In late April, the House passed an apparently routine bill to reauthorize research grants for small businesses. But the appearance of “small business as usual” was deceiving: The action actually capped a fierce lobbying battle that pitched wealthy venture capitalists’ pet research projects against more modestly funded enterprises in the pursuit of more than $2 billion in federal grant money.

New York Democrat Nydia M. Velazquez, who chairs the House Small Business Committee, sponsored the measure. Should the Senate go along with it, Vel?!zquez’s bill would extend grants and contracts for innovation research and technology transfer through 2010, and in the process allow small businesses backed by venture capital firms to qualify, as long as no single investment firm owned 50 percent or more of a business. Multiple investment firms could collectively own more than half.

Two small-business groups, the American Small Business League and the Small Business Technology Council, charge that Velazquez’s adjustments to grant-funding protocols effectively would bar their members from competing for the annual $2.3 billion of federal outlays in grants and contracts for technology research. Most of the grants come from the Defense Department and the National Institutes of Health.

“This is an attempt by the National Venture Capital Association to buy a piece of legislation for financial gain, and Velazquez and her committee have sold out to them,” complains Lloyd Chapman, president of the American Small Business League.

Chapman’s ally in his lobbying campaign against the bill is Jere W. Glover, a former Small Business Administration official who now heads the Small Business Technology Council, a trade group for companies that receive the grants. Glover says the House bill “radically changes a program that everyone says has worked well.”

The venture capital industry has been trying to persuade Congress to rewrite the law since 2003, after an SBA administrative law judge ruled that under the 1982 law setting up the research grant programs, small businesses owned by venture capitalists were not eligible. Vel?!zquez says her bill simply restores the system to the way it operated before 2003.

“Small firms must not be penalized for accepting the investments they need to advance their R&D efforts,” Velazquez said in a statement e-mailed by her office. The bill, she said, “is not a groundbreaking change.”

Advocates for the venture capital and biotech industries contend that Chapman and Glover are floating hyperbolic charges not borne out by the bill’s likely impact. Ruling out small businesses backed by venture capital, they say, eliminates some of the most promising young companies — those that have been able to attract outside investment.

“Simply because you got venture capital doesn’t mean you hit the jackpot,” says Mark Heesen, president of the National Venture Capital Association, “and it doesn’t mean you are a big business that doesn’t need any kind of assistance.”

James C. Greenwood, a former Republican House member from Pennsylvania who now heads the Biotechnology Industry Organization, says his member companies often need sums far greater than the federal grant program provides, making venture capital funding essential. And he says that only a flawed reading of the statute by the SBA judge has denied the companies participation.

But Glover and Chapman have been able to halt other attempts to change the grant program, and they are relying on Democratic Sen. John Kerry of Massachusetts, chairman of the Senate Small Business and Entrepreneurship Committee, to protect them. In the past, Kerry has voted against expanding the involvement of venture capital companies in the program. (Currently, small investment firms can hold limited stakes in companies seeking the grants.) But the lobbyists also worry that Kerry will be under pressure to compromise because the grant program expires at the end of September.

Kerry might be open to a third approach. Two years ago, he supported a bill by Maine Republican Sen. Olympia J. Snowe , who then chaired the Small Business panel, that would have allowed some grants for firms backed by venture capital, but with an overall funding increase to ensure that existing grantees did not lose anything. However, Velazquez’s bill contains no such provisions.

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