52.227-3 Patent Indemnity
Source: FAR 52.227-3 on acquisition.gov
FAR 52.227-3 requires contractors to indemnify the government against U.S. patent infringement claims arising from contract performance, with specific exclusions and tailored alternates for certain situations.
Overview
FAR 52.227-3, Patent Indemnity, requires contractors to protect the government from liability for infringement of U.S. patents arising from the manufacture, delivery, or use of supplies, services, or construction work under a federal contract. The clause ensures that if a third party claims patent infringement due to contract performance, the contractor—not the government—bears responsibility for defending and indemnifying the government, except in certain specified circumstances. The clause also provides for several alternates that allow contracting officers to tailor the scope of indemnity to specific items or types of contracts, such as communication services.
Key Rules
- General Patent Indemnity
- Contractors must indemnify the government against patent infringement claims related to contract performance, except for patents withheld under secrecy orders.
- Notification and Defense Participation
- Indemnity does not apply unless the government promptly informs the contractor of any infringement suit and allows participation in the defense.
- Exclusions from Indemnity
- Indemnity does not cover infringements resulting from government-directed changes, post-delivery modifications, or unreasonable settlements without contractor consent.
- Alternates for Scope Adjustment
- Alternate I excludes specified items from indemnity; Alternate II covers only specified items; Alternate III limits indemnity for communication service subcontracts above the simplified acquisition threshold.
Responsibilities
- Contracting Officers: Insert the appropriate clause and alternates, notify contractors of infringement claims, and allow contractor participation in defense.
- Contractors: Indemnify the government, participate in defense when notified, and comply with any exclusions or limitations specified in the contract.
- Agencies: Ensure proper clause application and oversight of indemnity provisions.
Practical Implications
- This clause shifts the risk of patent infringement from the government to the contractor, incentivizing due diligence in avoiding infringement. Contractors must be vigilant about potential patent issues and ensure compliance with notification and defense participation requirements. Failure to comply can result in significant liability. Common pitfalls include not monitoring for patent risks or misunderstanding the scope of indemnity, especially when alternates are used.
As prescribed in 27.201-2(c)(1), insert the following clause:
Patent Indemnity (Apr 1984)
(a) The Contractor shall indemnify the Government and its officers, agents, and employees against liability, including costs, for infringement of any United States patent (except a patent issued upon an application that is now or may hereafter be withheld from issue pursuant to a Secrecy Order under http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title35-section181&num=0&edition=prelim" target="_blank">35 U.S.C. 181) arising out of the manufacture or delivery of supplies, the performance of services, or the construction, alteration, modification, or repair of real property (hereinafter referred to as "construction work") under this contract, or out of the use or disposal by or for the account of the Government of such supplies or construction work.
(b) This indemnity shall not apply unless the Contractor shall have been informed as soon as practicable by the Government of the suit or action alleging such infringement and shall have been given such opportunity as is afforded by applicable laws, rules, or regulations to participate in its defense. Further, this indemnity shall not apply to—
(1) An infringement resulting from compliance with specific written instructions of the Contracting Officer directing a change in the supplies to be delivered or in the materials or equipment to be used, or directing a manner of performance of the contract not normally used by the Contractor;
(2) An infringement resulting from addition to or change in supplies or components furnished or construction work performed that was made subsequent to delivery or performance; or
(3) A claimed infringement that is unreasonably settled without the consent of the Contractor, unless required by final decree of a court of competent jurisdiction.
(End of clause)
Alternate I (Apr 1984). As prescribed in 27.201-2 (c)(2), add the following paragraph (c) to the basic clause:
(c) This patent indemnification shall not apply to the following items:
__________________________________________________ [Contracting Officer list and/or identify the items to be excluded from this indemnity.]
Alternate II (Apr 1984). As prescribed in 27.201-2 (c)(2), add the following paragraph (c) to the basic clause:
(c) This patent indemnification shall cover the following items:
__________________________________________________ [List and/or identify the items to be included under this indemnity.]
Alternate III (Jun 2020). As prescribed in 27.201-2 (c)(3), add the following paragraph (c) to the basic clause:
( ) As to subcontracts at any tier for communication service, this clause shall apply only to individual communication service authorizations over the simplified acquisition threshold, as defined in Federal Acquisition Regulation 2.101 on the date of subcontract award, issued under this contract and covering those communications services and facilities-
(1) That are or have been sold or offered for sale by the Contractor to the public,
(2) That can be provided over commercially available equipment, or
(3) That involve relatively minor modifications.