The Small Business Innovation Research Program (SBI)R) program was established in 1977 to stimulate innovation in the U.S. economy by engaging innovative small business concerns in federally-funded research and development. The program, unique in federal government contracting, uses a three phase process to solicit proposals and award funding agreements for technology development. Phase I is a feasibility effort; Phase II involves continuation of development; and Phase III is a transition to commercialization.
The SBA is required to issue a policy directive setting forth guidance to the federal agencies participating in the SBIR and STTR programs. On a regular basis, the SBA reviews its policy directives to determine areas that need updating and further clarification. On November 7, 2014, the SBA issued a notice of policy directive amendments. After several notice and comment periods over the next four years, the agency finally released its final Policy Directive on March 22, 2019.
The SBA’s revised Policy Directive for the Small Business Innovation Research Program (SBIR) which now includes the Small Business Technology Transfer (STTR) Program, became effective on May 2, 2019. The 150-page document provides important updates and significant changes regarding data rights protection that are afforded to small business awardees. Notably, the data protection period, during which the government cannot disclose SBIR/STTR data, has been changed to twenty years for awards that are made pursuant to new funding agreements.
The revised Policy also makes key changes to definitions as new terms have been introduced and existing definitions have been updated. For example, SBIR/STTR Data now specifically includes Technical Data and Computer Software. The updated Policy has strengthened the Phase III preference award for small business awardees.
Data protection is one of the most unique and important protections accorded to SBIR firms. Its purpose is to provide an incentive for small businesses to engage in government-funded innovative research and to support its potential commercialization, without the government obtaining Unlimited Rights in the technology. Because of SBIR/STTR Data Rights, small businesses, capable of innovative, timely and agile solutions, are incentivized to participate in the SBIR/STTR program given they will not lose control of their technology and such can put the company in a sole source competitive position.
The most notable update contained in the new Policy Directive is the change in the restricted disclosure period. Previously, the government was obligated to protect SBIR/STTR data for a minimum of four years (five years for military awards), with an automatic extension of rights protection through any subsequent awards related to the original Phase I research. This meant that an awardee could extend its data rights protection for an indefinite period of time. This led to some confusion due to the difficulty of tracking follow-on awards.
The revised Policy Directive provides that, as of May 2, 2019, a flat 20 years will apply to awards with new funding agreements. The protection period starts from the date of the award and there will no longer be an extension of data rights through follow-on awards. Importantly, it appears that the prior rule will apply to data rights developed under prior awards. This may create challenges to separate technology developed under the prior policy that arguably can be protected indefinitely with follow on Phases that are subject to the new policy, given the applicability of a new funding agreement.
At the end of the 20 years, the government receives “Government Purpose Rights,” allowing it to use the data for its own purposes and to provide it to third parties for noncommercial purposes to assist the agencies in their evaluation and administration of SBIR/STTR programs. The Policy Directive also clarifies that during the 20-year protection period, the government has some limited rights to data to enable agencies to evaluate the technology being developed and to administer their programs. These rights are similar to restricted or limited rights under the Federal Acquisition (FAR) and Department of Defense FAR Supplement (DFARS), and do not permit sharing data with third parties.
If you have a question about the revised Policy Directive and how it impacts your business, I welcome you to contact me.