Instructions for phs 398 and sf 424(R&R) Form Approved Through 08/31/2015

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5.5 Innovations, Inventions and Patents

According to NIH Grants Policy and Federal law, NIH recipient organizations must promptly report all inventions that are either conceived or first actually reduced to practice using NIH grant funds.

NIH strongly supports electronic reporting through an Internet-based system, Interagency Edison ( To meet the objectives of the Federal Financial Assistance Management Improvement Act of 1999 (P.L. 106-107), grantees should make all reasonable efforts to submit invention reports using iEdison. The system supports confidential transmission of required information and provides a utility for generating reports and reminders of pending reporting deadlines. Further information about the system, including instructions for creating an account needed to submit reports electronically, are on the iEdison site (

Inquiries or correspondence should be directed to Extramural Inventions and Technology Resources Branch of the Office of Policy for Extramural Research Administration, OER, NIH, 6705 Rockledge Dr., MSC 7980, Bethesda, MD 20892-7980, (301) 435-1986. Information from these reports is retained by the NIH as confidential and submission does not constitute any public disclosure. Failure to report as described at 37 CFR Section 401.14 is a violation of 35 U.S.C. 202 and may result in loss of the rights of the recipient organization.

Limited Rights Information and Data

Proprietary Information

Applicants are discouraged from submitting information considered proprietary unless it is deemed essential for proper evaluation of the application. However, when the application contains information that constitutes trade secrets, information that is commercial or financial, or information that is confidential or privileged, make sure you have checked the “Yes” box of question #3 in the “Other Project Information” component. Identify the pages in the SF424 R&R application that contain this information by marking those paragraphs or lines with an asterisk (*) in the left-hand margin. Include a legend at the beginning of Section 2, similar to “The following sections marked with an asterisk contain proprietary/privileged information that (name of Applicant) requests not be released to persons outside the Government, except for purposes of review and evaluation.”

When information in the application constitutes trade secrets or information that is commercial or financial, or information that is confidential or privileged, it is furnished to the Government in confidence with the understanding that the information shall be used or disclosed only for evaluation of this application. If a grant is awarded because of or in connection with the submission of this application, the Government shall have the right to use or disclose the information to the extent authorized by law. This restriction does not limit the Government’s right to use the information if it is obtained without restriction from another source.

Information contained in unfunded grant applications will remain the property of the applicant. The Government may, however, retain copies of all applications submitted. Public release of information in any application submitted will be subject to existing statutory and regulatory requirements.

Title to Equipment and Supplies

Title to equipment and supplies acquired by a for-profit organization as a grantee or subcontractor under a grant awarded by the agencies participating in this solicitation, shall vest, upon acquisition, in the grantee or subcontractor, respectively. Final disposition of equipment acquired with Federal funds by for-profit grantees is covered under 45 CFR 74.34.

Rights in Data Developed Under SBIR/STTR Funding Agreement

To preserve the SBIR data rights of the awardee, the legend (or statements) used in the SBIR Data Rights clause included in the SBIR award must be affixed to any submissions of technical data developed under that SBIR award. If no Data Rights clause is included in the SBIR award, the following legend, at a minimum, should be affixed to any data submissions under that award:

“These SBIR data are furnished with SBIR rights under Funding Agreement No. ___________ (and subcontract No. ___________ if appropriate), Awardee Name _________, Address, Expiration Period of SBIR Data Rights __________. The Government may not use, modify, reproduce, release, perform, display, or disclose technical data or computer software marked with this legend for (choose four (4) or five (5) years). After expiration of the (4  or 5-year period), the Government has a royalty free license to use, and to authorize others to use on its behalf, these data for Government purposes, and is relieved of all disclosure prohibitions and assumes no liability for unauthorized use of these data by third parties, except that any such data that is also protected and referenced under a subsequent SBIR award shall remain protected through the protection period of that subsequent SBIR award. Reproductions of these data or software must include this legend.”

