IP Costs Associated with SBIR and STTR

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The National Institutes of Health (NIH) small business programs, which include the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs, are the largest source of early stage capital for life sciences startups in the United States.  The grant money helps startups accelerate their discoveries and put their discoveries into clinical trials.  The grants awarded are just that, a grant and not a loan; there is no requirement to pay back the money. The NIH grants $1.2 billion dollars every year in the combined SBIR and STTR programs.

In addition to the grant award, the grantee companies own their data and intellectual property. The government does not take any equity stake for the grant.   Advantageously, the grantee can leverage the grant money to get additional funding from angel investors, venture capitalists and various partnering opportunities.

More recently, the NIH included Technical and Business Assistance (TABA) support requests in the grant application.  The purpose of TABA is to help the awardees identify, address and solve their most pressing product development needs.  TABA can help the small businesses make better technical decisions, minimize technical risks and accelerate commercialization.   TABA is essentially a mechanism to help awardees cover commercialization and business costs that otherwise could not be included in the SBIR/STTR proposal.

As part of the application, applicants can request $6500 per year for Phase I.  Applicants for Phase II, can request $50,000 per project period.  TABA funds can also be used for Intellectual Property (IP) procurement.  Applicants must label the requested cost “Technical Assistance” on one of the lines from 8-10 under “Section F. Other Direct Costs” in the proposal.  Applicants can request funds to support intellectual property protection, including development of patent applications, performing freedom-to-operate analysis, patentability searches, analysis of existing IP and competitor products, and filing fees.  Applicants can utilize the TABA to pay for patent filing costs.

For SBIR and STTR grants from the Department of Energy (DOE), patent prosecution costs related to obtaining United States patent protection for the grantee’s inventions from the award may also be budgeted under commercialization assistance.  DOE is explicit in saying patent prosecution costs include attorney fees and United States Patent and Trademark Office (USPTO) fees.  United States patent protection includes filings with the USPTO related to provisional, Patent Cooperation Treaty (PCT), non-provisional, continuation, and continuation-in-part patent applications.  Under the DOE parameters, patent prosecution costs related to foreign patent protection (e.g. foreign attorney, foreign patent office or translation fees) are not allowed.

We encourage start-ups to request TABA funds in their grant proposals.  These TABA funds will help defray the costs for drafting and preparing patent applications and patent procurement fees.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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