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###### Department of Defense

          - 48 CFR Parts 227 and 252
          - [DFARS Case 2001-D015]

# AGENCY:

Department of Defense (DoD). 

# ACTION:

Proposed rule with request for comments. 

# SUMMARY:

DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to add a clause pertaining to patent rights under contracts awarded to large business concerns for experimental, developmental, or research work. The clause is substantially the same as a clause that is presently found in the Federal Acquisition Regulation (FAR), but has been proposed for removal from the FAR because it applies only to DoD. 

      ( print page 58378)    

# DATES:

Comments on the proposed rule should be submitted in writing to the address shown below on or before November 1, 2004, to be considered in the formation of the final rule. 

# ADDRESSES:

You may submit comments, identified by DFARS Case 2001-D015, using any of the following methods: 
      -  Federal eRulemaking Portal: http://www.regulations.gov.                          Follow the instructions for submitting comments.                     
      -  Defense Acquisition Regulations Web Site: http://emissary.acq.osd.mil/​dar/​dfars.nsf/​pubcomm.                          Follow the instructions for submitting comments.                     
      -  E-mail: dfars@osd.mil.                          Include DFARS Case 2001-D015 in the subject line of the message.                     
      -  Fax:                          Primary: (703) 602-7887; Alternate: (703) 602-0350.                     
      -  Mail:                          Defense Acquisition Regulations Council, Attn: Ms. Amy Williams, OUSD (AT&L) DPAP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062.                     
      -  Hand Delivery/Courier:                          Defense Acquisition Regulations Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402.                     

                        All comments received will be posted to                         *http://emissary.acq.osd.mil/​dar/​dfars.nsf.*

# FOR FURTHER INFORMATION CONTACT:

Ms. Amy Williams, (703) 602-0328. 

# SUPPLEMENTARY INFORMATION:

## A. Background 

The proposed FAR rule published at 68 FR 31790 on May 28, 2003, under FAR Case 1999-402, included changes that would remove the clause presently found at FAR 52.227-12, Patent Rights—Retention by the Contractor (Long Form), as DoD is the only agency that uses the clause. The clause is included in contracts awarded to large business concerns for experimental, developmental, or research work. 

This proposed DFARS rule contains a clause that is substantially the same as the clause at FAR 52.227-12, but contains changes for consistency with current statutory provisions and the FAR changes proposed under FAR Case 1999-402. 
    - The definitions of “made” and “subject invention” in paragraph (a) of the clause have been revised to reflect that the term “date of determination” is no longer defined in Title 7 of the United States Code. The substance of the previously codified definition has been incorporated into the definition of “made,” and the obsolete statutory reference “ 7 U.S.C. 2401(d) ” has been removed from the definition of “subject invention.” 
    - “Domestic university” has been changed to “university” in the definition of “nonprofit organization” in paragraph (a) of the clause. The modifier “domestic” does not appear in the statutory definition at 35 U.S.C. 201(i) , the implementing Department of Commerce regulations at  37 CFR 401.2(h) , or the clause at FAR 52.227-11. The term “nonprofit organization” is used in the proposed DFARS clause only to refer to the application of the clause at FAR 52.227-11, which is not limited to domestic nonprofit organizations. 
    - The term “small business concern” has been excluded from the definitions in paragraph (a) of the clause. The proposed FAR changes under FAR Case 1999-402 move the definition of “small business concern” from FAR Part 19 to Part 2, since the term is used in Part 19 and Part 27. Accordingly, this definition will be made applicable throughout the FAR and DFARS via FAR 2.101 and the clause at FAR 52.202-1 and is unnecessary for inclusion in this DFARS clause.
    - In paragraph (b)(1) of the clause, the reference to 35 U.S.C. 203  has been excluded, consistent with the proposed changes to FAR 52.227-11(b)(1) under FAR Case 1999-402. Paragraph (b)(1) of the proposed DFARS clause provides that the contractor may retain ownership of a subject invention in accordance with the provisions of the clause.  35 U.S.C. 203  is referenced in paragraph (h) of the proposed clause; therefore, there is no need to restate this reference in paragraph (b) of the clause.
    - In paragraph (c) of the clause, the terms “provisional” and “nonprovisional” have been used to describe a patent application to be filed, instead of the term “initial,” which is presently used in paragraph (c)(3) of the clause at FAR 52.227-12. The terms “provisional” and “nonprovisional” have been used by the U.S. Patent and Trademark Office (see 35 U.S.C. 111 ) since 1995 (previously, there was no such thing as a “provisional” application). They are used in this clause to avoid any misunderstanding as to whether the term “initial” refers to either one or both of these types of filing. This change is consistent with the proposed change to paragraph (c)(3) of the clause at FAR 52.227-11 under FAR Case 1999-402. 
    - In paragraph (d) of the clause, the term “convey” has been replaced with the term “assign” with regard to transfer of title to a subject invention. The term “assign” is more technically accurate to describe the legal instrument used to transfer title or ownership.