Rights to data, including software developed under the terms of any funding agreement resulting from a grant application submitted in response to this solicitation, shall remain with the grantee, except that the Government shall have the limited right to use such data for internal Government purposes and shall not release such data outside the Government without permission of the grantee for a period of four years from completion of the project from which the data were generated.

Investigators submitting an NIH application seeking $500,000 or more in direct costs in any single budget period are expected to include a plan for data sharing or state why data sharing is not possible.


The grantee may normally copyright and publish (consistent with appropriate national security considerations, if any) material developed with PHS support. The awarding component receives a royalty-free license for the Federal Government and requires that each publication contain an acknowledgment of agency support and disclaimer statement, as appropriate. An acknowledgment shall be to the effect that “This publication was made possible by grant number ________ from (NIH/CDC/FDA awarding component)” OR “The project described was supported by grant number ________ from (NIH/CDC/FDA awarding component). Its contents are solely the responsibility of the authors and do not necessarily represent the official views of the (NIH/CDC/FDA awarding component).


Refer to for more detailed information.

Any invention first conceived or reduced to practice with award funds must be reported to the NIH. The inventor must report the discovery to the grantee organization promptly. Within two months of the inventor’s initial report to the grantee organization, the organization must report the invention to the NIH’s Extramural Invention Reporting and Technology Resources Branch of the Office of Policy for Extramural Research (see address in “Patents” section below). This should be done prior to any publication or presentation of the invention at an open meeting, since failure to report at the appropriate time is a violation of 35 U.S.C. 202, and may result in loss of the rights of the small business concern, inventor, and Federal Government in the invention. All foreign patent rights are immediately lost upon publication or other public disclosure unless a United States patent application is already on file. In addition, statutes preclude obtaining valid United States patent protection after one year from the date of a publication that discloses the invention.

NIH strongly supports electronic reporting through an Internet-based system, Interagency Edison ( Use of the iEdison system satisfies all mandated invention reporting requirements and access to the system is through a secure interactive Web site ( designed to ensure that all information submitted is confidential.

In addition to fulfilling reporting requirements, iEdison notifies the user of future time-sensitive deadlines with enough lead-time to avoid the possibility of loss of patent rights due to administrative oversight. IEdison can accommodate the invention reporting needs of all organizations. For additional information about this invention reporting and tracking system, visit the iEdison home page cited above or contact Edison via e-mail at


Small business concerns normally retain the principal worldwide patent rights to any invention developed with Government support. Under existing regulations, 37 CFR 401, the Government receives a royalty-free license for Federal Government use, reserves the right to require the patent-holder to license others in certain circumstances, and requires that anyone exclusively licensed to sell the invention in the United States must normally manufacture it substantially in the United States. The applicant small business concern is strongly encouraged to obtain information about additional requirements imposed by 37 CFR 401 from local counsel or from:

Extramural Inventions and Technology Resources Branch

Office of Policy for Extramural Research

National Institutes of Health

6705 Rockledge Drive, MSC 7980

Bethesda, MD 20892-7750

Phone: (301) 435-1986; Fax: (301) 480-0272


To the extent authorized by 35 U.S.C. 205, the Government will not make public any information disclosing a Government-supported invention for a four-year period from the date of disclosure (that may be extended by subsequent SBIR/STTR funding agreements) to allow the grantee a reasonable time to file a patent application, nor will the Government release any information that is part of that patent application.

Research Tools/Unique Research Resources

It is the policy of the NIH to make available to the public the results and accomplishments of the activities it funds. Restricted availability of unique research resources, upon which further studies are dependent, can impede the advancement of research and delivery of medical care. Notices in the NIH Guide for Grants and Contracts (Contracts (Volume 25, Number 23, July 12, 1996), and the NIH Grants Policy Statement ( fully explain the policy regarding the distribution of research resources developed with NIH funds.

The NIH encourages the commercialization of research products and allows grantee organizations to make materials available to others for commercial purposes with appropriate restrictions and licensing terms. Where the product of research developed with Federal funding is a patentable but unpatented research product, the terms of a license must be no more restrictive than they would have been if the product had been patented.

