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The STTR allocation of rights agreement, explained for founders

Andrew T. Flowers ·

Most founders go into their first STTR assuming that the company paying for the research owns whatever the research produces. It doesn't work that way. The STTR allocation of rights agreement is the written agreement, required before award, that settles who owns the project's inventions, who may patent them, and who may carry the research forward. Its starting point, in the SBA's model and in common practice, is that each party owns what its own people invent. The company's advantage comes from options on the university's inventions, not from owning everything, and the terms that matter most are the ones the model leaves blank.

Why doesn't paying for the research mean owning it?

Because on an STTR the company isn't really the one paying. The small business receives the award and passes the university's share through as a subaward, but the money is federal, and it brings federal rules on inventions with it.

The main one is the Bayh-Dole Act. Under 35 U.S.C. 202, small businesses and nonprofits, universities included, may elect to retain title to the inventions they own from federally funded work, subject to the government's license. Ownership itself comes from the people who invent. The Supreme Court held in 2011 that Bayh-Dole doesn't automatically give an organization title to its people's federally funded inventions, and that an inventor's rights belong to the inventor until they're assigned (563 U.S. 776). In practice, that means each employer's invention assignment agreements decide what it owns, so before you sign the allocation of rights agreement, confirm that everyone working on the project, students and consultants included, is covered by one. A university that keeps title to its researchers' inventions is doing what the law allows, and the model agreement follows the same logic: an invention belongs to the party whose people conceived it or first actually reduced it to practice.

That matters more on STTR, because so much of the technology starts on the university side. In the National Academies' assessment of the STTR program, the technology originated at the research institution on 29.3% of STTR projects, against 11.1% of SBIR projects, and it was licensed from the institution on 18.4% of STTR projects. If your product depends on what the lab already knows, this agreement is where you secure access to it.

What does the policy directive require?

Section 8(d) of the SBA's SBIR and STTR Policy Directive says the small business must negotiate a written allocation of rights agreement with its partnering research institution before it receives an STTR award. The agreement allocates the intellectual property rights and the rights to carry out follow-on research, development, or commercialization. Under the directive, the small business submits the agreement with its proposal and certifies in every proposal that it's satisfactory, and an agency may accept an existing agreement.

Check your solicitation for exactly what it asks for and when.

At a minimum, the agreement has to answer three questions:

  1. Who's responsible for, and who owns, the inventions that come out of the project, including expenses, liability, revenues, and profits?
  2. Which party may obtain U.S. or foreign patents?
  3. Which party may continue the research, including follow-on awards outside STTR?

The 2026 reauthorization didn't change this requirement.

What does the model agreement say, clause by clause?

SBA provides a model allocation of rights agreement, and its defaults show what a negotiation is about. Most of the defaults are balanced and not worth fighting. The terms you'll negotiate are the ones the model leaves blank.

Translation Box: background IP

On the academic side: the PI's earlier inventions and know-how, which belong to the university under its IP policy and which its technology transfer office may already have committed elsewhere.

On the industry side: everything you walked in with. The products, prototypes, code, data, and know-how built before the award, which founders assume stays theirs without saying so.

In this post: the model's meaning. The IP each party brings to the project, written on a list. Both sides may use it for the project, and the company's commercial use of the university's carries a royalty the parties set.

