Patent Law

Venture-Backed Companies May See SBIR Dollars

By Stephen Albainy-Jenei

The Senate Committee on Small Business & Entrepreneurship unanimously passed the SBIR/STTR Reauthorization Act of 2008 (S. 3362) to reauthorize the crucial Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. The bipartisan bill is the result of months of deliberations among Committee members and includes a pivotal compromise that would allow limited investment in the SBIR program by majority-owned venture capital firms.

According to Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship, the government-wide program has generated more than 84,000 patents and millions of jobs.  The reauthorized SBIR and STTR programs will pump another $1 billion into our small business economy.

Federal agencies with an annual extramural research and development budget of over $100 million are required to allocate 2.5 percent of their extramural R&D dollars to the SBIR program. Currently, eleven agencies have SBIR programs. Approximately 1 in 4 SBIR projects will result in the sale of new commercial products or processes.

Historically, the SBIR program has provided critical financial support to biotech companies.  Of the 252 FDA-approved biologics, 32% of those companies received at least one SBIR/STTR award.

Specifically, the bill passed out of Committee:

• Reauthorizes the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs for 14 years, making the new sunset dates September 30, 2022, and September 30, 2023, respectively.
• Includes a compromise on the issue of the participation of companies majority owned and controlled by multiple venture capital companies in the SBIR program, allowing NIH to award up to 18 percent of its SBIR dollars to companies majority owned and controlled by multiple VCs and the other ten SBIR agencies to award up to 8 percent of their SBIR dollars to this class of firms. The affiliation rule and the 500 employee standard remain unchanged in this bill.
• Increases the SBIR allocation from 2.5 percent of SBIR agencies? extramural research and development budgets to 3.5 percent over the course of 10 years, 0.1 percent per year, for all SBIR agencies except for the Department of Health and Human Services, home to the National Institutes of Health.
• Doubles the STTR allocation from 0.3 percent of STTR agencies? extramural research and development budgets to 0.6 percent, over the course of 6 years, for all STTR agencies.
• Increases the award size guidelines for the SBIR and STTR programs from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II. This is in line with the recommendation of the National Academy of Sciences.
• Attempts to increase geographic participation, particularly in rural states, by reauthorizing through 2014 and enhancing the Federal and State Technology Partnership (FAST) program and the Rural Outreach Program.
• Calls for better and streamlined data collection and assessment.
• Includes protections to address jumbo awards.

Venture capital companies have been pushing for changes to allow venture-backed companies compete for the money.  The compromise caps the percentages available.  There are provisions requiring each agency to track how many majority venture capital company proposals are received and the amount of venture capital a company has when it receives an award.

See more at the Committee on Small Business & Entrepreneurship

Full post as published by Patent Baristas on August 29, 2008 (boomark / email).