Would VC Control Stifle the Innovation in SBIR?

The SBIR advocacy is mobilized. Dozens of small business owners are now focused on raising the level of awareness of the importance of SBIR to our legislators in the House of Representatives. Our immediate focus is ensuring that there will be a full SBIR reauthorization debate this time around, and that we will be included in it. (See http://www.SBIRreauthorization.com/ for details.)

Central to the debate is whether VC controlled small businesses should be eligible to compete for SBIR awards. Some say it's a good idea, others say it's not. Both sides have compelling arguments. Both sides claim that their position will ensure SBIR Program "success". But, what is that?

The problem is that we've never really settled on what is SBIR success. Is it how many tough problems got solved? Is it how many small businesses got started with SBIR as seed funding? Is it how many high-paying jobs got created? Is it maximizing ROI for the funding agency? Is it how many patents get filed? Is it how much revenue is generated by the awardees in commercialization? Is it how many SBIR funded companies get acquired or go public? Is it all of the above or none of the above? The fact is that no one has ever come up with a universally accepted answer to this. I've seen every one of the above cited as the critical success factor. SBIR success is in the eyes of the beholder.

I'm going to use my Blog as a forum for exploring this, as the better we understand all of these perspectives, the better we'll be able to provide persuasive opinion to our legislators, and, hopefully, guide the improvement of SBIR.

Our first guest columnist is Jonathan Pearl. The subject is innovation, and whether a VC controlled company still cares about that...

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The difference between a VC and a small business: why SBIR is not the venue for supporting Venture Capitalists, by Jonathan Pearl

In a letter dated March 11, 2009, on the FY 2010 proposed budget, House Small Business Committee Chairwoman Representative Nydia Velazquez argues that: "The SBA should permit venture capital-backed small businesses to be able to fully participate in the Small Business Innovation Research program."

I laud Representative Velazquez her energy and commitment to supporting innovation and its benefits for the nation's economy, but I question the specifics of her case. By the rules of the SBA regarding the definition of a small business, nothing prevents venture capital-backed companies from fully participating in SBIR. The rules however require that small businesses be majority-owned by individuals, meaning simply that venture-capital groups can not own a majority stake in a small business eligible to compete for SBIR funding.

Venture capital firms typically have far greater resources than small businesses, providing an unfair advantage because those resources can be expended in the proposal stage. Many truly small firms may find the time and money needed to compete in such a field prohibitive, regardless of the worthiness of their proposed efforts. The unfortunate consequence of permitting firms majority-owned by VCs to compete against startups may be to stifle the innovation SBIR seeks to promote.

Representative Velazquez continues: "Such participation is essential for high-growth small firms seeking capital, particularly during this period of economic weakness."

The argument appears to be that the capital needed by high-growth small firms can only be provided by venture capital groups taking a majority-stake in their businesses. To be sure, venture capital serves a useful function in society. Venture groups can provide an influx of capital for high-growth ventures. Their motivation however is financial gain, not necessarily innovation. They seek a high return for their investments. There is nothing wrong with the profit motive, it simply should not be subsidized by public coffers. Allowing VC majority-owned firms to tap into SBIR resources is akin to providing TARP funds to remodel executive offices. It's the wrong course.

Entrepreneurship and small business innovation are critical for our economy and inestimably beneficial to society. Researcher entrepreneurs are most often motivated by a passion, driven by their ideas to solve problems in innovative ways. Their incentive is both innovation for its own sake and the financial gains that accrue from filling an unserved need. This juxtaposition of overlapping motives keeps innovation at the forefront. SBIR allows federal agencies to define their own high-priority needs.

It has been suggested that some agency administrators are concerned over difficulty identifying enough high-quality proposals to support even current levels of SBIR allocations. It is odd that Representative Velazquez would argue that many SBIR-awarded small firms need a greater influx of capital while agency administrators are concerned over not being able to spend all of their SBIR funding.

I would think the solution to both concerns can be managed without expanding SBA rules that define small businesses to include majority ownership by venture capital groups, or excluding small businesses from the efforts to stimulate economic activity:

1. Maintain SBA rules that require majority-ownership by individuals.

2. Permit agencies some discretion to provide additional capital where needed. Capital-intensive programs like some at NIH could be enhanced by permitting the sponsoring agency to spend some of their SBIR funding for providing necessary facilities or materials to SBIR-awardees, without overinflating the individual awards. Alternatively, the agencies could be allowed some discretion in providing additional amounts (in excess of the base award) for materials and facilities that may be necessary for successful execution of the project. Oversight would be key in this case, to ensure that SBIR expenditures are maintained to support SBIR efforts, for instance that residual materials or equipment be retained for future use by SBIR projects.

