[Federal Register: December 7, 2007 (Volume 72, Number 235)]
[Rules and Regulations]               
[Page 69159-69162]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Defense Acquisition Regulations System

48 CFR Parts 227 and 252

RIN 0750-AD72

Defense Federal Acquisition Regulation Supplement; Patent Rights-
Ownership by the Contractor (DFARS Case 2001-D015)

AGENCY: Defense Acquisition Regulations System, Department of Defense 

ACTION: Final rule.


SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to add a clause pertaining to 
patent rights under contracts awarded to large business concerns for 
experimental, developmental, or research work. The clause is 
substantially the same as a Federal Acquisition Regulation (FAR) clause 
that has been removed because DoD was the only agency using the clause.

DATES: Effective Date: December 7, 2007.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, Defense Acquisition 
Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense 
Pentagon, Washington, DC 20301-3062. Telephone 703-602-0328; facsimile 
703-602-7887. Please cite DFARS Case 2001-D015.


A. Background

    This final rule adds a clause at DFARS 252.227-7038, Patent Rights-
Ownership by the Contractor (Large Business). The DFARS clause is 
similar to the clause previously found at FAR 52.227-12, Patent Rights-
Retention by the Contractor (Long Form). The FAR clause was removed by 
the final rule published at 72 FR 63045 on November 7, 2007, because 
DoD was the only agency using the clause. The new DFARS clause also 
contains changes for consistency with current statutory provisions and 
with other changes made to the FAR in the final rule published on 
November 7, 2007. The clause is prescribed for use in contracts awarded 
to large business concerns for experimental, developmental, or research 
    DoD published a proposed rule at 69 FR 58377 on September 30, 2004. 
DoD received no comments on the proposed rule. Therefore, DoD has 
adopted the proposed rule as a final rule, with a minor change 
resulting from the final FAR rule published on November 7, 2007, 
removal of the clause at DFARS 252.227-7034, Patents-Subcontracts. The 
clause at DFARS 252.227-7034 was used in contracts containing the 
clause at FAR 52.227-11, Patent Rights-Retention by the Contractor 
(Short Form), to require inclusion of the clause at FAR 52.227-12, 
Patent Rights-Retention by the Contractor (Long Form), in subcontracts 
for experimental, developmental, or research work to be performed by 
other than a small business firm or nonprofit organization. Since the 
clause at FAR 52.227-12 has been removed, and paragraph (k) of the 
clause at FAR 52.227-11, as revised at 72 FR 63045 on November 7, 2007, 
adequately addresses subcontract requirements, the clause at DFARS 
252.227-7034 is no longer necessary and is removed.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the new DFARS clause applies only to contracts with large 
business concerns and is substantially the same as a FAR clause that is 
already being used in DoD contracts.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies. The 
information collection requirements in this rule are presently approved 
under Office of Management and Budget Control Number 9000-0095, 
applicable to FAR Subpart 27.3. These hours will be transferred to OMB 
Control Number 0704-0369, applicable to DFARS Part 227.

List of Subjects in 48 CFR Parts 227 and 252

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

Therefore, 48 CFR parts 227 and 252 are amended as follows:
1. The authority citation for 48 CFR parts 227 and 252 continues to 
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.


2. Section 227.303 is revised to read as follows:

227.303  Contract clauses.

    (1) Use the clause at 252.227-7039, Patents--Reporting of Subject 
Inventions, in solicitations and contracts containing the clause at FAR 
52.227-11, Patent Rights--Ownership by the Contractor.
    (2)(i) Use the clause at 252.227-7038, Patent Rights--Ownership by 
the Contractor (Large Business), instead of the clause at FAR 52.227-
11, in solicitations and contracts for experimental, developmental, or 
research work if--
    (A) The contractor is other than a small business concern or 
nonprofit organization; and
    (B) No alternative patent rights clause is used in accordance with 
FAR 27.303(c) or (e).
    (ii) Use the clause with its Alternate I if--
    (A) The acquisition of patent rights for the benefit of a foreign 
government is required under a treaty or executive agreement;
    (B) The agency head determines at the time of award that it would 
be in the national interest to acquire the right to sublicense foreign 
governments or international organizations pursuant to any existing or 
future treaty or agreement; or
    (C) Other rights are necessary to effect a treaty or agreement, in 
which case Alternate I may be appropriately modified.
    (iii) Use the clause with its Alternate II in long-term contracts 
if necessary to

[[Page 69160]]

effect treaty or agreements to be entered into.

