52.227-9
Refund of Royalties
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.