highly recommended.With organization, good counsel, and planning, SBIR participants can garner the benefit of significant grant funding while retaining a great deal of the intellectual property they develop with that money. Contact us if we can help you navigate that path.

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