227.304-4  [Removed]

3. Section 227.304-4 is removed.


252.227-7034  [Removed]

4. Section 252.227-7034 is removed and reserved.
5. Section 252.227-7038 is added to read as follows:

252.227-7038  Patent Rights--Ownership by the Contractor (Large 

    As prescribed in 227.303(2), use the following clause:

Patent Rights--Ownership by the Contractor (Large Business) (Dec 2007)

    (a) Definitions. As used in this clause--Invention means--
    (1) Any invention or discovery that is or may be patentable or 
otherwise protectable under Title 35 of the United States Code; or
    (2) Any variety of plant that is or may be protectable under the 
Plant Variety Protection Act (7 U.S.C. 2321, et seq.).
    (1) When used in relation to any invention other than a plant 
variety, means the conception or first actual reduction to practice 
of the invention; or
    (2) When used in relation to a plant variety, means that the 
Contractor has at least tentatively determined that the variety has 
been reproduced with recognized characteristics.
    Nonprofit organization means--
    (1) A university or other institution of higher education;
    (2) An organization of the type described in the Internal 
Revenue Code at 26 U.S.C. 501(c)(3) and exempt from taxation under 
26 U.S.C. 501(a); or
    (3) Any nonprofit scientific or educational organization 
qualified under a State nonprofit organization statute.
    Practical application means--
    (1)(i) To manufacture, in the case of a composition or product;
    (ii) To practice, in the case of a process or method; or
    (iii) To operate, in the case of a machine or system; and
    (2) In each case, under such conditions as to establish that--
     (i) The invention is being utilized; and
    (ii) The benefits of the invention are, to the extent permitted 
by law or Government regulations, available to the public on 
reasonable terms.
    Subject invention means any invention of the Contractor made in 
the performance of work under this contract.
    (b) Contractor's rights--(1) Ownership. The Contractor may elect 
to retain ownership of each subject invention throughout the world 
in accordance with the provisions of this clause.
    (2) License. (i) The Contractor shall retain a nonexclusive 
royalty-free license throughout the world in each subject invention 
to which the Government obtains title, unless the Contractor fails 
to disclose the invention within the times specified in paragraph 
(c) of this clause. The Contractor's license-
    (A) Extends to any domestic subsidiaries and affiliates within 
the corporate structure of which the Contractor is a part;
    (B) Includes the right to grant sublicenses to the extent the 
Contractor was legally obligated to do so at the time of contract 
award; and
    (C) Is transferable only with the approval of the agency, except 
when transferred to the successor of that part of the Contractor's 
business to which the invention pertains.
    (ii) The agency--
    (A) May revoke or modify the Contractor's domestic license to 
the extent necessary to achieve expeditious practical application of 
the subject invention pursuant to an application for an exclusive 
license submitted in accordance with 37 CFR Part 404 and agency 
licensing regulations;
    (B) Will not revoke the license in that field of use or the 
geographical areas in which the Contractor has achieved practical 
application and continues to make the benefits of the invention 
reasonably accessible to the public; and
    (C) May revoke or modify the license in any foreign country to 
the extent the Contractor, its licensees, or the domestic 
subsidiaries or affiliates have failed to achieve practical 
application in that foreign country.
    (iii) Before revoking or modifying the license, the agency--
    (A) Will furnish the Contractor a written notice of its 
intention to revoke or modify the license; and
    (B) Will allow the Contractor 30 days (or such other time as the 
funding agency may authorize for good cause shown by the Contractor) 
after the notice to show cause why the license should not be revoked 
or modified.
