27.202
Royalties
FAR 27.202 requires contractors to report royalties, notify the government of existing licenses, and comply with procedures for adjusting or refunding royalty payments to prevent unnecessary costs.
Overview
FAR 27.202 addresses the treatment of royalties in government contracts, outlining procedures for reporting, notification, adjustment, and refund of royalties, as well as the inclusion of relevant solicitation provisions and contract clauses. The section ensures that contractors disclose royalty payments associated with patented or copyrighted materials used in contract performance, and provides mechanisms for the government to manage royalty costs and avoid unnecessary payments. It also establishes the government's rights as a licensee and the process for adjusting or refunding royalties if overpayments or errors occur.
Key Rules
- Reporting of Royalties
- Contractors must report royalties paid or to be paid in connection with contract performance, ensuring transparency and compliance with government requirements.
- Notice of Government as a Licensee
- Contractors must notify the government if the government is already a licensee of the patent or copyright, potentially avoiding duplicate royalty payments.
- Adjustment of Royalties
- Procedures are provided for adjusting royalty payments if errors or overpayments are identified during contract performance.
- Refund of Royalties
- Contractors may be required to refund royalties if it is determined that payments were unnecessary or excessive.
- Solicitation Provisions and Contract Clause
- Solicitations and contracts must include specific provisions and clauses related to royalties to ensure compliance and proper administration.
Responsibilities
- Contracting Officers: Ensure appropriate clauses are included, review royalty reports, and manage adjustments or refunds as needed.
- Contractors: Accurately report royalties, notify the government of existing licenses, and comply with adjustment or refund requirements.
- Agencies: Oversee compliance and ensure royalty costs are justified and not duplicated.
Practical Implications
- This section exists to prevent unnecessary or duplicate royalty payments and to ensure transparency in the use of patented or copyrighted materials.
- It impacts daily contracting by requiring careful tracking and reporting of royalties, and by mandating prompt notification and adjustment if issues arise.
- Common pitfalls include failure to report royalties, overlooking government license rights, or not adjusting/refunding royalties when required.