3. Further, if there is concern that the costs associated with administering a large number of small awards is unfunded, a reasonable percentage of the SBIR Base Allocation can be specifically earmarked for this purpose, allaying agencies' resistance to potential increases to the percentages for SBIR Base Allocations.

Finally, I wish to argue that America is not at a lack for innovative ideas. If agencies are failing to receive a sufficient quantity of worthy proposals, the solution must lie in publicizing the availability of these programs where they will most garner an appropriate response.

This nation has a shamefully high number of unemployed and underemployed PhDs from across the spectrum of fields, who could provide the innovation we so desperately need to rise above our current crises. We have done an abysmal job of employing these valuable individuals in our institutions of higher learning. There are too few positions available for would-be professors, leaving thousands without an outlet for their creativity. Why not tap this resource? Improving and expanding SBIR, without losing its focus on innovation, is the first step.

Jonathan G. Secora Pearl, PhD, President
Perceptral LLC; Racine, Wisconsin
http://www.perceptral.com/
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Comments anyone?

If you'd like to have your opinion included here, send me a well constructed essay (please try to keep it below 750 words) and I'll consider posting it.

[In one of our advocacy conference calls a gentleman from Boston spoke quite eloquently about why eligibility of VC controled companies would be a good idea. I didn't get his name. If you know who that was, please have him contact me.]
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Small Business Advocacy Mobilizing Peer Pressure on Velazquez for First Step in SBIR Reauthorization

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All right folks, it's time to get serious. We got our continuing resolution, but with only four months of breathing room, we have to move fast. Like all revenue related legislation, SBIR Reauthorization must originate in the House of Representatives. And the bill will be introduced via the House Small Business Committee. That means dealing with Chairwoman Nydia Velazquez (D-NY).

So, we're mobilizing a letter and phone campaign. The ultimate goal is to persuade Chairwoman Velazquez, via peer pressure, to not change the SBIR eligibilty rules. It's mobilizing the peer pressure that's the object of the current campaign.

For those of you not familiar with all of this, the current rules limit SBIR eligibility to small businesses that are "at least 51 percent owned and controlled by one or more individuals". This precludes participation by companies that are majority owned by Venture Capital firms. In the past, Chairwoman Velazquez has adamantly promoted a change in the rules for SBIR eligibility that would allow unlimited participation by VC controlled small businesses. For the most part, it was that issue that derailed reauthorization last year. This won't be easy.

We have the support of some very good allies for this effort. A "Dear Colleague" letter signed by Representatives Edward Markey (D-MA), Niki Tsongas (D-MA), Peter Welch (D-VT), and Paul Hodes (D-NH) was sent recently to all of their fellow Members of the House of Representatives. The letter urges them to join in co-signing a letter to Chairwoman Velazquez, which will, in turn, urge her to "support preservation of the SBIR eligibility requirements in the current statute".

Our leader, Jere Glover, Executive Director of the Small Business Technology Council (SBTC), has just released a Legislative Action Plan for small business advocists everywhere to contact their House Representative and urge him or her to join in co-signing the letter to Chairwoman Velazquez.

The SBTC will be hosting a National Conference Call on Tuesday, March 31st, at 11AM EDT to discuss this peer-pressure strategy and how we can help build the pressure. The call-in number is 616-712-8000 (code 727524#). Please join us. And, please also consider joining the SBTC. All this work costs them money!

We really have to get this done THIS WEEK. Jere says that the deadline for getting signatories is April 10th, but Congress officially begins their two-week Easter Recess on Monday the 6th, so for all practical purposes, do what it takes to get the word to your home and office congressional district's Representative by Friday, April 3rd.

This is only the first step in this battle. We'll need to stay vigilant and be ready to debate with facts and strength of numbers in order to get a Reauthorization Bill that will truly improve the SBIR Program. I'll do my best to keep you informed. I've even created a special URL to take you quickly to my SBIR Coach wesbsite's SBIR Reauthorization section: www.SBIRreauthorization.com.