    (iv) The Contractor has the right to appeal, in accordance with 
37 CFR part 404 and agency regulations, concerning the licensing of 
Government-owned inventions, any decision concerning the revocation 
or modification of the license.
    (c) Contractor's obligations. (1) The Contractor shall--
    (i) Disclose, in writing, each subject invention to the 
Contracting Officer within 2 months after the inventor discloses it 
in writing to Contractor personnel responsible for patent matters, 
or within 6 months after the Contractor first becomes aware that a 
subject invention has been made, whichever is earlier;
    (ii) Include in the disclosure--
    (A) The inventor(s) and the contract under which the invention 
was made;
    (B) Sufficient technical detail to convey a clear understanding 
of the invention; and
    (C) Any publication, on sale (i.e., sale or offer for sale), or 
public use of the invention and whether a manuscript describing the 
invention has been submitted for publication and, if so, whether it 
has been accepted for publication; and
    (iii) After submission of the disclosure, promptly notify the 
Contracting Officer of the acceptance of any manuscript describing 
the invention for publication and of any on sale or public use.
    (2) The Contractor shall elect in writing whether or not to 
retain ownership of any subject invention by notifying the 
Contracting Officer at the time of disclosure or within 8 months of 
disclosure, as to those countries (including the United States) in 
which the Contractor will retain ownership. However, in any case 
where publication, on sale, or public use has initiated the 1-year 
statutory period during which valid patent protection can be 
obtained in the United States, the agency may shorten the period of 
election of title to a date that is no more than 60 days prior to 
the end of the statutory period.
    (3) The Contractor shall--
    (i) File either a provisional or a nonprovisional patent 
application on an elected subject invention within 1 year after 
election, provided that in all cases the application is filed prior 
to the end of any statutory period wherein valid patent protection 
can be obtained in the United States after a publication, on sale, 
or public use;
    (ii) File a nonprovisional application within 10 months of the 
filing of any provisional application; and
    (iii) File patent applications in additional countries or 
international patent offices within either 10 months of the first 
filed patent application (whether provisional or nonprovisional) or 
6 months from the date the Commissioner of Patents grants permission 
to file foreign patent applications where such filing has been 
prohibited by a Secrecy Order.
    (4) The Contractor may request extensions of time for 
disclosure, election, or filing under paragraphs (c)(1), (2), and 
(3) of this clause. The Contracting Officer will normally grant the 
extension unless there is reason to believe the extension would 
prejudice the Government's interests.
    (d) Government's rights-- (1) Ownership. The Contractor shall 
assign to the agency, upon written request, title to any subject 
     (i) If the Contractor elects not to retain title to a subject 
    (ii) If the Contractor fails to disclose or elect the subject 
invention within the times specified in paragraph (c) of this clause 
and the agency requests title within 60 days after learning of the 
Contractor's failure to report or elect within the specified times;
    (iii) In those countries in which the Contractor fails to file 
patent applications within the times specified in paragraph (c) of 
this clause, provided that, if the Contractor has filed a patent 
application in a country after the times specified in paragraph (c) 
of this clause, but prior to its receipt of the written request of 
the agency, the Contractor shall continue to retain ownership in 
that country; and
    (iv) In any country in which the Contractor decides not to 
continue the prosecution of any application for, to pay the 
maintenance fees on, or defend in reexamination or opposition 
proceeding on, a patent on a subject invention.

