TL/DR: For participation in the SBIR and STTR programs, agencies now have a standard set of questions to ask small business concerns about their foreign investments and affiliations. Companies can use the questions to prepare for their disclosures.

The Small Business Administration (SBA) is amending the Policy Directive of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs to harmonize participating agencies’ collection of information about applicants’ foreign investments and affiliations. Participating agencies have been required to collect such disclosures since passing of the SBIR and STTR Extension Act of 2022.

The amendment incorporates into the SBIR and STTR Policy Directive a standard template for participating agencies to collect disclosures of foreign investment and affiliations of small business concerns (SBCs) applying to the SBIR and STTR programs. A copy of the template disclosures is provided below. Each participating agency may tailor the Policy Directive when implementing agency‑specific regulations, but such adjustment must not conflict with or contradict the Policy Directive.

The amendment permits participating agencies to require a certification to the accuracy and completeness of an SBC applicant’s responses. SBC applicants should be aware that inaccurate, incomplete or misleading disclosures to the participating agencies may result in a range of penalties including fines, being excluded from future grants and contracts and even individual criminal liability.

In the near future, participating agencies are expected to adopt the template disclosure concerning SBIR/STTR applicants’ foreign investment and affiliations in their due diligence and information-collection procedures. Changes to the Policy Directive are scheduled to take effect on May 3, 2023, but may be subject to withdrawal if the SBA receives significant adverse comment prior to such date.

Companies seeking SBIR or STTR awards at any phase should (i) review the list of questions below to familiarize themselves with the required disclosures, (ii) develop and maintain clear records and procedures pertaining to disclosures and (iii) seek the advice of counsel before revealing any trade secret or privileged information via disclosure or if they are unsure of how to respond. For further guidance, please feel free to reach out to your Fenwick contact or the authors of this alert.

Disclosure Questions:

1. Is any owner or covered individual of the applicant or awardee party to any malign foreign talent recruitment program?

   If yes, disclose the first and last name of each owner or covered individual, identify their role (i.e., owner or covered individual), and the malign foreign talent recruitment program.

2. Is there a parent company, joint venture, or subsidiary, of the applicant or awardee that is based in or receives funding from, any foreign country of concern?

   If yes, disclose the name, full address, applicant or awardee relationships (i.e., parent company, joint venture, or subsidiary) of each entity based in, or funded by, any foreign country of concern.

3. Does the applicant or awardee have any current or pending contractual or financial obligation or other agreement specific to a business arrangement, or joint venture-like arrangement with an enterprise owned by a foreign state or any foreign entity?

   If yes, disclose the name of each enterprise or foreign entity, type of obligation, agreement, or arrangement (i.e., contractual, financial, or other), description of obligation, agreement, or arrangement, and the foreign state(s) and/or the country of the foreign entity (or entities).

4. Is the applicant or awardee wholly owned in a foreign country?

   If yes, disclose the foreign country.

5. Does the applicant or awardee have any venture capital or institutional investment?

   If yes, proceed to question 5a. If no, proceed to question 6.

   5a. Does the investing entity have a general partner or any other individual holding a leadership role who has a foreign affiliation with any foreign country of concern?

   If yes or unable to determine, disclose the venture capital or institutional investing entity's name, the percentage of ownership obtained by the investing entity, and the type of investment (i.e., equity, debt, or combination of equity and debt).

6. During the previous 5-year period, did the applicant or awardee have any technology licensing or intellectual property sales or transfers, to a foreign country of concern?

   If yes, disclose the name, address, and country of the institution or entity that licensed, purchased, or received the technology or intellectual property.

7. Is there any foreign business entity, offshore entity, or entity outside the United States related to the applicant or awardee?

   If yes, disclose the entity name, relationship type (i.e., foreign business entity, offshore entity, entity outside the United States), description of the relationship to the applicant or awardee, and entity address and country.

8. Does the applicant or awardee have an owner, officer, or covered individual that has a foreign affiliation with a research institution located in a foreign country of concern?

   If yes, disclose the first and last name of each owner, officer, or covered individual that has a foreign affiliation with a foreign country of concern, identify their role (i.e., owner, officer, or covered individual), and the name of the foreign research institution and the foreign country of concern where it is located.

Judd Chamaa also contributed to this alert.