A prescription for the DFARS clause has been added at 227.303(2). The references to FAR 27.303(c) and (e), in the text at 227.303(2)(i)(B), correspond to the proposed FAR changes published on May 28, 2003, under FAR Case 1999-402. 

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. 

## B. Regulatory Flexibility Act 

                    DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,                     *et seq.*, because the clause proposed for addition to the DFARS applies only to contracts with large business concerns and is substantially the same as a FAR clause that DoD is presently using. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2001-D015.                 

## C. Paperwork Reduction Act 

The Paperwork Reduction Act (44 U.S.C. Chapter 35) applies, because this rule contains information collection requirements proposed for addition to the hours approved under Office of Management and Budget (OMB) Control Number 0704-0369. OMB approval for the additional hours will be obtained prior to publication of the final rule. 

                    1.                     *Comments:*                     DoD invites comments on:                 

a. Whether the collection of information is necessary for the proper performance of the functions of DoD, including whether the information will have practical utility; 

b. The accuracy of the estimate of the burden of the proposed information collection; 

c. Ways to enhance the quality, utility, and clarity of the information to be collected; and 

d. Ways to minimize the burden of the information collection on respondents, including the use of automated collection techniques or other forms of information technology. 

                    2.                     *Title and OMB Number:*                     Defense Federal Acquisition Regulation Supplement (DFARS) Part 227, Patents, Data, and Copyrights, and related provisions and clauses at DFARS 252.227; OMB Control Number 0704-0369.                 

                    3.                     *Needs and Uses:*                     DoD needs this information to comply with 35 U.S.C. Chapter 18, Patent Rights in Inventions                           ( print page 58379)                        Made with Federal Assistance. The information will enable the Government to promote the commercialization of patentable results of Federally funded research by granting contractors the title to patents made in whole or in part with Federal funds, in exchange for royalty-free use by or on behalf of the Government.                 

                    4.                     *Affected Public:*                     Large businesses.                 

                    5.                     *Annual Burden Hours:*                     1,266.                 

                    6.                     *Number of Respondents:*                     360.                 

                    7.                     *Responses Per Respondent:*                     Approximately 3.                 

                    8.                     *Annual Responses:*                     1,055.                 

                    9.                     *Average Burden Per Response:*                     1.2 hours.                 

                    10.                     *Frequency:*                     On occasion.                 

                    11.                     *Summary of Information Collection:*                     The clause at DFARS 252.227-70XX requires the contractor to—                 

a. Establish and maintain effective procedures for identifying and disclosing subject inventions; 

b. Disclose, in writing, all subject inventions to the contracting officer, and identify any publication, on sale, or public use of the inventions; 

c. Require its employees, by written agreement, to disclose subject inventions; 

d. Submit interim and final reports listing subject inventions; 

e. Report, upon request, on the utilization of subject inventions; and 

f. Notify the contracting officer, in writing, of the award of any subcontract containing a patents right clause. 

# List of Subjects in 48 CFR Parts 227 and 252

      - Government procurement

Michele P. Peterson, 

Executive Editor, Defense Acquisition Regulations Council. 

Therefore, DoD proposes to amend 48 CFR Parts 227 and 252 as follows: 

1. The authority citation for 48 CFR Parts 227 and 252 continues to read as follows: 

Authority:41 U.S.C. 421 and 48 CFR Chapter 1. 