So, for the full story on what's going on, including a recitiation of the issues, the most up-to-date version of the SBTC's Legislative Action Plan, current lobbying and advocacy activities, copies of all the letters mentioned above, template letters to tailor and send, contact information for legislators, links to other sources of information, and some personal recommendations from The Coach, monitor www.SBIRreauthorization.com.
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NIH Slowly and Reluctantly Yielding to SBIR Pressure on Stimulus Funding

Letter writing works! A small victory was won by small business yesterday, as The National Institute of Neurological Disorders and Stroke (NINDS), an NIH component, has reversed their previous decision to deny SBIR granted companies receipt of Stimulus funds for "administrative supplements" per the exclusion that was included in the ARRA Stimulus Bill. These supplements were announced on March 16th in NIH Notice NOT-OD-09-056, and are designed to "promote job creation and economic development along with accelerating the pace and achievement of scientific research". Nineteen other NIH Instutues had already decided to allow the granting of supplements to SBIR grantees despite the exclusion.

A letter writing campaign, spearheaded by a Seattle small business called Icogenex, produced a reversal of policy from Dr. Story Landis, NINDS Director, who said, in a brief note to Fred Hagen, Icogenex CEO, "This is to let you know that the NINDS will now accept requests for supplements from grantees with SBIR and STTR funding. The new information should appear on our website in the next day or two". We applaud Dr, Landis' decison and encourage all NIH Institutes to follow her lead.

However, we still have not seen where the NIH or the HHS has complied with the Senate's request for a written response to how they will be funding additional new SBIR and STTR projects despite the ARRA exclusion. If a letter has been received by Senator Landrieu's Small Business and Entrepreneurship Committee, they have not shared it with us as of the time of this posting. If anyone knows of such a response, please let us know.

But the lesson here, is that, again, a letter writing campaign has produced positive results. We're going to continue to use this approach in the SBIR Reauthorization effort that's about to be launched. Keep up with the progress and get template letters at www.SBIRreauthorization.com.

And, in a related note, I had the distinct pleasure of spending a good deal of time with Jim Jaffe and Kelly O'Day of the National Association of Seed and Venture Funds (NASVF) at the World's Best Technologies Showcase conference that was held this week in Arlington, TX. We found much that we agree upon, including the basic issues involved in the SBIR Reauthorization debate, and they will be encouraging an attitude of reason and compromise to their VC membership as the SBIR debate unfolds. I became a member of NASVF this week, and plan to be an active contributor to their mission.

PS: Due to a bad link in a newsletter that features my columns, some of you wrote me that you were unable to read my "Movers and Shakers" column of March 18th. Click HERE to see the full posting.

Movers and Shakers

Y'all know that I'm a shaker-upper. Well, I've decided that I'm going to support the SBIR Reauthorization process in a more proactive way, and really do something to move it along.

In addition to this Blog, I'm going to write opinion pieces and attempt to get them published in various media where my voice for small business advocacy can make a difference.

To hone my writing skills I recently participated in an Op-Ed workshop offered by The Writers League of Texas. The following was first "penned" (sounds so much more elegant than "keyboarded") as a class exercise in that workshop. Thought I'd try it out on you....
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Know any movers and shakers?

Now you do!

Last week, I became one – a mover, I mean…and I didn’t start with something easy. No, not me!

I took on a major federal agency and the U.S. Congress, and moved the Senate to take an action. Oh, I didn’t do it alone. No, it was a group effort. But, I’ll take credit for shaking things up and forging the trail. Yep, that was me, at the front of the line, sticking my neck out and taking action.

In a nutshell, here’s what triggered it all: Some special wording had been slipped into the current stimulus package at the request of the National Institutes of Health. As usual, it was done at the very last moment…probably under the cover of darkness.

The result? About $250 million in research and development projects were denied to small businesses. What’s worse, this wording was in fine print and coded so nobody would notice.

When I discovered this injustice, I fired up my Blog. The story was picked up and broadcast by others and soon a whole bunch of people were up in arms. I encouraged a letter-writing campaign to tell our legislators they had been bypassed, and small business was being harmed. Moreover, as I (not being a lawyer) interpreted the law, the NIH couldn’t and shouldn’t have short-circuited small business R&D.

Up to this point, I was just being a shaker.

That’s when I decided to morph into a mover, too. Posting a template letter on my website, I explained how the system worked. Then I informed hundreds of clients and contacts, via my newsletter. I also kept up the pressure through my Blog and faxed dozens of letters myself to our Senators and Representatives.

