SBIR Gateway

SBIR Insider Newsletter
November 28, 2005 Edition

Dear SBIR Gateway Insider,

I apologize for the length of this "SBIR Insider" but I felt you needed to know the details of the first article.  Very important to the SBIR community! I want to thank Jere Glover and the SBTC for the heads up the SBIR Data Rights case.

In this issue:

U.S. Court Decision Threatens SBIR Data Rights and Phase III Opportunities
The U.S. Court of Federal Claims issued a decision in the Night Vision Corp (Plaintiff) v The United States of America (Defendant) case that is sending shock waves into parts of the SBIR community.  The ramifications of this decision include loss of SBIR data rights, and use of the SBIR work product given to a competing entity to produce the product and sell back to the government, in essence circumventing what should have been an SBIR phase III opportunity.

The Night Vision Corp (NVC) had received an SBIR phase I award from the Air Force to develop a single prototype of NVC's "Panoramic Night Vision Goggles" (PNVG), and a phase II award whereby NVC arranged for the production of twelve developmental night vision goggle prototypes with the help of a subcontractor, Insight Technology Inc. The relationship between NVC and Insight during the Phase II project was at best ,"strained."  At one point the relationship became so dysfunctional that the Air Force became concerned about the completion of the promising night vision project. 

The phase II SBIR was completed and the Air Force showed a strong "interest" in moving it to phase III, but no firm commitments were made.  Instead, the Air Force announced its intention to pursue development of the PNVG through a competitive procurement and the Air Force wanted to obtain "government purpose rights" to NVC's proprietary data. 

NVC delivered the final data package for its SBIR Phase II contract to the Air Force which included both technical information (such as drawing and schematics) and prototypes of the goggles.  NVC claims that it marked all technical data that it delivered to the Air Force with data rights legends indicating that the data was proprietary.  Nonetheless, it is uncontroverted that NVC did not affix such legends to the actual goggles that it delivered to the Air Force along with the technical documents (a significant factor in the judge's ruling against NVC)

The Air Force published a "Potential Sources Sought" notice seeking possible developers of a "night vision goggle" and the related descriptions in the document seemed to correspond with NVC's PNVG I and PNVG II configurations. 

At that time, Insight, the former subcontractor to NVC, was preparing to compete directly against NVC to further develop the PNVG system.  Insight executed an agreement with ITT Industries, Inc. to partner towards obtaining a PNVG competitive procurement contract. 

The Air Force sent several PNVG prototypes that NVC had delivered under the SBIR Phase II contract, to Insight.  Insight apparently retained some of these PNVG units for several days or weeks while shipping other units back to the Air Force only a few days after receiving them. 

The Air Force posted a Program Research and Development Announcement (PRDA) of their intention to award a negotiated, 24-month Advanced Technology Demonstration (ATD) contract for what the they termed an Integrated Panoramic Night Vision Goggles.  Only three firms responded (NVC, Insight and Litton) and Insight was awarded the contract. 

NVC filed a five part complaint against the government alleging:
1) That the defendant breached the SBIR contracts with the plaintiff by disclosing proprietary technical data to Insight; 2) That the defendant breached a provision allegedly incorporated by law into the SBIR contracts with the plaintiff, which required defendant to award plaintiff an SBIR Phase III contract; 3) That the defendant breached an oral contract with plaintiff by not awarding plaintiff a SBIR Phase III contract; 4) That the defendant violated a duty of good faith and fair dealing owed to plaintiff throughout the procurement process: 5) A bid protest challenging the award of the contract to Insight instead of NVC.

The court ruled against NVC on all counts.  However, most notable to small businesses engaging in SBIR are the rulings on counts 1 and 2. 

Count 1 - Since plaintiff did not attach the SBIR data rights legend to the PNVG prototypes, no restrictions applied to defendant's use of the prototypes. Defendant was thus within its rights when it shipped the PNVG prototypes to Insight and is therefore entitled to summary judgment dismissal of count 1.

Count 2 - Unless the item is covered by a patent, or is otherwise restricted by contract, the Government may use the item to reverse engineer its design or may provide it to a competitor to do the same.

Jere Glover, SBTC's executive director was shocked by this ruling.  He referred to it as one of the worst SBIR decisions in over 20 years.  The SBTC board will be meeting via telecon this week to discuss the fallout from this ruling.  Glover is urging his SBTC members to mark all prototypes as "proprietary" as well as written descriptions submitted as part of SBIR phase I or II.  SBTC will have a report on their web site at

Commentary:  This synopsis does not reflect the fact that the Air Force presented a good deal of information that cast doubt concerning NVC's ability to perform well for a phase III opportunity.  The Air Force's primary interest was to get those night vision goggles to the war fighter asap.  Many of us shun the methods the Air Force used concerning data rights, but it does point out the extent they were willing to go to in order to achieve their goals.  By the same token, we have seen cautionary signs in SBIR training presentations, such as those by SBIR legal guru, David Metzger, Esq., referring to "agency defense against phase IIIs," suggesting that an agency is not always pro SBIR phase III. 