# PART 227—PATENTS, DATA, AND COPYRIGHTS 

2. Section 227.303 is revised to read as follows: 

227.303 

(1) Use the following clauses in solicitations and contracts containing the clause at FAR 52.227-11, Patent Rights—Ownership by the Contractor: 

(i) 252.227-7034, Patents—Subcontracts. 

(ii) 252.227-7039, Patents—Reporting of Subject Inventions. 

(2)(i) Use the clause at 252.227-70XX, Patent Rights—Ownership by the Contractor (Large Business), instead of the clause at FAR 52.227-11, in solicitations and contracts for experimental, developmental, or research work if— 

(A) The contractor is other than a small business concern or nonprofit organization; and 

(B) No alternative patent rights clause is used in accordance with FAR 27.303(c) or (e). 

(ii) Use the clause with its Alternate I if— 

(A) The acquisition of patent rights for the benefit of a foreign government is required under a treaty or executive agreement; 

(B) The agency head determines at the time of award that it would be in the national interest to acquire the right to sublicense foreign governments or international organizations pursuant to any existing or future treaty or agreement; or 

(C) Other rights are necessary to effect a treaty or agreement, in which case Alternate I may be appropriately modified. 

(iii) Use the clause with its Alternate II in long term contracts if necessary to effect treaty or agreements to be entered into. 

227.304-4 

3. Section 227.304-4 is removed. 

# PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 

4. Section 252.227-7034 is amended by revising the introductory text to read as follows: 

252.227-7034 

As prescribed in 227.303(1)(i), use the following clause: 

* * * * *

5. Section 252.227-70XX is added to read as follows: 

252.227-70XX 

As prescribed in 227.303(2), use the following clause:

#### PATENT RIGHTS—OWNERSHIP BY THE CONTRACTOR (LARGE BUSINESS) (XXX 2004) 

                                (a)                                 *Definitions.*                                 As used in this clause—                             

*Invention*                                 means—                             

(1) Any invention or discovery that is or may be patentable or otherwise protectable under Title 35 of the United States Code; or 

                                (2) Any variety of plant that is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 2321,                                 *et seq.*).                             

*Made*                                —                             

(1) When used in relation to any invention other than a plant variety, means the conception or first actual reduction to practice of the invention; or 

(2) When used in relation to a plant variety, means that the Contractor has at least tentatively determined that the variety has been reproduced with recognized characteristics. 

*Nonprofit organization*                                 means—                             

(1) A university or other institution of higher education; 

(2) An organization of the type described in the Internal Revenue Code at 26 U.S.C. 501(c)(3) and exempt from taxation under 26 U.S.C. 501(a); or 

(3) Any nonprofit scientific or educational organization qualified under a State nonprofit organization statute. 

*Practical application*                                 means—                             

(1)(i) To manufacture, in the case of a composition or product; 

(ii) To practice, in the case of a process or method; or 

(iii) To operate, in the case of a machine or system; and 

(2) In each case, under such conditions as to establish that— 

(i) The invention is being utilized; and 

(ii) The benefits of the invention are, to the extent permitted by law or Government regulations, available to the public on reasonable terms. 

*Subject invention*                                 means any invention of the Contractor made in the performance of work under this contract.                             

                                (b)                                 *Contractor's rights.*

                                (1)                                 *Ownership.*                                 The Contractor may elect to retain ownership of each subject invention throughout the world in accordance with the provisions of this clause.                             

                                (2)                                 *License.*

(i) The Contractor shall retain a nonexclusive royalty-free license throughout the world in each subject invention to which the Government obtains title, unless the Contractor fails to disclose the invention within the times specified in paragraph (c) of this clause. The Contractor's license— 

(A) Extends to any domestic subsidiaries and affiliates within the corporate structure of which the Contractor is a part; 

(B) Includes the right to grant sublicenses to the extent the Contractor was legally obligated to do so at the time of contract award; and 

(C) Is transferable only with the approval of the agency, except when transferred to the successor of that part of the Contractor's business to which the invention pertains. 