Much to my delight, a whole bunch of small businesses began to follow my lead. A flood of letters were sent. A key senator’s staffer even called me, asking for a briefing…and my opinion. That senator -- a lawyer -- evidently agreed with my assessment.

Amazingly, hundreds had followed my lead and my instructions. But what’s even more amazing? The right people on the Hill heard our plea and supported our cause…and, last Tuesday, the Senate sent notice to the NIH. Their message? Follow the law and provide the funding to small business R&D…and don’t you dare bypass us again!

My suggestion had been adopted! I had moved the U.S. Senate to needed action.

Why was I amazed? I’ve always thought of myself as only a shaker – the guy who challenged the status quo, suggested what to do and then let someone else actually make the moves. See, I’m a consultant, and that’s what we do. We shake up situations that need shaking. Then, we make suggestions and let someone else do it. Hey, consulting’s a fun job!

But, I really enjoyed that taste of being a mover, so, while I’ll continue shaking, I just might step up and do some moving too. It’s even more fun than consulting!
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So, please help me out here...

If you have a suggestion for a media outlet that might be useful for marshaling support for SBIR Reauthorization please let me know about it. The name and phone number of their Op-Ed editor would be especially useful. And if you actually know someone there and can get me an introduction to that editor, that's even better.

This is going to be fun!

PS: If you're new to the NIH/SBIR-exclusion story and would like to see the columns that reported on it, click HERE, and scroll down to see them. The story broke on February 21st.
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SBIR to be Extended to July 31st

This is just a quick note to inform you that the House and Senate have reached a compromise on a Continuing Resolution that will again extend the SBIR Program, this time until July 31, 2009.

In a special edition of his SBIR Insider Newsletter, Rick Shindell reported that "In a bill to originate in the House, this legislation will amend PL 110-235 (the current CR) that expires on March 20, 2009. As reported earlier, the House wanted a short fuse while the Senate wanted a longer one."

Never count your chickens before they're hatched, and things could go awry before this takes effect on March 19th, but it does look like we'll have about four months to get a re-authorization bill put together that all sides will agree to.

We do have our work cut out for us. I'll have a new Legislator Letter up on my website soon.

Stay tuned...
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"Getcha SBIR Stimulus Contracts While They're Hot!"

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Now that the Senate has told the NIH, in no uncertain terms, to provide our nations' small businesses the full measure of SBIR R&D funding to which they are entitled under the law, we can turn to some other Stimulus opportunities for SBIR companies. Hold on to your hats, what I'm about to reveal may startle you....

If you peruse the ARRA Stimulus Bill you'll find something for just about every Federal agency. Every one of them of them has been given a pile of money to spend quickly. One of the problems these agencies are having is getting the stimulus contracts issued fast enough. Remember the whole idea behind this Stimulus deal is a quick infusion of capital into the economy.

Procurement law under Section Six (Competition Requirements) of the Federal Acquisition Regulations (The FAR) requires that, except for special circumstances, all Federal government contracts must be issued only after a "fair and open competition." That takes time and lots of effort on the part of the government procurement officers to create and issue RFPs and collect and evaluate bids before the contract can be issued. They'd love to have a way to bypass the competition requirement and just issue contracts. Well, guess what, we have a special circumstances solution for them!

We who are members of the Small Business Technology Council (SBTC), an arm of the National Small Business Association (NSBA), participated in a national conference call this morning. Our leader and SBIR advocacy mentor, SBTC's Executive Director, Jere Glover, laid out the following very simple strategy: leverage your SBIR awards into Phase III contracts with Federal agencies needing to spend stimulus funds quickly.

Here's how it works... It turns out that once you have a Phase I SBIR award for developing a technology, all subsequent government contracts (or grants) for work that "derives from, extends, or logically concludes" that work are SOLE SOURCE JUSTIFIED. This means that if you can find something that ANY one of the Federal agencies is looking to have done, and you have had an SBIR (or STTR) award that you can show has such a relationship to that desired work, you can call up that agency, find the procurement officer who's responsible for issuing stimulus contracts (here's a website that makes your search easier: http://www.recovery.gov/?q=content/agencies), and let him/her know that you have a "sole source justification" for the work. The contract can be immediately issued to you, styled as a Phase III SBIR, without the need for a competition. Truly.

