52.227-3
Patent Indemnity
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.