5.6 Joint Ventures and Limited Partnerships

Joint ventures and limited partnerships are eligible provided the entity created qualifies as a small business concern in accordance with the definition in Section III. Size determination of a joint venture entity requires that the combined total number of employees from all affiliates not exceed 500. Other criteria under the definition of a small business concern must also be met.

5.7 American-Made Equipment and Products

When purchasing equipment or a product under the SBIR/STTR award, the small business concern should purchase only American-made items whenever possible.

5.8 Profit or Fee

A reasonable profit/fee is available to small business concerns receiving awards under the SBIR/STTR program; however, this profit/fee must be included in your budget request at the time of application. The fee is not a “cost” item and may be used by the small business concern for any purpose, including additional effort under the SBIR/STTR award. The fee is intended to be a reasonable profit factor available to for-profit organizations, consistent with normal profit margins provided to profit-making firms for research and development work. However, the amount of the fee approved by the agencies participating in this solicitation normally will not exceed 7% of total costs (direct and indirect) for each phase (I and II) of the project.

$70,000 direct costs (includes all third party costs) + $28,000 F&A costs (40% * 70,000) = $98,000.
Maximum allowable fee = 7% * $98,000 = $6,860 fee. Total Award = $104,860.

The profit/fee applies solely to the small business concern (grantee organization) receiving the SBIR/STTR award and not to any other participant in the project. However, the grantee may pay a profit/fee to a contractor providing routine goods or services in accordance with normal commercial practice.

5.9 Additional Information

The omnibus solicitation is intended for informational purposes and reflects current planning. If there is any inconsistency between the information contained herein and the terms of any resulting SBIR/STTR funding agreement, the terms of the funding agreement are controlling.

Prior to award of an SBIR/STTR funding agreement, the Government may request the applicant small business concern to submit certain organizational, management, personnel, and financial information to ensure organizational eligibility and responsibility of the applicant organization.

The omnibus solicitation is not an offer by the Government and does not obligate the Government to make any specific number of awards. Awards under the SBIR/STTR program are contingent upon the scientific and technical merit and potential for commercialization of an application and the availability of funds for research and development. The Government is not responsible for any monies expended by the applicant organization before award of any funding agreement.

5.10 Cost Sharing

Cost sharing is permitted for SBIR/STTR applicants, however it is not required, and it will not be a review criterion. If you are cost sharing the project, be sure that the costs reflected on the budget page(s) are only those Federal funds that you are requesting from the SBIR/STTR program. You may state in the budget justification or elsewhere in the application your plans to cost share.

5.11 Audit Requirements of For-Profit Organizations

The Department of Health and Human Services (DHHS) has specified requirements for non-Federal audits of for-profit (commercial) organizations in DHHS' Title 45, Code of Federal Regulations (CFR), part 74.26, “Non-Federal Audits.” Per the regulations, a for-profit (commercial) organization is subject to audit requirements for a non-Federal audit if, during its fiscal year, it expended $500,000 or more under DHHS awards and at least one award is a DHHS grant.

Title 45 CFR part 74.26 essentially incorporates the thresholds and deadlines of Office of Management and Budget (OMB) Circular No. A-133, “Audits of States, Local Governments and Non-Profit Organizations,” but provides for-profit organizations with two options regarding the type of audit that will satisfy the audit requirements, either: (1) a financial related audit (as defined in the Government Auditing Standards, GPO Stock #020-000-00-265-4, of all the DHHS awards in accordance with Government Auditing Standards, or (2) an audit that meets the requirements contained in OMB Circular No. A-133,

Audits shall be completed and submitted to the office shown below within a period that is either (1) the earlier of 30 days after receipt of the auditor's report(s), or (2) nine months after the end of the audit period (i.e., the organization's fiscal year).

National External Audit Resources

DHHS Office of Audit Services

Lucas Place

323 West 8th Street, Room 514

Kansas City, MO 64105

The DHHS will identify organizations not meeting audit requirements. Failure to comply may jeopardize eligibility for receiving future DHHS awards.