And, believe it or not, whether or not you've gotten a Phase II is completely immaterial to this discussion. Of course, you do need to have something of value to offer the government in this deal, and there needs to be a match with agency needs and company capabilities.

I'm not saying that this will be easy. You'll have to play detective. It may be a challenge to find the "wires" to connect for getting to the funds. If you have an internal agency champion they may have to help you in navigating that agency's process. They'll probably have to use the Recovery.gov site themselves. But, the fact is that procurement officers in every agency have the responsibility to spend a LOT of money in a relatively very short time. Do whatever it takes to find them. They're motivated to make things happen.

We've already heard about one such contract issued -- The Department of Transportation issued a Phase III contract to a small business that had a DOD Phase I for some work that applied the same technology. Yes, it doesn't matter who issued the Phase I to you -- ANY other Agency can issue you a Phase III -- even ones who don't do SBIRs at all!

Get the idea? Yes, this is HUGE! GINORMOUS, as my granddaughter would say!

If you're not sure what a Phase III SBIR award is, download a copy of my SBIR Coach's Newsletter of Novermber 2008 that answers the question: "What is Phase III?"

Then download a copy of the ARRA Stimulus Bill from http://readthestimulus.org. Search it for anything that one of the Federal Agencies needs that may relate to what your company has done with its SBIRs. Make some calls. Do some negotiating. Sign some deals. Get some money.

We do expect to see a Continuing Resolution introduced and passed before the March 20th SBIR expiration deadline, but it will likely be short term -- maybe 60 days. So we'll have some hoop jumping to do to get an acceptable SBIR re-authorization bill crafted, passed and signed, but we will git er done!

Jere has promised to put some additional information on all of this on the SBTC website: http://SBTC.org. They put the really good stuff in the "Members Center" section, so please join the SBTC and help support our advocacy.

This ARRA deal is a short term opportunity. Make the best of it. "Getcha SBIR Stimulus Contracts While They're Hot!" (Opening day is just a couple of weeks away and I'm getting in the mood. Maybe this will be the Rangers' year! Someone please pass the mustard!)
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Key Senators join the call for NIH to "IGNORE" SBIR Stimulus Exclusion

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We got some action! Perseverance pays off!

The Senate's Small Business & Entrepreneurship Committee's Chairwoman, Mary Landrieu (D-LA) and Ranking Member, Olympia Snowe (R-ME) joined my call for the NIH to effectively IGNORE the ARRA Stimulus Bill's SBIR Exclusion in a letter sent today to Charles Johnson, the Acting Secretary of the U.S. Department of Health and Human Services (HHS), the parent organization of the NIH.

The PR Newswire story about the letter can be viewed by clicking HERE.

The headline is:

Landrieu, Snowe Emphasize Importance
of Small Business Innovation
to Economic Recovery

The subtitle is:

Call on HHS to fund SBIR/STTR despite
exemptions in economic recovery plan.

Quoting from the letter:

"While the $8.2 billion allocated through Title VIII of the Recovery Act is relieved from specifically funding SBIR and STTR projects, the Act does not exempt the HHS from its continued statutory obligation of allocating a minimum of 2.5 percent and 0.3 percent, respectively, of its total extramural budget for research and development for SBIR and STTR projects. At stake is as much as $229 million."

"The SBIR and STTR programs allow small research and development firms -- our nation's innovation lifeline -- to create high-quality jobs and cutting-edge products and therefore are fundamental to our country's economic recovery. Consequently, it is of great concern to us that the NIH maximize the benefits of the Recovery funding and provide not less than the statutory percentages of the Department's extramural research and development funding to the SBIR and STTR programs."

All I can say is THANK YOU Senators Landrieu and Snowe, and the rest of the Senate SBE Committee. I know for a fact that, due to the letters that many of us wrote, some of you also had a hand in this.

The HHS has until March 24th to respond to the Senate Committee in writing. Frankly, I don't think they need two weeks to decide to do the right thing. I sugest that we keep the pressure on the NIH to respond quickly and favorably.

Of course, March 24th is after the March 20th expiration date, so we MUST get that Continuing Resolution to make this really be other than a hollow promise.

UPDATE, March 11, 2009: Check out Rick Shindell's SBIR Insider Newsletter of this date. It provides some more information on activities concerning the Continuing Resolution, and some additional background on the NIH deal, including an actual copy of the Senate SBE letter.
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SBIR Exclusion From NIH Stimulus was even more underhanded than we thought!