(ii) The agency— 

(A) May revoke or modify the Contractor's domestic license to the extent necessary to achieve expeditious practical application of the subject invention pursuant to an application for an exclusive license submitted in accordance with 37 CFR Part 404 and agency licensing regulations; 

(B) Will not revoke the license in that field of use or the geographical areas in which the Contractor has achieved practical application and continues to make the benefits of the invention reasonably accessible to the public; and 

                                (C) May revoke or modify the license in any foreign country to the extent the Contractor, its licensees, or the domestic subsidiaries or affiliates have failed to                                       ( print page 58380)                                    achieve practical application in that foreign country.                             

(iii) Before revoking or modifying the license, the agency— 

(A) Will furnish the Contractor a written notice of its intention to revoke or modify the license; and 

(B) Will allow the Contractor 30 days (or such other time as the funding agency may authorize for good cause shown by the Contractor) after the notice to show cause why the license should not be revoked or modified. 

(iv) The Contractor has the right to appeal, in accordance with 37 CFR Part 404 and agency regulations, concerning the licensing of Government-owned inventions, any decision concerning the revocation or modification of the license. 

                                (c)                                 *Contractor's obligations.*

(1) The Contractor shall— 

(i) Disclose, in writing, each subject invention to the Contracting Officer within 2 months after the inventor discloses it in writing to Contractor personnel responsible for patent matters, or within 6 months after the Contractor first becomes aware that a subject invention has been made, whichever is earlier; 

(ii) Include in the disclosure— 

(A) The inventor(s) and the contract under which the invention was made; 

(B) Sufficient technical detail to convey a clear understanding of the invention; and 

                                (C) Any publication, on sale (                                *i.e.*, sale or offer for sale), or public use of the invention and whether a manuscript describing the invention has been submitted for publication and, if so, whether it has been accepted for publication; and                             

(iii) After submission of the disclosure, promptly notify the Contracting Officer of the acceptance of any manuscript describing the invention for publication and of any on sale or public use. 

(2) The Contractor shall elect in writing whether or not to retain ownership of any subject invention by notifying the Contracting Officer at the time of disclosure or within 8 months of disclosure, as to those countries (including the United States) in which the Contractor will retain ownership. However, in any case where publication, on sale, or public use has initiated the 1-year statutory period during which valid patent protection can be obtained in the United States, the agency may shorten the period of election of title to a date that is no more than 60 days prior to the end of the statutory period. 

(3) The Contractor shall— 

(i) File either a provisional or a nonprovisional patent application on an elected subject invention within 1 year after election, provided that in all cases the application is filed prior to the end of any statutory period wherein valid patent protection can be obtained in the United States after a publication, on sale, or public use; 

(ii) File a nonprovisional application within 10 months of the filing of any provisional application; and 

(iii) File patent applications in additional countries or international patent offices within either 10 months of the first filed patent application (whether provisional or nonprovisional) or 6 months from the date the Commissioner of Patents grants permission to file foreign patent applications where such filing has been prohibited by a Secrecy Order. 

(4) The Contractor may request extensions of time for disclosure, election, or filing under paragraphs (c)(1), (2), and (3) of this clause. The Contracting Officer will normally grant the extension unless there is reason to believe the extension would prejudice the Government's interests. 

                                (d)                                 *Government's rights.*

                                (1)                                 *Ownership.*                                 The Contractor shall assign to the agency, upon written request, title to any subject invention—                             

(i) If the Contractor elects not to retain title to a subject invention; 

(ii) If the Contractor fails to disclose or elect the subject invention within the times specified in paragraph (c) of this clause and the agency requests title within 60 days after learning of the Contractor's failure to report or elect within the specified times; 

(iii) In those countries in which the Contractor fails to file patent applications within the times specified in paragraph (c) of this clause, provided that, if the Contractor has filed a patent application in a country after the times specified in paragraph (c) of this clause, but prior to its receipt of the written request of the agency, the Contractor shall continue to retain ownership in that country; and 

(iv) In any country in which the Contractor decides not to continue the prosecution of any application for, to pay the maintenance fees on, or defend in reexamination or opposition proceeding on, a patent on a subject invention. 