[[Page 69161]]

    (2) License. If the Contractor retains ownership of any subject 
invention, the Government shall have a nonexclusive, 
nontransferable, irrevocable, paid-up license to practice, or have 
practiced for or on behalf of the United States, the subject 
invention throughout the world.
    (e) Contractor action to protect the Government's interest. (1) 
The Contractor shall execute or have executed and promptly deliver 
to the agency all instruments necessary to--
    (i) Establish or confirm the rights the Government has 
throughout the world in those subject inventions in which the 
Contractor elects to retain ownership; and
    (ii) Assign title to the agency when requested under paragraph 
(d)(1) of this clause and enable the Government to obtain patent 
protection for that subject invention in any country.
    (2) The Contractor shall--
    (i) Require, by written agreement, its employees, other than 
clerical and nontechnical employees, to--
    (A) Disclose each subject invention promptly in writing to 
personnel identified as responsible for the administration of patent 
matters, so that the Contractor can comply with the disclosure 
provisions in paragraph (c) of this clause; and
    (B) Provide the disclosure in the Contractor's format, which 
should require, as a minimum, the information required by paragraph 
(c)(1) of this clause;
    (ii) Instruct its employees, through employee agreements or 
other suitable educational programs, as to the importance of 
reporting inventions in sufficient time to permit the filing of 
patent applications prior to U.S. or statutory foreign bars; and
    (iii) Execute all papers necessary to file patent applications 
on subject inventions and to establish the Government's rights in 
the subject inventions.
    (3) The Contractor shall notify the Contracting Officer of any 
decisions not to file a nonprovisional patent application, continue 
the prosecution of a patent application, pay maintenance fees, or 
defend in a reexamination or opposition proceeding on a patent, in 
any country, not less than 30 days before the expiration of the 
response or filing period required by the relevant patent office.
    (4) The Contractor shall include, within the specification of 
any United States nonprovisional patent application and any patent 
issuing thereon covering a subject invention, the following 
statement: ``This invention was made with Government support under 
(identify the contract) awarded by (identify the agency). The 
Government has certain rights in this invention.''
    (5) The Contractor shall--
    (i) Establish and maintain active and effective procedures to 
ensure that subject inventions are promptly identified and disclosed 
to Contractor personnel responsible for patent matters;
    (ii) Include in these procedures the maintenance of--
    (A) Laboratory notebooks or equivalent records and other records 
as are reasonably necessary to document the conception and/or the 
first actual reduction to practice of subject inventions; and
    (B) Records that show that the procedures for identifying and 
disclosing the inventions are followed; and
    (iii) Upon request, furnish the Contracting Officer a 
description of these procedures for evaluation and for determination 
as to their effectiveness.
    (6) The Contractor shall, when licensing a subject invention, 
arrange to--
    (i) Avoid royalty charges on acquisitions involving Government 
funds, including funds derived through the Government's Military 
Assistance Program or otherwise derived through the Government;
    (ii) Refund any amounts received as royalty charges on the 
subject inventions in acquisitions for, or on behalf of, the 
Government; and
    (iii) Provide for the refund in any instrument transferring 
rights in the invention to any party.
    (7) The Contractor shall furnish to the Contracting Officer the 
    (i) Interim reports every 12 months (or any longer period as may 
be specified by the Contracting Officer) from the date of the 
contract, listing subject inventions during that period and stating 
that all subject inventions have been disclosed or that there are no 
subject inventions.
    (ii) A final report, within 3 months after completion of the 
contracted work, listing all subject inventions or stating that 
there were no subject inventions, and listing all subcontracts at 
any tier containing a patent rights clause or stating that there 
were no subcontracts.
    (8)(i) The Contractor shall promptly notify the Contracting 