[THIS STORY HAS EVOLVED SINCE THIS POSTING. SENATE TELLS NIH TO FULLY FUND SBIR DESPITE THE EXCLUSION.....READ THE POST OF MARCH 10th FOR THE STORY!]

The campaign is working folks! Everyone is incredulous that such a counter-productive restriction would have been made in these politically charged times, effectively excluding ARRA Stimulus money from small business, the ONLY sector of the economy that's currently creating jobs! And they're angry that it was intentionally done in such a manner as to escape scrutiny.

But you haven't heard anything yet. My original posting on this only scratched the surface of the underhandedness. It was even worse than we thought. I suggest that you take your blood pressure meds before reading any further.....

I gleaned a very disturbing fact today: The version of the ARRA Stimulus Bill that was engrossed (that's the term for being voted on and passed to the next step in the process) by the House, and the version that was amended and engrossed by the Senate, DID NOT CONTAIN THE NIH SBIR EXCLUSION CLAUSE! That means that when your Representative and Senators voted on this bill, SBIR and STTR were, as they should have been, a part of the NIH's Stimulus funding to the tune of some hundreds of millions of dollars in new projects for worthy small businesses.

The engrossed Bills differed in some minor elements, including the amount of money that the NIH was to receive, so they were sent to a Conference Committee (five Members each from the House and the Senate) to have the differences resolved. The Committee did its business and produced the final copy of the now enrolled Bill for the President's signature. Guess what!

THAT FINAL COPY, AND ONLY THAT FINAL COPY, DOES CONTAIN THE NIH SBIR EXCLUSION CLAUSE, and the President signed it into law, thereby taking away, without a vote, the money for those SBIR and STTR projects that effectively had been authorized by your legislators.

Check it out for yourself. All of the versions of the Bill can be found at: http://www.govtrack.us/congress/billtext.xpd?bill=h111-1. Look at each version. (To find the pertinent section, search for "HIV". It turns out that that term only appears in the same paragraph as the one that contains (or doesn't yet contain) the SBIR exclusion clause.)

When I was alerted to this, I was momentarily speehless. (Those of you who know me know how unusual that is!) I couldn't believe that anyone would have the guts to try such skulduggery and that the rulebook would allow this. So I did some research. They did; I'm not sure if it does; but that's indeed where and when they did it!

What about the Rulebook? According to the official government document "How Our Laws Are Made", Conferees are limited in their authority to make substantive changes: "Furthermore, they may not insert new matter that is not germane to or that is beyond the scope of the differences between the two Houses." Does this exclusion clause qualify as being germane or within scope? I'll leave it up to the legal eagles among you to weigh in on that. But what's done is done. The question now is how to best undo it, or at least undo the effects of it.

The legal eagles can advise us on what would need to happen to get this exclusion lifted, either by an action of the Congress with some sort of Bill, or by the President himself with an Executive Order. I just don't know what our next step should be in a procedural sense (someone please help me on this), only that we shall not sit by and let this stand unchallenged.

Of course, the NIH can choose to unilaterally undo this injustice and do the right thing by simply deciding to add an equivalent amount to what would have been newly authorized funds to their regular Allocation Base for SBIR and STTR, dust off those projects that scored well in recent evaluations but just missed the pay-line due to lack of funds, call up the companies, and issue the grants! VOILÀ! Instant stimulus. Shovel-ready job creation, as they say. What about it NIH, y'all up to doing the right thing? Legally you can do it. So please just do it!

OK, the list of suspects in our whodunit has suddenly gotten much shorter. Call in CSI. The ONLY people who could have introduced that clause into the bill were in that Conference Committee room. Who were the Conferees? Here's a source of that information: http://neinuclearnotes.blogspot.com/2009/02/stimulus-bill-conference-committee.html. [Hmmm.... Seems that Senator Specter wasn't on that Conference Committee, so our previous information may have been incorrect, and, if it turns out that we were wrong, and he had nothing to do with this, we hereby apologize to the Senator for that.]

All right, will the real culprit please fess up? Unlikely. Probably not even CSI can solve this crime. These sneaky-snakes tend to cover their tracks too well and close ranks when challenged. But someone in that Committee room did this, probably at the request of some misguided individual high up in HHS/NIH who thought they were doing something in the best interests of their Agency. At least I certainly hope it wasn't done maliciously. Frankly, at this point, I don't care who did it, just that the effects of it be undone.