                                (2)                                 *License.*                                 If the Contractor retains ownership of any subject invention, the Government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on behalf of the United States, the subject invention throughout the world.                             

                                (e)                                 *Contractor action to protect the Government's interest.*

(1) The Contractor shall execute or have executed and promptly deliver to the agency all instruments necessary to— 

(i) Establish or confirm the rights the Government has throughout the world in those subject inventions in which the Contractor elects to retain ownership; and 

(ii) Assign title to the agency when requested under paragraph (d)(1) of this clause and enable the Government to obtain patent protection for that subject invention in any country. 

(2) The Contractor shall— 

(i) Require, by written agreement, its employees, other than clerical and nontechnical employees, to— 

(A) Disclose each subject invention promptly in writing to personnel identified as responsible for the administration of patent matters, so that the Contractor can comply with the disclosure provisions in paragraph (c) of this clause; and 

(B) Provide the disclosure in the Contractor's format, which should require, as a minimum, the information required by paragraph (c)(1) of this clause; 

(ii) Instruct its employees, through employee agreements or other suitable educational programs, as to the importance of reporting inventions in sufficient time to permit the filing of patent applications prior to U.S. or statutory foreign bars; and 

(iii) Execute all papers necessary to file patent applications on subject inventions and to establish the Government's rights in the subject inventions. 

(3) The Contractor shall notify the Contracting Officer of any decisions not to file a nonprovisonal patent application, continue the prosecution of a patent application, pay maintenance fees, or defend in a reexamination or opposition proceeding on a patent, in any country, not less than 30 days before the expiration of the response or filing period required by the relevant patent office. 

(4) The Contractor shall include, within the specification of any United States nonprovisional patent application and any patent issuing thereon covering a subject invention, the following statement: “This invention was made with Government support under (identify the contract) awarded by (identify the agency). The Government has certain rights in this invention.” 

(5) The Contractor shall— 

(i) Establish and maintain active and effective procedures to ensure that subject inventions are promptly identified and disclosed to Contractor personnel responsible for patent matters; 

(ii) Include in these procedures the maintenance of— 

(A) Laboratory notebooks or equivalent records and other records as are reasonably necessary to document the conception and/or the first actual reduction to practice of subject inventions; and 

(B) Records that show that the procedures for identifying and disclosing the inventions are followed; and 

(iii) Upon request, furnish the Contracting Officer a description of these procedures for evaluation and for determination as to their effectiveness. 

(6) The Contractor shall, when licensing a subject invention, arrange to— 

(i) Avoid royalty charges on acquisitions involving Government funds, including funds derived through the Government's Military Assistance Program or otherwise derived through the Government; 

(ii) Refund any amounts received as royalty charges on the subject inventions in acquisitions for, or on behalf of, the Government; and 

(iii) Provide for the refund in any instrument transferring rights in the invention to any party. 

(7) The Contractor shall furnish to the Contracting Officer the following: 

(i) Interim reports every 12 months (or any longer period as may be specified by the Contracting Officer) from the date of the contract, listing subject inventions during that period and stating that all subject inventions have been disclosed or that there are no subject inventions. 

                                (ii) A final report, within 3 months after completion of the contracted work, listing all subject inventions or stating that there were                                       ( print page 58381)                                    no subject inventions, and listing all subcontracts at any tier containing a patent rights clause or stating that there were no subcontracts.                             

(8)(i) The Contractor shall promptly notify the Contracting Officer in writing upon the award of any subcontract at any tier containing a patent rights clause by identifying— 

(A) The subcontractor; 

(B) The applicable patent rights clause; 

(C) The work to be performed under the subcontract; and 

(D) The dates of award and estimated completion. 

(ii) The Contractor shall furnish, upon request, a copy of the subcontract, and no more frequently than annually, a listing of the subcontracts that have been awarded. 

(9) In the event of a refusal by a prospective subcontractor to accept one of the clauses specified in paragraph (l)(1) of this clause, the Contractor— 

(i) Shall promptly submit a written notice to the Contracting Officer setting forth the subcontractor's reasons for the refusal and other pertinent information that may expedite disposition of the matter; and 

(ii) Shall not proceed with that subcontract without the written authorization of the Contracting Officer. 

