27.306 Licensing background patent rights to third parties
Source: FAR 27.306 on acquisition.gov
The government can only require small businesses or nonprofits to license background inventions to third parties if the agency head personally justifies and approves it, ensuring due process and contractor rights.
Overview
FAR 27.306 governs the circumstances under which the government may require small businesses or nonprofit organizations to license their background patent rights (i.e., inventions not arising from the contract) to third parties. Generally, contracts with these entities cannot include provisions mandating such licensing unless the agency head personally approves and justifies it in writing. This authority is non-delegable and can only be exercised if it is determined that third-party use is necessary for the practice or application of a subject invention or contract work object. Any such determination must be made on the record, after a hearing opportunity, and the contractor must be formally notified, including information about their right to seek judicial review within 60 days.
Key Rules
- Restriction on Licensing Requirements
- Contracts with small businesses or nonprofits cannot require licensing of background inventions to third parties unless specifically justified and approved by the agency head.
- Agency Head Approval
- Only the agency head (not a delegate) can approve such licensing, and only with a written justification based on necessity for contract performance or practical application.
- Due Process for Contractors
- Determinations must be made on the record, with an opportunity for a hearing, and contractors must be notified by certified or registered mail, including their right to judicial review within 60 days.
Responsibilities
- Contracting Officers: Ensure contract clauses comply with these restrictions and facilitate required notifications.
- Contractors: Be aware of rights regarding background inventions and respond promptly to notifications.
- Agencies: Agency heads must personally justify and document any required licensing, provide due process, and notify contractors properly.
Practical Implications
- Protects small businesses and nonprofits from overreaching government claims on background inventions.
- Ensures due process and limits government authority to only essential cases.
- Contractors should monitor contract language and agency notifications to safeguard their intellectual property rights.
(a) A contract with a small business concern or nonprofit organization shall not contain a provision allowing the Government to require the licensing to third parties of inventions owned by the contractor that are not subject inventions unless the agency head has approved and signed a written justification in accordance with paragraph (b) of this section. The agency head may not delegate this authority and may exercise the authority only if it is determined that the-
(1) Use of the invention by others is necessary for the practice of a subject invention or for the use of a work object of the contract; and
(2) Action is necessary to achieve the practical application of the subject invention or work object.
(b) Any determination will be on the record after an opportunity for a hearing, and the agency shall notify the contractor of the determination by certified or registered mail. The notification shall include a statement that the contractor must bring any action for judicial review of the determination within 60 days after the notification.