Overview
FAR Subpart 27.3 implements the policies of the Bayh-Dole Act, governing the ownership, reporting, and licensing of inventions created during federal research, developmental, or experimental work. It establishes a general "contractor-first" ownership model while ensuring the Government retains a perpetual, royalty-free license to use those inventions for federal purposes.
Key Rules
- Ownership Preference: Contractors (specifically small businesses and nonprofit organizations) generally have the right to elect to retain title (ownership) to "subject inventions" made under the contract.
- Government License: Even when a contractor retains title, the Government must receive a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention throughout the world.
- Mandatory Disclosure: Contractors must disclose every subject invention to the Government within a specific timeframe. Failure to disclose or file for a patent within the required windows can result in the Government taking title to the invention.
- March-In Rights: The Government may exercise "march-in rights" to require the contractor to grant licenses to third parties if the contractor fails to achieve "practical application" of the invention or if it is necessary for public health or safety.
- U.S. Manufacturing Preference: Contractors who receive title must agree that any products embodying the subject invention or produced through its use will be manufactured substantially in the United States.
- Subcontractor Rights: Prime contractors are prohibited from using their leverage to acquire rights in a subcontractor's inventions. The patent rights clauses must "flow down" to subcontractors.
Responsibilities
- Contracting Officers (CO):
- Ensuring the correct Patent Rights clause (FAR 52.227-11 vs. 52.227-13) is inserted into R&D solicitations.
- Approving or disapproving contractor requests to transfer licenses.
- Ensuring appropriate "exceptional circumstances" determinations are made if the Government intends to take title from the outset.
- Contractors:
- Disclosing subject inventions to the CO in writing.
- Electing in writing whether to retain title within the specified regulatory period.
- Filing patent applications and providing the Government with the serial numbers and filing dates.
- Providing periodic "utilization reports" on how the invention is being commercialized.
- Agency Heads:
- Determining if "exceptional circumstances" exist to restrict a contractor's right to retain title (e.g., for national security or intelligence activities).
- Initiating "march-in" procedures if a contractor is not meeting the public's needs.
Practical Implications
- Commercialization Incentive: This subpart is designed to encourage private sector participation in government R&D by allowing companies to own their intellectual property (IP), which they can then monetize in the commercial market.
- Administrative Rigor: For contractors, the "practical application" of this subpart requires a robust internal IP tracking system. Missing a reporting deadline (e.g., failing to disclose an invention within two months of the inventor's report to the company) can lead to a total loss of IP rights to the Government.
- Dual-Use Tech: In real-world scenarios, a company developing a new alloy for NASA can own the patent and sell that alloy to automotive manufacturers, provided they provide NASA with the required "paid-up license" for space missions.
- Foreign Entities: Companies that are foreign-owned or do not have a U.S. place of business are under much stricter scrutiny; the Government often exercises its right to take title to inventions made by these entities to protect national interests.