52.227-9 Refund of Royalties
Source: FAR 52.227-9 on acquisition.gov
Contractors must accurately report, justify, and, if necessary, refund royalties included in the contract price, ensuring the government only pays for allowable and actually paid royalties.
Overview
FAR 52.227-9, Refund of Royalties, establishes requirements for contractors regarding royalties included in the contract price for the use of patents or patent applications. The clause ensures that the government only pays for royalties that are actually paid and properly chargeable to the contract, and provides mechanisms for refund or credit if royalties are not paid or are later deemed unallowable. Contractors must report royalties paid or to be paid, justify them, and reimburse the government if they are relieved from payment within three years after final payment. The clause must also be flowed down to subcontracts where reported royalties exceed $250.
Key Rules
- Reporting and Justification of Royalties
- Contractors must report all royalties paid or to be paid in connection with the contract and provide reasons for these payments before final payment.
- Adjustment and Refund of Royalties
- If royalties included in the contract price are not paid or are found not properly chargeable, the contract price is reduced and the contractor must repay or credit the government as directed.
- Post-Contract Royalty Relief
- If the contractor is relieved from paying reported royalties within three years after final payment, they must notify the Contracting Officer and reimburse the government accordingly.
- Flowdown to Subcontracts
- The clause must be included in subcontracts where reported royalties exceed $250.
Responsibilities
- Contracting Officers: Review royalty statements, determine allowability, direct repayments or credits, and ensure clause flowdown.
- Contractors: Report and justify royalties, adjust contract price as required, notify and reimburse government if relieved from royalty payments, and flow down the clause to qualifying subcontracts.
- Agencies: Oversee compliance and ensure proper contract administration regarding royalties.
Practical Implications
- This clause protects the government from overpaying for royalties and ensures transparency in royalty payments. Contractors must maintain accurate records and be prepared for post-contract audits or adjustments. Failure to comply can result in repayment obligations and potential contract disputes.
As prescribed in 27.202-5(c), insert the following clause:
Refund of Royalties (Apr 1984)
(a) The contract price includes certain amounts for royalties payable by the Contractor or subcontractors or both, which amounts have been reported to the Contracting Officer.
(b) The term "royalties" as used in this clause refers to any costs or charges in the nature of royalties, license fees, patent or license amortization costs, or the like, for the use of or for rights in patents and patent applications in connection with performing this contract or any subcontract hereunder.
(c) The Contractor shall furnish to the Contracting Officer, before final payment under this contract, a statement of royalties paid or required to be paid in connection with performing this contract and subcontracts hereunder together with the reasons.
(d) The Contractor will be compensated for royalties reported under paragraph (c) of this clause, only to the extent that such royalties were included in the contract price and are determined by the Contracting Officer to be properly chargeable to the Government and allocable to the contract. To the extent that any royalties that are included in the contract price are not in fact paid by the Contractor or are determined by the Contracting Officer not to be properly chargeable to the Government and allocable to the contract, the contract price shall be reduced. Repayment or credit to the Government shall be made as the Contracting Officer directs.
(e) If, at any time within 3 years after final payment under this contract, the Contractor for any reason is relieved in whole or in part from the payment of the royalties included in the final contract price as adjusted pursuant to paragraph (d) of this clause, the Contractor shall promptly notify the Contracting Officer of that fact and shall reimburse the Government in a corresponding amount.
(f) The substance of this clause, including this paragraph (f), shall be included in any subcontract in which the amount of royalties reported during negotiation of the subcontract exceeds $250.
(End of clause)