27.202-2 Notice of Government as a licensee
Source: FAR 27.202-2 on acquisition.gov
When the Government must pay patent royalties under an existing license, contracting officers must disclose license details to offerors and require them to declare their patent ownership or license status for accurate pricing.
Overview
FAR 27.202-2 outlines the procedures contracting officers must follow when the Government is obligated to pay royalties on a patent due to an existing license agreement and the patent may apply to a prospective contract. The regulation ensures transparency for offerors and enables the Government to make informed pricing decisions by disclosing relevant patent and royalty information in solicitations.
Key Rules
- Notice to Offerors
- When a licensed patent is applicable, the Government must provide prospective offerors with notice of the license, the patent number, and the royalty rate.
- Solicitation Requirements
- Solicitations must require offerors to state whether they are the patent owner or a licensee under the patent, enabling the Government to adjust pricing or negotiate reductions as appropriate.
Responsibilities
- Contracting Officers: Must disclose patent and royalty information to offerors and require offerors to declare their patent ownership or license status.
- Contractors/Offerors: Must indicate in their proposals whether they own or are licensed under the relevant patent.
- Agencies: Must ensure solicitations and contract pricing reflect royalty obligations and potential reductions.
Practical Implications
- This section ensures fair competition and accurate pricing by making royalty obligations transparent to all offerors.
- It helps prevent double payment of royalties and allows the Government to negotiate better terms if offerors have more favorable licensing arrangements.
- Common pitfalls include failing to disclose required information or not collecting offeror patent status, which can lead to pricing errors or disputes.
(a) When the Government is obligated to pay a royalty on a patent because of an existing license agreement and the contracting officer believes that the licensed patent will be applicable to a prospective contract, the Government should furnish the prospective offerors with-
(1) Notice of the license;
(2) The number of the patent; and
(3) The royalty rate cited in the license.
(b) When the Government is obligated to pay such a royalty, the solicitation should also require offerors to furnish information indicating whether or not each offeror is the patent owner or a licensee under the patent. This information is necessary so that the Government may either-
(1) Evaluate an offeror’s price by adding an amount equal to the royalty; or
(2) Negotiate a price reduction with an offeror when the offeror is licensed under the same patent at a lower royalty rate.