FUNDING YOUR INVENTION

For many small businesses, the costs of developing their invention to a marketable stage may be one of the largest obstacles. Patenting an invention is an additional obstacle and investment.

Each situation is different. The initial source of capital is typically from one or all of the three “F’s”, the founder (inventor), family, or friends. At some point, the inventor/business may seek the assistance of an angel investor and/or a venture capitalist. (See the short blogs regarding angel investors and venture capitalist linked here.)

In the Houston area, there are several groups that can provide some assistance to the small startup business. These are Houston Technology Center, the Rice Alliance, and the MIT Enterprise Forum.

There are also grants available through the federal government. These can be “Small Business Innovative Research Contracts” (SBIRs) and “Small Business Technology Transfer” (STTRs)

It is important to understand and comply with the contractual requirement of an SBIR or STTR award to avoid loss of ownership of the invention or loss of rights to information related to the invention.

One requirement is to avoid inserting non essential proprietary information into the proposal. Any proprietary information submitted must be accompanied with the specified legend. Proprietary information, including patentable ideas, should be included ONLY if necessary to understand the proposed project. The first page of the proposal should contain a specific statement (see the proposal instructions) that the data can be used only for evaluation of the proposal. Each page of the proposal containing the actual data must be similarly marked.

The government obtains rights in data (including software) developed in performance of the SBIR or STTR project. The inventor retains ownership subject to the government’s royalty free license. The license includes the right of the government to transfer the data to another party to for use in a separate government project.

In regard to creation of patentable inventions made in performance of the project, the small business may retain the patent rights but the government retains a royalty free license to the patentable invention for use for government purposes. Note the small business must timely disclose the creation of such an invention. Failure to timely disclose the invention to the government as detailed in the contract can result in complete loss of rights.

Please note the above is a summary only. The proposal instructions and model contract terms must be carefully studied.