5.12 Time and Effort Reporting for Commercial Organizations


Commercial (for-profit) organizations must document salaries and wages charged to contracts and grants by maintaining a labor distribution system for all employees regardless of function. The labor distribution system must account for total hours and charge direct and indirect labor to the appropriate cost objectives to accurately identify labor costs:

  • Charged to direct projects.

  • Charged to indirect activities.

  • Included in the base to which indirect costs are allocated.

Internal Controls

Timekeeping procedures and controls on labor charges are of utmost concern. Unlike other costs, labor is not supported by external documentation or physical evidence, which provides independent checks and balances. It is critical that managers indoctrinate individual employees on their independent responsibility for accurately recording their time. Internal controls over labor charging should meet the following criteria:

  • Responsibility for timekeeping and payroll accounting should be separated.

  • Procedures must be clear and reasonable so there is no confusion regarding the rationale for the controls or misunderstanding as to what is and is not permissible.

  • Maintenance of controls must be verified continually, and violations must be acted upon promptly and effectively to serve as a deterrent to prospective violations.

  • Individual employees must be constantly made aware of controls that act as an effective deterrent against violations. This awareness can be accomplished by emphasizing the importance of accurate time and effort reporting in orientation sessions, periodic meetings, and the posting of messages as reminders.

  • Changes on timesheets to the number of hours recorded or the cost center identified should be made by the employee and must be initialed by the employee.

  • Company policy must state that the nature of the work performed determines the proper distribution of time, not the availability of funding, type of contract/grant, or other factors.

  • Company policy should emphasize that complete and accurate time and effort reporting is an important part of an employee's job. Careless or improper reporting may lead to disciplinary actions under company policies as well as applicable Federal statutes.

Time and Effort Documentation Requirements and Responsibilities

Detailed instructions for time documentation should be established in written company procedures. A manual system would require handwritten pen and ink entries on a paper timesheet reflecting all the days in the pay period. An automated timekeeping system typically would use remote data entry for recording labor charging data and sending it directly to a central computer for processing. Supporting documentation for an automated system would normally consist of computer printouts showing data that appear on source documents, i.e., timesheets in a manual system.

Employee Responsibilities

Whether a manual or automated time and effort reporting system is in place, the employee is personally responsible for:

  • After the fact recording of hours (or fractions thereof) on a daily basis.

  • Recording all hours worked and all hours absent. All hours should be recorded whether or not they are paid.

  • Recording of hours on the timesheet in ink (manual system only).

  • Recording the correct distribution of hours by project or indirect category. The nature of the work performed determines the proper distribution of time, not the availability of funding, type of contract/grant, or other factors.

  • To ensure accuracy, a listing of project numbers/indirect categories and their descriptions should be provided in writing to each employee.

  • Any changes/corrections to timesheets should be made by the employee and must show what was initially recorded, i.e., no erasures or “white out” of entries.

  • The employee also must initial any change(s).

  • At the end of each pay period, the employee must sign the timesheet or electronically certify the labor distribution in an automated system.

Supervisor Responsibilities

  • An authorized company official (e.g., supervisor) must cosign timesheets or electronically certify individual time and effort reporting at the end of each pay period.

The supervisor is prohibited from completing an employee's timesheet or entering hours in an automated system unless the employee is absent for an extended period of time on some form of authorized leave.

The SBIR Program is not a substitute for existing unsolicited proposal mechanisms. Unsolicited proposals must not be accepted under the SBIR Program in either Phase I or Phase II. All DHHS SBIR and STTR grant applications to the National Institutes of Health (NIH), Centers for Disease Control and Prevention (CDC), and the Food and Drug Administration (FDA) must be submitted electronically through the Federalwide portal ( using the SF424 Research and Related (R&R) forms and the SF424 (R&R) SBIR/STTR Application Guide. All SBIR and STTR applications must be in response to a funding opportunity announcement (FOA) for the electronic submission of applications as announced in

If an award is made pursuant to a proposal submitted under this SBIR/STTR Program solicitation, a representative of the contractor or grantee or party to a cooperative agreement will be required to certify that the concern has or is currently being, paid for essentially equivalent work by any Federal agency.

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