SBIR Program and Intellectual Property Protection

The SBIR & STTR programs provide for intellectual property rights to the small business awardee.  The SBIR or STTR awardee is usually given IP rights in accordance with FAR 52.227-11.  This clearly allows the awardee to keep the rights to the IP, provided they follow the guidelines of the FAR paragraph.  This does allow the government access to the IP for their use if they so desire.  What has been troubling in recent years, however, is that these rights appear to have been either ignored or abused when the Government reaches Phase III of the SBIR program. Now, officially the SBIR program does not fund the Phase III portion of the program.  They can, however fund product development in this phase thru other contracting vehicles or with matching funds from industry. 

The Defense Authorization Act for FY 2013 required the DoD to investigate the transition of SBIR developed technologies into weapons systems (Section 1615).  In response to this, and other requirements of the act, the Department of Defense Inspector General Office issued a report DODIG-2014-049.  This report had the stated objective:

In response to a requirement in House Armed Services Committee Report 112-479, to accompany the National Defense Authorization Act for FY 2013, we reviewed 22 Small Business Innovation Research (SBIR) Phase III contracts, with a combined base award value of about $244.9 million, to determine whether the Services properly awarded SBIR Phase III contracts to other than small businesses. Specifically, we determined whether the Services considered small business intellectual property rights and properly notified the Small Business Administration (SBA) of the contract award.

The Conclusion of the report stated generally that there was "no problems noted":

U.S. Army Medical Research Acquisition Activity, Naval Air Systems Command, Naval Sea Systems Command, and Air Force Research Laboratory contracting personnel:
• properly awarded all 11 SBIR Phase III contracts that were awarded to other than
small businesses because the awardee owned the SBIR data rights; and
• considered SBIR intellectual property rights when awarding 21 of 22 contracts by including the required contract clause.

In addition, DoD organizations did not:
• have any documented instances of contractor intellectual property complaints within the SBIR Program because DoD personnel were not required to track complaints and believedthat none existed; and
• know the complete universe of SBIR Phase III contract awards because no mechanism existed to fully track SBIR Phase III contracts.

This report has been criticized recently (April 17, 2014) in a letter from the Small Business Technology Council (SBTC) to the Office of the Inspector General.  The letter from the SBTC stated, in part, that:

• The report fails to adequately respond to the House request
• The DoD-designated SBIR Phase III awards (as focused on by the report) are not the problem
• The IG report accepted that DoD personnel were not required to track IP complaints and believed that none existed
• The report does not review protests, lawsuits or administrative procedures as requested by the House, saying it could find none
• The report does not review action by primes, as similarly requested
• The report simply accepts DoD personnel assertions that complaints were not required to be tracked within the SBIR program and that none were believed to exist
• The IG report does not see fit to test this no-problem-reported finding with any interview with any small businesses or the SBA in a search to find complaints.

The SBTC is standing up for small business on this issue.  They are requesting that the IG office re-examine the IP rights of SBIR/STTR awardees in relation to awards to develop hardware relative to Phase III awards.  As a small business I would recommend you support this effort.  You may contact your congressional representatives on this to have them put more pressure on the DoD IG office.  You could give the SBTC a call to see if there is anything you can do to help (report cases of abuse).  Finally, you can talk with other small business owners to make them aware of the problem too.