Navigating Foreign Disclosure in NIH SBIR/STTR Applications
Contemporary business structures are often complex and multi-layered. As we live in a globalized world, your team and project may also be global in nature. This is not a roadblock for your application, but having a foreign interest in your project does add additional steps and considerations to your SBIR/STTR application.
In this post, we will provide an overview of the requirements of foreign disclosure in your application as well as how Blue Haven Grant Consultants will help you navigate this process.
Eligibility and Foreign Ownership
The first question on most teams’ minds is “Are we eligible for an SBIR/STTR grant?” SBIR/STTR eligibility requires that the entity be a for-profit business located in the U.S. with less than 500 employees, and it must be at least 51% owned and controlled by U.S. citizens. This core requirement is in place to ensure that federally funded innovation benefits the American economy. There are exceptions to this, but most projects will need to meet this requirement.
So long as the ownership is majority owned and controlled by U.S. citizens, your project is ready to go. But there are additional steps to disclose foreign ownership and interests in your company.
Declaring Foreign Ownership and Interests
Separate from the scientific merit review, a foreign risk assessment will be conducted to identify and evaluate an applicant's foreign affiliations. The assessment is not designed to discourage all international collaboration but to ensure such relationships are transparent and do not pose a risk. The review focuses on several key areas:
● Foreign Ownership and Control: The review will scrutinize the ownership structure to ensure compliance with the 51% U.S. ownership rule, including any institutional investments.
● Financial Ties and Obligations: This involves looking for any significant financial dependencies, such as loans or contracts, your company or its key personnel have with foreign governments or entities.
● Participation in Foreign Talent Recruitment Programs: This is a particularly sensitive area. The review will identify any involvement of covered individuals (e.g., the Principal Investigator) in foreign government-sponsored talent recruitment programs, which are often seen as a mechanism for foreign governments to acquire U.S. intellectual property.
● Foreign Affiliations: The assessment also considers a wide range of professional and personal affiliations, such as appointments at foreign universities or research institutions, which could create a conflict of commitment or an obligation to a foreign entity.
● Cybersecurity Practices and Patent Analysis: The due diligence process may also review a company's cybersecurity measures and patent portfolio to assess the potential for foreign entities to gain access to or control over the intellectual property being developed with federal funds.
This is not a one-time process. Award recipients are required to continuously monitor and report any changes to their foreign relationships throughout the entire duration of the award. The key takeaway for any applicant is that a commitment to transparency and a clear demonstration of U.S. ownership and control are essential for navigating this aspect of the application process.
BHGC Approach
We recognize that great ideas are often the result of extensive collaboration, including international collaboration. If your team is concerned that foreign investment or participation is a risk to your project, we are ready to help you with the necessary due dilligence and transparent compliance with foreign disclosure requirements in the SBIR/STTR program.
Ready to have your questions answered? Schedule a free consultation, and let’s get your project moving forward together.