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SBIRs & Your Intellectual Property

Posted by Ed Bard on

SBIR IP top secret confidential papers

Disclaimer:  The information contained in this article does not constitute legal advice.  Please consult your IP attorney for legal advice.

How Intellectual Property Helps Your Business

Intellectual property can help your business in several ways.  It protects core products and services, creates valuable assets, and expands market shares.  It also demonstrates technology leadership, discourages copying and infringement, and increases litigation readiness.  Finally, securing intellectual property can directly lead to a stream of revenue and generate interest from venture capital and/or other funding mechanisms.

Types of Intellectual Property in Government Procurement 

There are many types of intellectual property: patents, copyrights, trademarks, trade secrets, and SBIR/STTR data.  A patent for an invention is the grant of a property right to the inventor, which is issued by the U.S. Patent Trademark Office (USPTO).  Patents give the patent holder the right to prevent others from using or selling their patented object.  The most popular types of patents are utility and design.  Patents are usually never in commercial contracts and are instead mostly in development contracts and research projects.  

Copyrights are a bundle of exclusive rights, such as copies, derivatives, and distribution, over creative and literary expression.  These rights typically last for the life of the author plus 50 years.  Trademarks provide protection over a word, phrase, design, or symbol that identifies a source of goods.  A trademark survives as long as it is being used.  Trade secrets protect ingredients, formulas, steps of a process, and so on.  Trade secrets exist as soon as they are created and may last indefinitely, as long as it is a secret.            

SBIR/STTR data or technical data is a form of intellectual property where the government is under a non-disclosure obligation and cannot share computer software or technical information.  Technical data is not financial, management, cost, price, or contract administration information; instead, it is only recorded information.  It generally does not rise to the level of patented technology. 

Government Funding and Patent Rights

There are three types of rights that can be allocated to technical data:

  • Unlimited or Unrestricted rights are somewhat like ownership and give the right to do anything with the data. This right is concurrent rather than exclusive and is associated with government funding. 
  • Limited or restricted rights are narrowly defined and are typically contract or program-specific. These rights are typically associated with private, non-SBIR funding.
  • Government purpose license rights are usually associated with mixed funding and apply to both technical data and software.

If your invention was originally conceived or actually reduced to practice in connection with an SBIR/STTR grant, government funding can affect patent rights.  Small businesses must take three affirmative steps to secure title to their patent rights:

  1. Disclose their invention to the government in writing within two months of discovery per FAR 52.227-11. It is recommended to use iEdison for reporting. 
  2. Elect to retain the title within two years of invention disclosure (if the invention has not yet published) per FAR 52.227-12.
  3. Apply for patent application to the USPTO. Expertise of patent professional is highly recommended. 

Data Protected Under SBIR/STTR

The government cannot share your SBIR/STTR data with anyone outside the government for either a four-year or five-year protection period, which can be extended.  The data has three basic attributes.  The data must be recorded; the recorded data includes source codes, sketches, drawings, equations, reports, and descriptions of SBIR/STTR technologies.  The data must be technical; information such as company background and costs and pricing data are not considered technical.  The data must also be SBIR/STTR-funded, which includes grants, contracts, cooperative agreements, or any other type of SBIR/STTR funding award.

SBIR Data and Rights

SBIR data is recorded technical information of any type.  This may include SBIR final reports, sketches, computer source codes, object codes, reports, drawings, formulae, equations, written descriptions of SBIR technologies, charts, and any other type of recorded technical information.  SBIR data rights do not protect ideas or concepts unless they are written down.

All SBIR-funding agreements receive SBIR data rights.  Under the DoD SBIR Data Rights clause, agencies are required to protect all proprietary information and must abstain from disclosing all information generated under an SBIR funding agreement.  FAR 52.227-20 provides four years of data protection from the end of the contract while DFARS 252.27-7018 provides five years of data protection from the date of the last deliverable.

