Can SBIR Funds Cover Patent or Marketing Costs?

Startups and small businesses pursuing federal innovation funding through the SBIR program often run into the same question: can these funds be used for patent filings or to prepare for commercialization? The short answer is: it depends. Some patent costs are allowable if they directly support your R&D project, and certain commercialization activities may be covered—but only under specific conditions and agency guidelines.

Understanding these distinctions early in your application process can prevent budget disapprovals and help you make the most of your award. This post breaks down when and how SBIR funds can legally and strategically support patenting and commercialization work.

When Patent Costs Are Allowable Under SBIR

R&D-Related Patent Costs

If your project results in a novel invention or a breakthrough that needs protection, some agencies allow you to include costs for patent-related activities. This might include drafting invention disclosures, conducting prior art searches, or even filing a provisional patent that protects intellectual property arising from the funded research. These costs must be justified as integral to the project’s research and development.

Agency-Specific Policies

Phase I vs. Phase II Differences

Patent budgeting also differs by project phase. In Phase I, direct patent costs are usually disallowed, but some agencies let you use your “Company Fee” (profit, often 7%) to cover them informally. In Phase II, agencies like the Department of Energy allow up to $15,000 for your first U.S. patent filing, provided it relates to work done under the award.

Commercialization Costs: What’s Not Allowed

One of the most common misconceptions among SBIR applicants is that they can use award funds for general business development, marketing, or sales. Unfortunately, that’s not the case. SBIR awards are primarily for research and development. As a result, most commercialization costs are considered unallowable unless they are tightly connected to the technical objectives of the funded project.

General Marketing & Sales

SBIR funds cannot be used for broad marketing campaigns, sales efforts, or brand promotion. This includes activities such as website redesigns aimed at customer acquisition, promotional materials, and attendance at trade shows for the purpose of selling. These are explicitly excluded from the SBIR cost structure because they fall outside the scope of technical research and innovation.

The “Performance-Related” Loophole

That said, there are limited exceptions. If you can demonstrate that a commercialization activity—such as a customer discovery interview or a product-market fit study—is critical to achieving a technical milestone, some agencies may consider it allowable. However, this must be justified in your proposal and approved in advance.

The bottom line: assume that commercialization activities are unallowable unless your agency’s solicitation says otherwise and you provide strong justification tying them to your project’s scientific goals.

How TABA Expands Commercialization Support

While general commercialization expenses are off-limits under SBIR’s core budget, the Technical and Business Assistance (TABA) program offers a separate, dedicated path to fund these critical activities.

What Is TABA?

TABA is a supplemental funding mechanism available under many SBIR and STTR solicitations. It’s designed to help small businesses strengthen their commercialization strategy through expert third-party support. You can request TABA funding as part of your proposal, and if approved, it’s added on top of your core award.

Eligible Uses of TABA Funds

TABA funds are flexible and specifically meant to cover activities that would otherwise be unallowable under the main SBIR budget. Depending on your agency’s rules, you can use TABA for:

• Patent filing and intellectual property (IP) protection
• Market research and competitive analysis
• Commercialization and business planning
• Regulatory strategy and reimbursement planning
• Manufacturing assessment and scale-up strategy

This added flexibility makes TABA a vital tool for teams that want to accelerate from prototype to product.

Funding Amounts by Phase

SBIR Tip
Most agencies allow up to $6,500 in TABA funding during Phase I and up to $50,000 in Phase II—on top of your base award.

Always check the solicitation to confirm TABA availability and request procedures, as rules and allowances differ by agency.

Can I Include Market Research in My SBIR Budget?

Market research is often essential for determining product viability, assessing competition, and refining a commercialization strategy. But whether you can include these costs in your SBIR budget depends entirely on how—and why—you’re conducting the research.

If your agency permits it, you may include a market research subcontract in your SBIR proposal. This subcontract must be clearly justified in your technical narrative and linked directly to the objectives of the R&D effort. For example, assessing customer requirements to inform prototype design might qualify, whereas gauging pricing strategies or branding options would not.

When in doubt, consider whether the research is informing the science or the sale. If it’s the latter, you should plan to use TABA funds instead.

Best Practices for Budgeting Patent and Commercialization Costs

Because agency rules vary and misunderstandings are common, budgeting patent and commercialization expenses in an SBIR proposal requires a strategic, proactive approach. Here are three best practices to keep your proposal compliant and competitive.

Read the Solicitation Carefully

Pro Tip
Always review your agency’s specific solicitation to understand what costs are allowed. Assumptions lead to disallowed budgets.

Agencies publish detailed guidance in each solicitation. These rules define what’s allowable, how much can be allocated, and whether TABA support is available. Read these sections closely—especially any appendices on budget preparation or cost principles.

Plan Early for IP Needs

If you anticipate generating patentable technology, coordinate early with an intellectual property attorney. You’ll need to decide whether to include the cost in your base budget (if allowed) or to fund it through your company fee or TABA. Early planning ensures you don’t miss deadlines for provisional filings or disclosures that protect your rights under the Bayh-Dole Act.

Consider Outside Support

Don’t try to handle everything in-house. TABA-approved vendors and commercialization consultants can help with market analysis, regulatory guidance, IP strategy, and more. Using third-party support can strengthen your commercialization plan and free up internal resources to focus on the technical work.

Summary: What You Can and Can’t Do

Navigating the limits of SBIR funding can be tricky, but with a clear understanding of what’s allowed—and through which channels—you can budget effectively without running afoul of agency rules.

Here’s what you can do:

• Include patent costs in your R&D budget if they’re directly tied to the project and allowed by the agency.
• Use your company fee to offset costs not permitted as direct charges, such as patent filings during Phase I.
• Request TABA funds for broader commercialization needs like IP strategy, market research, and regulatory planning.
• Propose a market research subcontract if it’s justified as supporting technical milestones and the agency permits it.

And here’s what you can’t do:

• Charge general marketing or sales costs to your SBIR budget.
• Assume all patent or commercialization costs are allowed—agency rules differ.
• Retroactively apply funds to commercialization efforts not outlined in your proposal.

By aligning your budget strategy with agency expectations and using TABA where appropriate, you can support both innovation and the path to market. Always use the solicitation as your rulebook—and when in doubt, ask your program officer.