Newsletters

Manufacturing March 2008

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.