Coincidentally, but nonetheless interesting, is the fact that the new awardee, Insight, founded and run by a former DoD employee, had enough "juice" to get [then] candidate for president, George W. Bush to visit Insight and pose for photographs holding prototypes of the goggles designed by NVC under its Phase II SBIR contract. 

DoD TPOC Communication Update
Utilizing informal interviews at the recent National SBIR Conference in Albany, NY, it was apparent that there is not a consensus within the DoD agency components and their sub-components as to the question of direct and private contact with TPOCs during the presolicitation phase of their SBIR.  Surprisingly we found similar disparity among the small business community.  The split is very close to even with a slight edge to keeping the current policy in place. 

The SBIR Gateway will be covering this topic in depth and encourgages you to add your comments as well. 

HHS Requests Comments on Compliance Program Guidance for Recipients of PHS Research Awards
SUMMARY: The HHS issued a Federal Register notice seeking the comments of interested parties on draft compliance guidance developed by the Office of Inspector General (OIG) for recipients of extramural research awards from the National Institutes of Health (NIH) and other agencies of the U.S. Public Health Service (PHS). Through this notice, OIG is setting forth its general views on the value and fundamental principles of compliance programs for colleges and universities and other recipients of PHS awards for biomedical and behavioral research and the specific elements that the award recipients should consider when developing and implementing an effective compliance program.

DATES: To assure consideration, comments must be delivered to HHS OIG by no later than 5 p.m. on December 28, 2005.

You can download the Federal Register notice from the SBIR Gateway at: 

House Small Business Subcommittee Hearing:  The SBIR Program -- Opening Doors to New Technology
On Tuesday, November 8, 2005 the Subcommittee on Workforce, Empowerment, and Government Programs of the House Committee on Small Business held a hearing to discuss in detail the health and well being of the SBIR program within each of the agencies testifying. 

Subcommittee Chair Marilyn Musgrave (R-CO) conducted the hearing which included testimony from Calvin Jenkins, Acting Associate Deputy Administrator for Government Contracting and Business Development, SBA; Frank Ramos, Director Office of Small and Disadvantaged Business Utilization, OSD/DoD; James Decker, Principal Deputy Director Office of Science DOE;  Norka Ruiz Bravo, Deputy Director for Extramural Research, NIH; Colien Hefferan, Administrator Cooperative State Research, Education & Extension Service USDA; and Joseph Hennessey, Senior Advisor Industrial Innovation Program, SBIR, NSF. 

Some highlights included testimony from Calvin Jenkins of SBA who reported on the overall health of the SBIR program, as well as actions taken to work with Agency participants to modify the Policy Directive to incorporate the President's Executive Order 13329 Encouraging Innovation in Manufacturing.  SBA also reported that they are currently coordinating with the Office of Management and Budget on an assessment of the effectiveness, management, and performance measurement of the SBIR/STTR programs at the DoD, NASA, DOE, NIH, and NSF. They expect to use the findings of that assessment to address any shortcomings in these programs.

Jenkins also testified that the SBIR program now evaluates more than 30,000 proposals and makes over 6,000 awards per year to about 3,000 companies.  He also addressed a perennial SBA sore point, the TechNet database.  In Jenkin's testimony, he stated, "We are currently implementing an online reporting system, through an enhancement of our existing TechNet system, to collect this information on an annual basis across all agencies. This should increase the reliability of the data, and enable us to develop new measures of commercial success and critical program outcomes in the future."  Note: The SBIR Insider will have an important follow up on the SBA TechNet database in a future issue.

The other agencies reported on the strength and health of their SBIR programs and we will have a compressive report soon on the SBIR Gateway web site,  The full text of the testimony will be available soon on the committee's web site at

A few items worth mentioning: DoD's Frank Ramos pointed out improvements to the DoD SBIR program.  Important points to our readers are:  1. "We are increasingly selecting firms most capable of commercializing the results of their work by using a commercialization score in source selection."  2. "Phase II Enhancement Programs, established throughout our Program, offer SBIR matching funds to firms that attract additional funds from third party sources, such as acquisition program offices." 

Ramos also cited improvements to the programs being implemented by the DoD's agency components.  Examples included the Navy's funding of a Technology Assistance Program to enhance the commercialization efforts of interested Phase II firms which helps them market to acquisition programs. Also notable was the Navy's initiative to increase prime contractor and systems integrator awareness of the SBIR Program to better use the SBIR technologies.  Ramos included in his list of improvements the mention of an annual SBIR "Phase II & Beyond" conference (the first being the San Diego event last July) to bring together SBIR Phase II firms with potential prime contractor partners, acquisition community buyers and financial community investors to facilitate matchmaking and relationship building to enable technology transition. 