I've been receiving lots of emails from people who want to know what they can do to help. Hits on this Blog and on my website's SBIR Reauthorization section are up more than tenfold from before this story broke. At least a dozen other Blogs and News sites have picked up the story and spread the word. It's almost viral!

So, let's keep up the pressure. Send out links to this Blog posting, including to other media. Send letters. Make phone calls. Armed with these new revelations we might get some attention from the right people, either in the White House, in the Congress or at the NIH, and turn this around.

And, one final word. That Continuing Resolution must still be secured. SBIR expiration is only two weeks away without it. The House Small Business Committee is the one that will introduce it, so focus on them. We hear rumors of a CR bill being prepared there, but nothing official has surfaced yet. I know it's a lot to ask, but please keep that pressure on too.

We shall persevere.

UPDATE - Sunday, March 8, 2009, 2:00 PM CDT:

An email letter addressed to the "Small Business Research Community" was sent out today by Jo Anne Goodnight, NIH's SBIR/STTR Program Coordinator, wherein the opportunity for small businesses to apply for grants in a new ARRA funded opportunity called "NIH Challenge Grants in Health and Science Research" was touted with the statement in bold face: Small businesses are eligible to apply for grants under this program.

Yes, Jo Anne, eligible, but competing with who else? You have to drill into the announcements a ways to see the list. Here's a shortcut. Among others, the eligible organizations include Public and Private Institutes of Higher Education, For-Profit Organizations (Other than Small Businesses), Not-for-profits of all types, and City, County, and State Governments. Hardly a level playing field! Good try NIH, but no cigar.

If you didn't get the NIH's email letter and would like a copy, write to me and I'll forward it.
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Four Federal Agencies Announce New SBIR Opportunities

Even though we haven't yet seen that Continuing Resolution issued for extending the expiration date of the SBIR Program beyond March 20th, I'm happy to report that the Federal Agencies aren't holding back on issuing their announcements for new SBIR opportunities, and four of them: Transportation, Homeland Security, Environmental Protection and the National Science Foundation have recently published new topics.

Department of Homeland Security (DHS) - due by April 6th

Domestic Nuclear Detection Office (DNDO)
- X-ray Generators to Enhance Material Discrimination for NIT Imaging
- Innovative Training Technology for Preventive RadNuc Detection

Department of Transporation (DOT) - due by April 15th

Federal Highway Administration
- Shockwave Mitigation On Roadway Systems
- Thermographic Device for Nondestructive Evaluation of Bridge Integrity
- Vehicle Detection, Counting and Tracking System
- Pedestrian Detection, Counting and Tracking System
- Self-Sustaining, Intelligent Pavement Systems
Federal Motor Carrier Safety Administration
- Individualized Fatigue Risk Management in Trucking Operations
Pipeline And Hazardous Materials Safety Administration
- Development of in-field pipeline inspection tools
- Hazardous Materials

Environmental Protection Agency (EPA) - due by May 14th

A) Green Building Materials and Systems
B) Innovation in Manufacturing
C) Nanotechnology
D) Greenhouse Gases
E) Drinking Water and Water Monitoring
F) Water Infrastructure
G) Air Pollution
H) Biofuels and Vehicle Emissions Reduction
I) Waste Management
J) Homeland Security

These are anticipated topic areas. Details will be available March 19th.

National Science Foundation (NSF) - due by June 9th

Broad Area Topics are:
- Biotech and Chemical Technologies (BC)
- Education Applications (EA)
- Information and Communication Technologies (IC)
- Nanotechnology, Advanced Materials and Manufacturing (NM)

Note that all of these Agencies do state that awards are subject to "availability of funds", and we all know what that means!

Even the NIH is continuing to announce new opportunities, and they have promised that there will be small business participation in ARRA Stimulus funding, although what form that will take is still not apparent. It's important that small businesses compete for R&D funds on a level playing field, and if it's not via SBIR or STTR it's hard to imagine how that will be managed.

And, DO KEEP THE PRESSURE ON FOR THAT CONTINUING RESOLUTION! The SBIR Coach's website's SBIR Reauthorization section has all the information you'll need (including a recently added Excel file of the key legislators' contact data) and the template letter to send. So, please just do it!
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Protecting the Business of Your Business

We're going to take a short break from fighting with Congress about the damaging things being done to SBIR, and talk about something that will be a bit more uplifting. But if you really came here to find out about the sneaky and underhanded SBIR lockout from the NIH's Stimulus money, click HERE to see that SBIR Coach's Blog posting. But promise to come back later and read this one -- it's important!

