Intellectual Property Rights for SBIR Awardees

We have talked before about Intellectual Property rights for the government contractor.  I thought it might be good to get a little more specific to the SBIR awardee since this program usually always involves some innovative discovery. There are 3 areas related to Intellectual Property:

• Trade Secrets

• Patents

• Copyrights

Trade secrets are not formally protected, but instead are kept confidential within a company or organization.  This can be the most useful way to protect some kinds of information.  The only worries here are about normal security with respect to employee confidentiality, computer security and document security.  Patents and Copyrights are formal registrations and carry some legal protection along with them. 

When a company secures an SBIR (or STTR) award there are always clauses covering the intellectual property and who owns it and who has rights to it.  There are also regulations covering who will pay for what costs associated with the protection and registration of those rights.  For instance, FAR 31.205-30 is a section of the Federal Acquisition Regulations (FAR) that covers what costs are allowable under such an award.  Agencies such as the Department of Defense, NASA and Homeland Security will follow this clause in the FAR to the letter.  Other agencies may not interpret this as strictly or may have different policies about what is allowable.  For instance, the NIH doesn't allow patent costs to be billed as an indirect cost and the NSF doesn't allow patent costs at all.

There also is a section of the FAR that covers patent rights ownership and is found in FAR 52.227-11.  One key element from this section of the FAR is that the government has rights if the invention is conceived or or first actually reduced to practice under the contract.   There are 3 important timelines from this section to remember:

• The company shall disclose the patent in writing to the government within 2 months of discovery,

• The company shall elect in writing whether or not to retain ownership within 2 years of disclosure, and

• The company shall file either a provisional or non provisional patent application within 1 year after election.

These are responsibilities that are easily overlooked by a company that is not familiar with government contracting and the complexities of the Federal Acquisition Regulations.  Certainly we don't have the room here to discuss all of the implications and all of the regulations found in the FAR related to intellectual property but I think you can begin to gain an understanding of how important this is to the SBIR holder.  In other words, the SBIR awardee has rights to the ownership of this intellectual property but because the government is funding the development, they have the right to a paid up license to use the patent as well.  This is a crucial concept to understand when submitting a proposal for an SBIR award.  If you have questions, please let me know.  We would be happy to discuss some of these issues with you.