Officer in writing upon the award of any subcontract at any tier 
containing a patent rights clause by identifying--
    (A) The subcontractor;
    (B) The applicable patent rights clause;
    (C) The work to be performed under the subcontract; and
    (D) The dates of award and estimated completion.
    (ii) The Contractor shall furnish, upon request, a copy of the 
subcontract, and no more frequently than annually, a listing of the 
subcontracts that have been awarded.
    (9) In the event of a refusal by a prospective subcontractor to 
accept one of the clauses specified in paragraph (l)(1) of this 
clause, the Contractor--
    (i) Shall promptly submit a written notice to the Contracting 
Officer setting forth the subcontractor's reasons for the refusal 
and other pertinent information that may expedite disposition of the 
matter; and
    (ii) Shall not proceed with that subcontract without the written 
authorization of the Contracting Officer.
    (10) The Contractor shall provide to the Contracting Officer, 
upon request, the following information for any subject invention 
for which the Contractor has retained ownership:
    (i) Filing date.
    (ii) Serial number and title.
    (iii) A copy of any patent application (including an English-
language version if filed in a language other than English).
    (iv) Patent number and issue date.
    (11) The Contractor shall furnish to the Government, upon 
request, an irrevocable power to inspect and make copies of any 
patent application file.
    (f) Reporting on utilization of subject inventions. (1) The 
Contractor shall--
    (i) Submit upon request periodic reports no more frequently than 
annually on the utilization of a subject invention or on efforts in 
obtaining utilization of the subject invention that are being made 
by the Contractor or its licensees or assignees;
    (ii) Include in the reports information regarding the status of 
development, date of first commercial sale or use, gross royalties 
received by the Contractor, and other information as the agency may 
reasonably specify; and
    (iii) Provide additional reports that the agency may request in 
connection with any march-in proceedings undertaken by the agency in 
accordance with paragraph (h) of this clause.
    (2) To the extent permitted by law, the agency shall not 
disclose the information provided under paragraph (f)(1) of this 
clause to persons outside the Government without the Contractor's 
permission, if the data or information is considered by the 
Contractor or its licensee or assignee to be ``privileged and 
confidential'' (see 5 U.S.C. 552(b)(4)) and is so marked.
    (g) Preference for United States industry. Notwithstanding any 
other provision of this clause, the Contractor agrees that neither 
the Contractor nor any assignee shall grant to any person the 
exclusive right to use or sell any subject invention in the United 
States unless the person agrees that any products embodying the 
subject invention or produced through the use of the subject 
invention will be manufactured substantially in the United States. 
However, in individual cases, the agency may waive the requirement 
for an exclusive license agreement upon a showing by the Contractor 
or its assignee that--
    (1) Reasonable but unsuccessful efforts have been made to grant 
licenses on similar terms to potential licensees that would be 
likely to manufacture substantially in the United States; or
    (2) Under the circumstances, domestic manufacture is not 
commercially feasible.
    (h) March-in rights. The Contractor acknowledges that, with 
respect to any subject invention in which it has retained ownership, 
the agency has the right to require licensing pursuant to 35 U.S.C. 
203 and 210(c), 37 CFR 401.6, and any supplemental regulations of 
the agency in effect on the date of contract award.
    (i) Other inventions. Nothing contained in this clause shall be 
deemed to grant to the Government any rights with respect to any 
invention other than a subject invention.
    (j) Examination of records relating to inventions. (1) The 
Contracting Officer or any authorized representative shall, until 3 
years after final payment under this contract, have the right to 
examine any books (including laboratory notebooks), records, and 
documents of the Contractor relating to the conception or first 
reduction to practice of inventions in the same field of technology 
as the work under this contract to determine whether--