Clause The model's default What you actually negotiate
Background IP Neither party gets rights in the other's background IP except the items each lists. Listed items may be used for the project nonexclusively and, unless noted, without compensation. Commercial use of listed institution background IP, where reasonably necessary, carries a royalty left blank What goes on each party's list, and the royalty if your product will need the university's background IP to sell
Inventions by one party Ownership vests in the party whose personnel conceived the invention or first actually reduced it to practice Usually nothing. Agree how and when each side tells the other about a new invention
Joint inventions Jointly owned, and the small business has the first option to perfect rights in them Who leads on filing, who pays, and how long the company has to decide
Exclusive license option The small business gets an exclusive option to license the institution's inventions from the project. If it extends the option, it reimburses the institution's patent costs up to the end of the option period The option periods, the royalty on a license, and the revenue split, which the model leaves blank or to negotiation
Government license The government holds a nonexclusive, royalty-free license for governmental purposes Nothing. It comes with the federal funding
Publication Either party may publish its results. The other party gets a review period (blank), a "right of refusal" over a proposed publication that the model doesn't define, and on request a deferral (blank number of days) to file a patent application How long the review period runs, whether a patent deferral applies and for how long, and narrowing the right of refusal to removing your confidential information
Follow-on work Follow-on agreements must carry the project IP rights forward Which party may continue the research, including follow-on awards outside STTR

Three rows deserve more thought. Background IP is the one founders usually leave thin. List what you're bringing by name, ask the lab to do the same, and if the product will rely on the university's background IP, settle that royalty now, while you can still walk away.

The license option is the company's main lever, and it comes with a cost. If you extend the option, you reimburse the university's patent costs up to the end of the option period, so ask for the period you need to decide, not the longest you can get.

Publication is where academic and company timelines collide. Expect the university to narrow the model's right of refusal to the removal of your confidential information. Universities generally accept a review period and a short delay for a patent filing, but not a broader veto.

How do you get it signed before the deadline?

Start from a template, not a blank page. Most research offices have their own version ready, and starting from it, or from the model, is faster than drafting yours. Then move early:

  • Find the right office in week one. The professor agrees to collaborate, but the research office negotiates the allocation of rights agreement and signs it. Ask who handles it and what the internal deadline is.
  • Decide your positions on the blanks before the first call. The option period, the royalty, the revenue split, the review period, and your background IP list.
  • Check the IP and publication clauses against a list. Our free Contract Red Flags Kit lists the clauses that tend to slow these agreements down, with a balanced position for each.
  • Keep it with everything else. Our free SBIR and STTR partner readiness checklist puts the agreement alongside the budget, the people, and the institutional commitments needed.

The professor will have questions of their own about publishing and credit, covered in what to offer a professor when you ask them to join your SBIR or STTR proposal.

Helikon Labs isn't a law firm, and this post isn't legal advice. Before anyone signs, the agreement should go to your company's counsel and to the university's research office.

Do you need an allocation of rights agreement for an SBIR?

No. SBIR has no allocation of rights requirement. When a university does part of the work on an SBIR, the IP terms go in the subaward instead. The three questions still need answers, though: who owns what's invented, who may patent it, and who may continue the work. A subaward that doesn't answer them leaves you negotiating after the invention exists, when agreeing is hardest. Still deciding between the programs? See SBIR vs STTR: which program fits when you already have a university collaborator.

The policy directive also protects SBIR and STTR data rights for 20 years from award, or longer at the agency's discretion. That protection is separate from patent ownership. It doesn't settle who owns an invention, so the allocation of rights agreement or the subaward still has to.

For the work split, the PI rules, and the rest, see our guide to SBIR and STTR university partners.

Where should you start?

With the proposal set up as a project. On Helikon Labs, create a project with the SBIR/STTR agreement type, its timeline, budget, and contract requirements, and invite the PI, the co-PI, and your research office contact by email, from any organization, each with a role. Give the allocation of rights agreement its own milestone, with an owner, a due date ahead of the university's internal deadline, and reminders. Keep the draft in the project's files with a per-file audience, so the redline reaches only the people negotiating it, and let the discussion and activity log keep a dated record of what was agreed. On every plan, the project can require a signed NDA, an IRB approval, or a signed contract before it goes active, records each one with its expiry date and the signed copy attached, emails you before anything expires, and keeps an audit trail of who recorded what. On Pro, the Partnership Pipeline tracks proposals still in negotiation, with a next action, a due date, and overdue reminders for each.

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If you'd like a senior second opinion on your position before you send the agreement, see Office Hours.

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The STTR allocation of rights agreement, explained for founders · Helikon Labs