For-profit small businesses, especially those leveraging Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants, increasingly rely on MBA interns to drive innovation and manage strategic projects. Many interns receive stipends from their universities, not the host companies, creating a cost-effective talent pipeline. However, complex issues arise when these interns work on intellectual property (IP), such as product designs, business strategies, or proprietary data. Universities often require students to sign IP agreements as a condition of receiving stipends, which can conflict with the host company’s IP interests. This article explores the ramifications of using stipend-funded interns and provides actionable strategies to manage IP ownership and avoid disputes.
The Context: Stipend-Funded Interns and IP
MBA interns, often placed through federal or state agency programs, bring analytical skills and fresh perspectives to small businesses. These interns may contribute to patentable innovations, trade secrets, or copyrighted materials (e.g., marketing strategies, software code) in biotech, tech, or other IP-intensive industries. Since the host company does not pay interns who receive university stipends, businesses may assume they face fewer legal obligations. However, universities frequently require students to sign IP agreements, assigning rights to work produced during their studies, including internships, to the university. This pre-existing IP agreement creates potential conflicts with the host company’s claim to IP, threatening their competitive advantage and SBIR/STTR funding requirements.
Key Ramifications
Competing IP Claims
University IP agreements often assert ownership over any work product students create during their academic program, especially if university resources or grants fund stipends. For example, an MBA intern developing a market entry strategy for a biotech company might inadvertently assign rights to that strategy to their university. If the host company assumes ownership without an explicit agreement, disputes can arise, potentially requiring costly litigation or licensing fees.
Example: In a 2024 case at a tech startup, the company and the intern’s university claimed an intern’s proprietary algorithm, delaying a patent application and costing $50,000 in legal fees to resolve.
SBIR/STTR Compliance Risks
SBIR/STTR-funded companies must demonstrate clear IP ownership to secure and maintain grants. The U.S. Small Business Administration requires grantees to retain rights to IP developed under these programs. If an intern’s university claims ownership, the company risks non-compliance, jeopardizing future funding, or triggering audits.
Confidentiality Breaches
Stipend-funded interns may share IP-related work with university advisors or peers as part of academic requirements (e.g., capstone projects or reports). Without clear boundaries, this sharing can expose trade secrets, such as proprietary processes or customer data, undermining the company’s competitive edge.
Ambiguity in Intern Agreements
Many small businesses fail to require interns to sign direct IP assignment and confidentiality agreements, relying instead on agency or university contracts. This gap leaves companies vulnerable if universities assert IP rights or interns disclose sensitive information.
Reputational and Operational Impacts
IP disputes can delay product launches, deter investors, and harm a company’s reputation. Resolving these conflicts for small businesses with limited resources diverts time and funds from core operations.
Strategies to Mitigate IP Risks
Host companies, agencies, and universities must collaborate on clear policies and contracts to protect IP and avoid conflicts with university agreements. Here are actionable steps to manage the risks of stipend-funded interns working on IP.
Require Direct IP Assignment Agreements
Host companies must mandate that interns sign IP assignments and non-disclosure agreements (NDAs) directly with the company, explicitly stating that all work products created during the internship belong to the business. These agreements should:
- Assign IP rights (e.g., patents, copyrights, trade secrets) to the company.
- Prohibit sharing work with third parties, including universities, without permission.
- Supersede any conflicting university agreements, where legally permissible.
Action Step: Work with legal counsel to draft a standardized IP assignment agreement. The agreement should include a clause requiring interns to disclose any existing university IP agreements before starting.
Coordinate with Universities
Before placing interns, the agency and host company should engage with universities to clarify IP policies. Many universities are open to negotiating internship exceptions, especially if the host company’s IP is critical to SBIR/STTR compliance. Options include:
- A joint agreement where the university waives IP claims for internship work.
- A licensing arrangement allowing the company to use intern-created IP while the university retains nominal rights.
Action Step: Host a pre-internship meeting with university representatives to align on IP ownership, document agreements in writing, signed by all parties.
Limit Intern Access to Sensitive IP
Restrict interns to projects with defined scopes, minimizing exposure to critical IP like core R&D or trade secrets. For example, an MBA intern could analyze market trends without accessing proprietary product data.
Action Step: Use role-based access controls for company systems and assign interns to non-sensitive tasks where possible. Review project outputs to ensure no proprietary data gets shared with universities.
Provide IP and Confidentiality Training
Interns may not understand IP’s legal or competitive implications, especially if their university encourages sharing work for academic credit. Training should cover:
- Definitions of IP (patents, trade secrets, copyrights).
- Risks of disclosing work to universities or peers.
- Obligations under company NDAs and IP agreements.
Action Step: Include a 30-minute IP training module in intern onboarding, using case studies of biotech IP breaches. Require interns to sign an acknowledgment of responsibilities.
Audit Agency and University Agreements
The agency placing interns should review their university stipend agreements to identify potential IP conflicts. If university contracts claim broad IP rights, the agency must negotiate carve-outs or warn host companies of risks.
Action Step: Require the agency to summarize university IP policies for each intern. Flag any conflicts for resolution before placement.
Monitor and Enforce Compliance
Companies should monitor intern communications to ensure compliance with NDAs and IP agreements. If interns submit work to universities (e.g., for capstone projects), review the content to prevent unauthorized disclosures.
Action Step: Appoint a company IP officer to oversee intern work and review any academic submissions. Establish a process for reporting and addressing breaches, such as immediate termination from the program.
Case Example
A biotech startup, BioInnovated, hosted an MBA intern through a federal-state agency program. The intern, funded by a university stipend, developed a go-to-market strategy for a new diagnostic tool. Unbeknownst to BioInnovated, the intern’s university agreement claimed rights to all work produced during the academic term. When the intern submitted the strategy as part of a capstone project, the university claimed IP ownership, delaying BioInnovated’s patent application and jeopardizing a $500,000 SBIR grant. After six months of negotiations, the dispute resolution required BioInnovated to pay the university a $20,000 licensing fee.
Lesson: BioInnovated could have avoided this by requiring a direct IP assignment agreement and coordinating with the university upfront to waive IP claims for internship work.
Conclusion
Using stipend-funded MBA interns offers small businesses a cost-effective way to leverage talent, but it introduces significant IP risks, particularly when university agreements conflict with company needs. By requiring direct IP agreements, coordinating with universities, limiting access to sensitive data, and providing robust training, companies can protect their IP while benefiting from interns’ contributions. For SBIR/STTR-funded businesses, these steps are critical to maintaining grant compliance and competitive advantage. Proactive collaboration between companies, agencies, and universities ensures internship programs deliver value without compromising proprietary assets.