The testimony of the various agencies points out the need for flexibility in the SBIR rules. However, the degree and amount of flexibility is yet to be determined.  In the mean time several SBIR studies are underway as well as pending legislative changes.  In a recent SBTC newsletter, Executive Director Jere Glover stated that it was now time to start working on issues of SBIR reauthorization.  It appears that Glover and SBTC are on the right side of the power curve. 

VC Biotech Issue Heats Up - BIO Holds Rally on the Hill
On November 9, 2005, BIO held a press conference/rally featuring some compelling comments from people such as Katy Anderson of Chevy Chase, MD, a cancer survivor whose struggle for life was greatly aided by the drug Rituxan, developed by a once small biotech firm that used to receive SBIR grants from NIH.  Ms. Anderson's heart tugging story showed determination and courage in her fight to beat cancer, and her loyalty to the company whose drug helped her.  Interestingly enough, the drug Rituxan was apparently not part of an SBIR funded project. 

BIO made an excellent presentation that demonstrated their skill in manipulating the press, patients, industry and lawmakers, certainly worthy of their big pharma budget and reputation.  Their sales job on morphing a falsehood into the truth was nothing short of amazing.  Watching the presentation, seeing the passion not only in they eyes of the presenters, but also Congressmen Graves (R-MO) and Baird (D-WA), makes you realize just how successful BIO is at pleading their case. 

Of course BIO has a few major points in their favor that the opposition doesn't, it's called money, power and access.  Can you arrange to sit down and have a face to face with many Congressmen, Senators and their senior staff and command the attention that big pharma BIO can?  Would your press releases carry the weight and get the coverage that big pharma BIO is receiving?  You should consider these points in determining if a membership to an organization such as the Small Business Technology Council (SBTC) would be of value to you and your business.  SBTC is one of the few organizations that BIO fears.

This VC issue is complex and requires honest and open dialog in order to come to a reasonable compromise that would benefit the agencies and the small businesses.  However, big pharma BIO's tactics prevents this from happening and they are well on their way to steam-rolling their legislation through Congress.  Beware, the effects are not limited to Biotech nor small businesses.  Read the proposed legislation and see the provision for "start up" companies (of any size).  It should startle you.

NASA's 6 Regional Technology Transfer Centers (RTTCs) prepare to turn out the lights.
NASA's funding for their regional technology transfer centers (RTTCs) will end December 31, 2005 for three of the centers and March 31, 2005 for the others.  This closes the chapter on an important resource for small businesses and state support organizations throughout the country. 

NASA had originally planned to migrate these centers to a "super-contractor" to run new centers under a program called Technology Transfer Transformation (TTT) out of NASA's Exploration Systems Mission Directorate.  They held a TTT industry presentation in May, issued a solicitation in June but mysteriously cancelled their solicitation on July 29, 2005 after receiving many proposals.  NASA, in a carefully worded document claimed that the RFP no longer matched the agency's needs and over the next 3 months they would be reviewing the Agency's requirements for technology transition efforts supporting all four Mission Directorates' activities. 

Technology transition and technology transfer are not synonymous and it is noteworthy that the term "technology transfer" was eliminated from NASA's future consideration.  NASA actions suggest that their earlier plan to replace the RTTCs with a new model has been abandon and the RTTCs are destine to become a part of federal technology transfer history.  This is especially poignant when one considers that a major selling point to the establishment of NASA was their technology transfer program. 

Although this action does not directly affect NASA's SBIR/STTR program funding, it certainly impacts the amount of support available to small businesses participating in NASA SBIR.  The RTTCs rendered a great deal of valuable support to small businesses (and others).  Their presence will be missed. 

Federal Laboratory Happenings
The DOE has announced a slight delay in the selection of a contractor to manage the great Los Alamos National Laboratory (LANL).  The selection was due to be announced by December 1, 2005, but the Chairman of DOE's Source Evaluation Board has requested more time for the board to complete its report to the Source Selection Official.  The Source Evaluation Board Chairman said that he does not anticipate a significant delay in the selection decision. 

The competition between current contractor, University of California (UC) and hopeful contractor, Lockheed Martin (LMCO), has been termed by insiders as "brutal."  Many of LANL's top researchers are uneasy, to say the least.  Lab director and management changes, acid tipped BLOGs and misleading press releases have heightened the tension.  Both organizations have established offices in New Mexico as a "good neighbor" policy, to answer questions and put the public at ease.  Regardless of DOE's selection of the contractor, life will be different at Los Alamos. 

That's it for now.  Please reply to this email if you have any comments, questions or want to be excluded from the SBIR Insider.



Rick Shindell
SBIR Gateway
Zyn Systems
40 Alderwood Dr.
Sequim, WA 98382
[email protected]

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