Overview
This section of the FAR (52.227) prescribes clauses and provisions related to patents, inventions, and royalties. It establishes the legal framework for allocating intellectual property rights, indemnifying the government against infringement, and managing the disclosure of inventions "made" during the performance of federal contracts.
Key Rules
- Authorization and Consent (52.227-1): The Government provides its authorization and consent for the Contractor to use patented inventions in the performance of the contract, which limits the patent holder's remedy for infringement to a suit against the Government in the U.S. Court of Federal Claims.
- Patent Indemnity (52.227-3 & -4): Contractors are generally required to indemnify the Government against liability for patent infringement arising out of the delivery of supplies or services, except when the infringement results from complying with specific Government specifications.
- Royalty Reporting (52.227-6 & -9): Offerors must disclose any royalties exceeding $250 included in their price. The Government maintains the right to a refund or price reduction if royalties included in the contract price are not actually paid or are determined to be improper.
- Classified Subject Matter (52.227-10): Strict security protocols apply to filing patent applications that contain "Secret" or "Confidential" information, requiring Contracting Officer notification and approval before filing.
- Contractor Ownership of Inventions (52.227-11): Under the Bayh-Dole Act framework, Contractors (specifically small businesses and nonprofits) may elect to retain title to "subject inventions" provided they:
- Disclose the invention to the Government within two months.
- Elect to retain title within two years.
- File patent applications within specified timelines.
- Grant the Government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention.
- Domestic Preference (52.227-11(g)): Products embodying subject inventions or produced through their use must generally be manufactured "substantially in the United States."
Practical Implications
- Risk Mitigation: These clauses protect contractors from direct injunctions by patent holders when performing government work, but they also place a heavy burden on contractors to manage their own third-party patent risks through indemnity.
- Administrative Compliance: Contractors must implement robust internal tracking systems to meet strict reporting deadlines for "subject inventions"; failure to disclose an invention within the two-month window can result in the loss of patent ownership to the Government.
- Subcontracting Oversight: Prime contractors are required to flow down these patent and invention clauses to subcontractors (typically those above the Simplified Acquisition Threshold), ensuring the Government's rights are protected throughout the entire supply chain.