On April 2, 2019, the U.S. Small Business Administration (SBA) issued a new Policy Directive for the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. All provisions in the new Policy Directive apply to both the SBIR and STTR programs unless specifically noted otherwise. The Policy Directive is available here.
The new Policy Directive is prospective, affecting only SBIR and STTR awards made after May 2, 2019. Existing SBIR/STTRs will continue to function under the current policies.
Significant changes in the new Policy Directive include:
New/Revised Definitions The SBA updated and defined several new terms relating to data rights, including the following: computer database, computer programs, computer software, computer software documentation, data, form fit and function data, operations maintenance installation or training (OMIT) data, prototype, SBIR/STTR computer software rights, SBIR/STTR data, SBIR/STTR data rights, SBIR/STTR protection period, SBIR/STTR technical data rights, technical data and unlimited rights. To the extent practicable, the SBA based these definitions on definitions used in the Federal Acquisition Regulation (FAR) and Department of Defense Federal Acquisition Regulation Supplement (DFARS).
The SBA is adopting a new, potentially narrower definition of “Intellectual Property” (IP):
(u) Intellectual Property. The separate and distinct types of intangible property that are referred to collectively as “Intellectual Property,” including but not limited to: patents, trademarks, copyrights, trade secrets and mask works.
The new definition removed previous references to “ideas,” “know-how,” “business,” “technical and research methods,” “other types of intangible business assets,” “all types of intangible assets either proposed or generated by a small business concern (SBC) as a result of its participation in the SBIR program,” “designs” and “SBIR technical data.” The SBA removed the terms “ideas” and “business,” because they are not typically recognized as intellectual property. Although some references were removed, the SBA noted that the list in the new definition is not exclusive. As a result, some of the removed references may still be considered IP under certain circumstances.
Data Rights The current directives state that the SBC retains the rights in data for a minimum of four years from the date of the last deliverable. This protection period (referred to as the “SBIR/STTR Protection Period”) is extended with each subsequent, related SBIR or STTR award. The government may not use, modify, reproduce, release, perform, display or disclose data or computer software for a minimum of four years. However, after expiration of the SBIR/STTR Protection Period, the government has a royalty-free license to use, and to authorize others to use on its behalf, this data for government purposes, and is relieved of all disclosure prohibitions and assumes no liability for unauthorized use of this data by third parties.
Pursuant to the new Policy Directive, the SBIR/STTR Protection Period will still be a minimum of four years, but it will no longer be subject to indefinite extensions. Instead, there will now be a maximum Protection Period of 20 years. When the Protection Period expires, agencies will have government purposes rights to the data, allowing the government to use the data itself and to allow third parties (with proper nondisclosure agreements) to use the data for noncommercial purposes. The government will continue to obtain unlimited rights in the form, fit and function data and the operations, maintenance, and installation or training purposes (OMIT) data consistent with FAR 52.227-14, FAR 52.227-20, DFARS 252.227-7013 and DFARS 252.227-7018. This means that the government will continue to treat a SBIR/STTR awardee’s data just as it has treated data developed at private expense, making the carve out apply only to the form, fit and function and OMIT data.
The Policy Directive is also clear: SBIR/STTR awardees must identify clearly and mark their data with a prescribed legend. The SBIR/STTR awardee has a six-month period in which to correct any marking errors or to mark any previously unmarked data. No corrections or additions will be allowed after the six-month period. If data is unmarked, the government obtains unlimited rights in the data. In addition, when responding to SBIR/STTR solicitations, offerors are now required to include a restrictive legend identifying and marking proprietary information such as trade secret, commercial or financial information on the title page.
Funding SBIR/STTRs have never been allowed to accept duplicate funding from federal sources for essentially equivalent work, but there is no explicit restriction regarding the acceptance of state program funding for work to be performed under an SBIR/STTR award. Under the new Policy Directive, the SBA clarified that the definition of “essentially equivalent work” applies to work funded by the same or any other federal agency. As a result, SBIR/STTR awardees may accept state program funding as supplemental funding for SBIR/STTR-funded projects.
Partnering with Research Institutions Also new, the Policy Directive lifts the ban on STTR awardees working with more than one research institution. The STTR awardee may now partner with more than one research institution as long as at least 30% of the work is performed by a single research institution and the Principal Investigator is employed by either the SBC or the primary research institution.
Phase III Work Finally, the SBA has tightened the rules surrounding Phase III – commercialization awards. Despite having created the technology and being in the best position to commercialize it, agencies have failed to exercise their contractual authority to offer Phase III follow-on work to SBIR/STTR awardees. Agencies pursued other companies to commercialize the technology instead. Now, agencies that bypass the SBIR/STTR awardee in favor of a different company must provide the SBA with documentation to justify their decision.
These changes are mostly favorable to SBIR/STTR awardees as long as they are vigilant about their protecting their rights and pay attention to their responsibilities