SBIR data is valuable in that unlike non-SBIR data, the government cannot disclose SBIR data to outside entities.  This is because disclosure destroys the value, as firms will not pay for something they can access for free.  Data rights protection periods are able to roll over indefinitely which ends up exceeding the protection period for patents.  Because of the “roll-over” clause in Section 7 of the Directive, it is imperative to provide notice of subsequent awards to agencies that you have received prior SBIR funding agreements, as well as the new protection period.  This ensures that the prior funding agencies are aware that your prior protection periods have “rolled over” to the new data.  If competitors intend to gain access to SBIR data, they must either purchase the company or the technology line the data supports.  

Marking Data

All SBIR data is required to be marked with the data rights legends found in DFARS 252.227-7018 for defense agency contracts and FAR 52.227-20 for non-defense (civilian) agencies.  The exact wording from those clauses should be used and the date must be annotated to indicate the “roll-over”.  If data is not marked, you can potentially lose your data rights.  There is no deadline for marking in the DFARS or FAR clauses and you can cure a failure to mark by resubmitting your deliverable with the SBIR marking on it.  However, you have no recourse if any disclosure took place while your data was unmarked and no disclosure can be made after re-submission.

SBIR data rights apply to all SBIR funding agreements.  Phase I and II are clearly SBIR funding agreements and customarily includes SBIR data clauses FAR 52.227-20 for non-military and 252.227-7018 for military.  While data rights apply to Phase III, it is imperative to identify Phase III.  Identification is the key to preserving data rights in procurements that might not look like an SBIR but constitutes a Phase III award.  Once a Phase III is identified, the law adds Phase III rights and obligations, which includes Phase III data rights. 

SBIR technical data rights are non-negotiable; therefore, agencies must insert the SBIR technical rights clause into every SBIR award, including Phase IIIs.  Agencies cannot diminish or remove SBIR Phase III technical data rights during contract administration and any transfer of technical data rights to the agency or another party must be in writing and can only be executed after the SBIR award is signed.  SBA is required to immediately report any attempt or action by an agency to condition, exclude, or diminish SBIR data rights to Congress. 

Non-SBIR Data Rights

Pre-existed, noncommercial data developed at private expense is not SBIR data.  This is still true even if this data is delivered under an SBIR contract.  To deliver this data, it must be marked with the Restrictive rights legend for non-commercial computer software or Limited rights legend for anything other than computer software or documentation to indicate that it was not generated under the SBIR contract.  This data must be marked in this manner because such data can never be disclosed.

Because non-SBIR data can never be disclosed, small businesses must affirmatively act to preserve non-SBIR data.  Non-SBIR data rights are more restrictive than SBIR data rights. To preserve, small firms must identify data developed at private expense and not developed under the SBIR contract that the small firm may bring to the contract, assert rights to the data, describe the basis for the assertion, and provide the name or company asserting rights.  If you fail to identify and assert rights to non-SBIR technical data submitted under a contract, you may forfeit rights to the non-SBIR data.

Computer Software and Rights

When acquiring commercial software, the government can use the contractor’s standard commercial license.  This allows for some government-specific negotiation; additionally, certain standard government clauses must still be used and cannot be disclaimed by the license.  Restricted rights in software may be developed for government or customized commercial software.  These rights are not as favorable to contractors as the government may modify the software for their use.  Unlimited rights in software are required to be delivered under the contract and can be used when other limitations such as government purpose rights expire. 

Agency Pushback

Some agencies push back on recognizing or acknowledging Phase IIIs and SBIR data rights due to the desire to retain maximum flexibility with data.  Contracting personnel are also under the impression that openly available data results in cheaper prices.  To deal with the push back, SBIR firms must establish Phase III SBIR status in one of two ways.  The firm can use a technology tree that demonstrates prior SBIR lineage of the SBC’s technology.  The firm can also use a “side-by-side” showing similar metrics, language, and functionality between the agency requirement and the SBC’s past SBIR effort.  Next, firms should draft and send a comprehensive letter demonstrating the Phase III status of the agency requirement to the contracting officer.  The letter should cite the Directive, as it incorporates the force of law.  As soon as Phase III status is established, the law provides SBIR data rights.


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