Recently, my friend, Charles Moster, invited me to contribute a guest column about SBIR on his Springboard Blog - Create Momentum. Since the February SBIR Coach's Newsletter (and a subsequent update to it) discussed protection of SBIR Data Rights, and, since Charles is, among other things, a respected IP attorney, I invited him to stay on theme, and do one for us on the importance of looking at protection of intellectual property from the perspective of its contribution to your business model...

Protecting the Business of your Business

Imagine that you just stepped off the elevator having traveled 30 floors talking to the CEO at your top prospect. You gave the most stirring elevator speech in the history of elevator speeches, and captured her imagination with your tale of cutting-edge technologies and memorable branding.

Much to your surprise, the CEO gets off the elevator and calls her friend at a company across town and now you have a new competitor. Have you protected what makes you so unique? Have you protected the business of your business?

This may sound like lawyer-speak or the turning of a phrase which would be the nightmare of any fifth grade English teacher. However, I have been a lawyer for over 22 years and have represented clients including Uncle Sam, huge corporations, small startups and 100’s of emerging businesses in nearly every industry from technology to trucking. I have found that all too often companies fail to understand and appreciate the critical importance of protecting their intellectual property rights – the business of their business.

By “intellectual property” I mean the creative products of your imagination. I’m a lawyer but I’m also an inventor, playwright and composer so I understand the intrinsic value of creating something that never existed before. However, I also know that you need to take steps to protect your novel idea, brand, technology before you can translate that value into sustainable revenue.

When talking with our clients we first define what intellectual property is and what they can and cannot legally protect. Patents, copyrights, trademarks and tradesecrets are all in the mix. Then we discuss the role the IP will have in their business model and how it will affect their ability to create revenue. It is important that we scale their level of protection and legal investment based on their current needs and growth plans because not every company needs everything filed at once.

Having secured your IP rights allows you to work both offensively and defensively. Sadly, some people are born with what I call “perforated halos”. Their business model is to steal your technology and employees, trade off the goodwill your brand creates in the market, and essentially grab whatever they can.

Don’t let them get away with it! Protecting your IP allows you to be offensive in your pursuits of infringers. I’m not advocating suing everyone who comes along because litigation is very rarely the best option, but if you haven’t taken the steps to protect your assets your position of strength is diminished. Plus, not every dispute ends in lengthy and expensive litigation. Many companies strike win-win licensing deals with former infringers and create new revenue streams.

Protecting your IP rights also lets you be offensive in your pursuit of business and strategic/channel partners, licensees, investors, and acquirers. Anyone who has talked with a potential partner, licensee, investor, and acquirer knows that whether or not you have protected your IP is always an initial question, if not the very first one. Your ability to garner interest from these groups and negotiate a higher price, royalty, valuation goes part in parcel with the investment you’ve made in your patents, copyrights and trademarks. If your technology isn’t camera ready, have you considered a provisional patent and the “Patent Pending” label you can use? If your product launch isn’t for several months would an Intent to Use trademark application ease your concern about losing the name in the interim?

Intellectual property is also a tremendous competitive advantage. Novel, patented technology can create high barriers to entry, and if you combine it with a strong, trademarked brand you can intensify customer loyalty and improve your ability to charge price premiums.

Our firm is focused on being a positive force and avoiding the focus on fear – there’s plenty of that to go around already. However, the defensive value of IP is just as important to help you avoid costly and sometimes catastrophic issues.

For example, before you invest the time, emotion and thousands of dollars into a new brand and marketing campaign consider a trademark search and filing. Unfortunately, on several occasions clients have come to us with a growing business (great news) but also a nasty cease and desist letter from a lawyer halfway across the country threatening our client with infringement (not so great news). Sometimes we can prevail but sometimes the client has to completely scrap their name – along with the untold value of the brand they’ve worked so hard to create! Uggh.

There are countless reasons to protect the business of your business, more so than the word limit on this post. Intellectual property is a complex area of law, but the rationale for pursuing the protection it affords is not.

Charles Moster, Senior Partner
MosterWynne; Austin, TX
www.mosterwynne.com
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