SBA Amends SBIR / STTR Policy Guideline, Clarifying Broad Phase III Eligibility for Successors in the Interest of Phase II Beneficiaries – Corporate / Commercial Law

United States: SBA Amends SBIR / STTR Policy Guideline, Clarifying Broad Phase III Eligibility for Successors in the Interest of Phase II Beneficiaries

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The United States Small Business Administration recently made important clarifications to its Policy Guidance on Innovation Research for Small Business (SBIR) and Technology Transfer for Small Business (STTR), giving industry more for certainty as to whether and when a successor of interest to a Phase I / Phase II SBIR / STTR awardees are eligible for Phase III scholarships.

As we discussed in more detail on GovConLaw, the SBIR and STTR programs are three-phase federal programs through which small national businesses can receive federal research and research and development (R / D) funds and resources, to help them in their development and further commercialization. In Phase I, an agency awards an eligible small business a contract or grant, typically not exceeding $ 150,000, to conduct experimental or theoretical R&D activities related to feasibility on a topic of interest or interest. a particular need for the agency. The agency awards the contract or grant on the basis of “scientific and technical merit and the feasibility of ideas that appear to have commercial potential.” The Phase II grants are then intended to continue the efforts of the IR / R & D phase which meet the needs of the agencies and which have the potential for commercial application. Typically, Phase II grants do not exceed $ 1 million depending on a variety of factors including Phase I results, the company’s marketing history, private sector funding commitments, and others. indicators of the idea’s commercial potential.

Finally, phase III rewards focus on commercializing the work that arises, extends or complements an effort made during phase I / II. And while companies typically do not receive SBIR funding in Phase III, a major feature of SBIR / STTR programs, and an incentive for small business participation, is that the agency is licensed for limited data rights. developed under an SBIR / STTR award, which promotes a competitive advantage for the small business, as opposed to larger potential competitors, to achieve commercialization. The government’s limited rights license to SBIR / STTR data, combined with the legal requirement for the agency to pursue Phase III assignments on a non-competitive basis with the small business that performed previous SBIR / STTR assignments, is a central aspect of the program.

Effective October 1, 2020, the SBA made changes to its policy directive, which imply Phase III eligibility for a Phase II beneficiary in one particular circumstance: when “the small business that performed the previous SBIR / STTR assignments ”no longer exist due to a merger or acquisition. As a reminder, the SBA policy guideline provides detailed guidance to federal agencies participating in SBIR and STTR programs, outlining how these agencies should generally conduct their programs and what discretion the agency should tailor its program to its own needs. Previously, the policy directive suggested that a firm was eligible for a Phase III scholarship only in two circumstances: when it had received a Phase I or Phase II scholarship or had undergone a novation for a phase I or phase II scholarship. amendment, the SBA clarified that this section of the Police Directive “was never intended to be an exclusive list of all scenarios in which an SBIR / STTR assignment could be assigned to a company other than the recipient of a previous Phase I or Phase II award “. The new amendment clarifies that these are just two examples and adds additional wording to read as follows:

[A Phase II] The beneficiary can include, and SBIR / STTR [Phase III] work can be performed by those identified through a “novated” or “successor interests” funding agreement or similarly revised. For example, a Phase III recipient may have received a Phase I or Phase II grant or have renewed a Phase I or Phase II grant (or received a revised Phase I or Phase II grant). phase II if it is a grant or a cooperative grant) or be a successor-entity of interest. With this clarification, the SBA gives the industry more certainty that the value of the SBIR / STTR stake is not lost in a merger or acquisition. Since the successor in title of a Phase II beneficiary is eligible for a Phase III award, the successor in title retains the limited and non-exclusive data rights agreement with the federal government, the right to phase III to a sole source contract with the relevant agency, and many others.

Originally posted Mar 25, 2021

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