[[Page 69162]]

    (i) Any inventions are subject inventions;
    (ii) The Contractor has established procedures required by 
paragraph (e)(5) of this clause; and
    (iii) The Contractor and its inventors have complied with the 
    (2) If the Contracting Officer learns of an unreported 
Contractor invention that the Contracting Officer believes may be a 
subject invention, the Contractor shall be required to disclose the 
invention to the agency for a determination of ownership rights.
    (3) Any examination of records under this paragraph (j) shall be 
subject to appropriate conditions to protect the confidentiality of 
the information involved.
    (k) Withholding of payment (this paragraph does not apply to 
subcontracts). (1) Any time before final payment under this 
contract, the Contracting Officer may, in the Government's interest, 
withhold payment until a reserve not exceeding $50,000 or 5 percent 
of the amount of the contract, whichever is less, is set aside if, 
in the Contracting Officer's opinion, the Contractor fails to--
    (i) Establish, maintain, and follow effective procedures for 
identifying and disclosing subject inventions pursuant to paragraph 
(e)(5) of this clause;
    (ii) Disclose any subject invention pursuant to paragraph (c)(1) 
of this clause;
    (iii) Deliver acceptable interim reports pursuant to paragraph 
(e)(7)(i) of this clause; or
    (iv) Provide the information regarding subcontracts pursuant to 
paragraph (e)(8) of this clause.
    (2) The reserve or balance shall be withheld until the 
Contracting Officer has determined that the Contractor has rectified 
whatever deficiencies exist and has delivered all reports, 
disclosures, and other information required by this clause.
    (3) The Government will not make final payment under this 
contract before the Contractor delivers to the Contracting Officer--
    (i) All disclosures of subject inventions required by paragraph 
(c)(1) of this clause;
    (ii) An acceptable final report pursuant to paragraph (e)(7)(ii) 
of this clause; and
    (iii) All past due confirmatory instruments.
    (4) The Contracting Officer may decrease or increase the sums 
withheld up to the maximum authorized in paragraph (k)(1) of this 
clause. No amount shall be withheld under this paragraph while the 
amount specified by this paragraph is being withheld under other 
provisions of the contract. The withholding of any amount or the 
subsequent payment thereof shall not be construed as a waiver of any 
Government right.
    (l) Subcontracts. (1) The Contractor--
    (i) Shall include the substance of the Patent Rights-Ownership 
by the Contractor clause set forth at 52.227-11 of the Federal 
Acquisition Regulation (FAR), in all subcontracts for experimental, 
developmental, or research work to be performed by a small business 
concern or nonprofit organization; and
    (ii) Shall include the substance of this clause, including this 
paragraph (l), in all other subcontracts for experimental, 
developmental, or research work, unless a different patent rights 
clause is required by FAR 27.303.
    (2) For subcontracts at any tier--
    (i) The patents rights clause included in the subcontract shall 
retain all references to the Government and shall provide to the 
subcontractor all the rights and obligations provided to the 
Contractor in the clause. The Contractor shall not, as consideration 
for awarding the subcontract, obtain rights in the subcontractor's 
subject inventions; and
    (ii) The Government, the Contractor, and the subcontractor agree 
that the mutual obligations of the parties created by this clause 
constitute a contract between the subcontractor and the Government 
with respect to those matters covered by this clause. However, 
nothing in this paragraph is intended to confer any jurisdiction 
under the Contract Disputes Act in connection with proceedings under 
paragraph (h) of this clause.

    (End of clause)
    Alternate I (DEC 2007).
    As prescribed in 227.303(2)(ii), add the following paragraph 
(b)(2)(v) to the basic clause:

    (v) The license shall include the right of the Government to 
sublicense foreign governments, their nationals, and international 
organizations pursuant to the following treaties or international 
agreements: ----------------*.
    [* Contracting Officer to complete with the names of applicable 
existing treaties or international agreements. This paragraph is not 
intended to apply to treaties or agreements that are in effect on 
the date of the award but are not listed.]

    Alternate II (DEC 2007).
    As prescribed in 227.303(2)(iii), add the following paragraph 
(b)(2)(v) to the basic clause:

    (v) The agency reserves the right to--
    (A) Unilaterally amend this contract to identify specific 
treaties or international agreements entered into or to be entered 
into by the Government after the effective date of this contract; 
    (B) Exercise those license or other rights that are necessary 
for the Government to meet its obligations to foreign governments, 
their nationals, and international organizations under any treaties 
or international agreement with respect to subject inventions made 
after the date of the amendment.

6. Section 252.227-7039 is amended by revising the introductory text to 
read as follows:

252.227-7039  Patents--Reporting of Subject Inventions.

    As prescribed in 227.303(1), use the following clause:
* * * * *
[FR Doc. E7-23655 Filed 12-6-07; 8:45 am]