This analysis covers FAR Part 27, which dictates how the Federal Government manages intellectual property (IP), including inventions, technical data, and copyrighted material developed or used during contract performance.
Overview
FAR Part 27 establishes a regulatory framework that balances the government's need for technology and data with the contractor’s right to retain ownership of intellectual property. It primarily governs patent infringement liability, the reporting of royalties, and the allocation of rights for inventions made under government-funded research and development (R&D) contracts.
Key Rules
- Authorization and Consent: Under 28 U.S.C. 1498, the government can authorize a contractor to use patented inventions. The exclusive remedy for a patent owner in such cases is to sue the Government for monetary damages in the Court of Federal Claims, rather than seeking an injunction against the contractor.
- Patent Indemnity: Contractors providing commercial products or services are generally required to indemnify the government against liability for patent infringement. This requirement is typically waived for non-commercial, specialized R&D work where the government specifies the design.
- Ownership of Inventions (Bayh-Dole Act): For R&D contracts, contractors generally have the right to "elect title" (retain ownership) of subject inventions, provided they disclose them to the government.
- Government License: Even when a contractor retains ownership of a patent, the government automatically receives a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention worldwide.
- March-in Rights: The government maintains the right to require the contractor to license a "subject invention" to third parties if the contractor fails to commercialize the technology or if it is necessary to meet health and safety needs.
- U.S. Manufacturing Preference: Any contractor receiving title to a subject invention must agree that products embodying that invention will be manufactured "substantially" in the United States.
- Royalties: Contractors must report royalties charged to the contract. The government may adjust or demand refunds for royalties that are excessive or for which the government already holds a license.
Responsibilities
- Contracting Officers (CO):
- Ensuring the correct IP clauses (e.g., 52.227-1, 52.227-11) are inserted based on the type of work (R&D vs. Commercial).
- Consulting with patent counsel regarding royalty reports and infringement claims.
- Reporting classified patent applications to the appropriate security authorities.
- Contractors:
- Disclosing all "subject inventions" to the government within the specified timeframe.
- Formally electing whether to retain title to inventions.
- Obtaining permissions from third-party copyright owners before including their work in delivered data.
- Ensuring subcontractors follow the same patent and data rights flow-down requirements.
- Agency Patent Counsel/Cognizant Office:
- Reviewing royalty information to ensure charges are not improper.
- Advising the CO on legal disputes regarding patent and copyright infringement.
- Agency Heads:
- Approving "exceptional circumstances" where the government may take ownership of an invention instead of the contractor.
Practical Implications
In real-world scenarios, FAR Part 27 prevents government projects from being halted by patent injunctions, ensuring that critical defense and infrastructure work can continue even if a patent dispute arises. For contractors, the "duty to disclose" is the most critical operational burden; failing to report an invention discovered during a contract can result in the government taking full ownership of that patent. Additionally, commercial vendors must be aware that they carry the financial risk of patent infringement lawsuits through indemnity clauses, whereas R&D contractors are often shielded from these costs by the "Authorization and Consent" clause. Finally, the "substantially in the U.S." requirement for manufacturing acts as a significant "Buy American" constraint on the commercialization of federally funded technology.