(10) The Contractor shall provide to the Contracting Officer, upon request, the following information for any subject invention for which the Contractor has retained ownership: 

(i) Filing date. 

(ii) Serial number and title. 

(iii) A copy of any patent application (including an English-language version if filed in a language other than English). 

(iv) Patent number and issue date. 

(11) The Contractor shall furnish to the Government, upon request, an irrevocable power to inspect and make copies of any patent application file. 

                                (f)                                 *Reporting on utilization of subject inventions.*

(1) The Contractor shall— 

(i) Submit upon request periodic reports no more frequently than annually on the utilization of a subject invention or on efforts in obtaining utilization of the subject invention that are being made by the Contractor or its licensees or assignees; 

(ii) Include in the reports information regarding the status of development, date of first commercial sale or use, gross royalties received by the Contractor, and other information as the agency may reasonably specify; and 

(iii) Provide additional reports that the agency may request in connection with any march-in proceedings undertaken by the agency in accordance with paragraph (h) of this clause. 

(2) To the extent permitted by law, the agency shall not disclose the information provided under paragraph (f)(1) of this clause to persons outside the Government without the Contractor's permission, if the data or information is considered by the Contractor or its licensee or assignee to be “privileged and confidential” (see 5 U.S.C. 552(b)(4)) and is so marked. 

                                (g)                                 *Preference for United States industry.*                                 Notwithstanding any other provision of this clause, the Contractor agrees that neither the Contractor nor any assignee shall grant to any person the exclusive right to use or sell any subject invention in the United States unless the person agrees that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States. However, in individual cases, the agency may waive the requirement for an exclusive license agreement upon a showing by the Contractor or its assignee that—                             

(1) Reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States; or 

(2) Under the circumstances, domestic manufacture is not commercially feasible. 

                                (h)                                 *March-in rights.*                                 The Contractor acknowledges that, with respect to any subject invention in which it has retained ownership, the agency has the right to require licensing pursuant to 35 U.S.C. 203 and 210(c), 37 CFR 401.6, and any supplemental regulations of the agency in effect on the date of contract award.                             

                                (i)                                 *Other inventions.*                                 Nothing contained in this clause shall be deemed to grant to the Government any rights with respect to any invention other than a subject invention.                             

                                (j)                                 *Examination of records relating to inventions.*

(1) The Contracting Officer or any authorized representative shall, until 3 years after final payment under this contract, have the right to examine any books (including laboratory notebooks), records, and documents of the Contractor relating to the conception or first reduction to practice of inventions in the same field of technology as the work under this contract to determine whether— 

(i) Any inventions are subject inventions; 

(ii) The Contractor has established procedures required by paragraph (e)(5) of this clause; and 

(iii) The Contractor and its inventors have complied with the procedures. 

(2) If the Contracting Officer learns of an unreported Contractor invention that the Contracting Officer believes may be a subject invention, the Contractor shall be required to disclose the invention to the agency for a determination of ownership rights. 

(3) Any examination of records under this paragraph (j) shall be subject to appropriate conditions to protect the confidentiality of the information involved. 

                                (k)                                 *Withholding of payment (this paragraph does not apply to subcontracts).*

(1) Any time before final payment under this contract, the Contracting Officer may, in the Government's interest, withhold payment until a reserve not exceeding $50,000 or 5 percent of the amount of the contract, whichever is less, is set aside if, in the Contracting Officer's opinion, the Contractor fails to— 

(i) Establish, maintain, and follow effective procedures for identifying and disclosing subject inventions pursuant to paragraph (e)(5) of this clause; 

(ii) Disclose any subject invention pursuant to paragraph (c)(1) of this clause; 

(iii) Deliver acceptable interim reports pursuant to paragraph (e)(7)(i) of this clause; or 

(iv) Provide the information regarding subcontracts pursuant to paragraph (e)(8) of this clause. 

(2) The reserve or balance shall be withheld until the Contracting Officer has determined that the Contractor has rectified whatever deficiencies exist and has delivered all reports, disclosures, and other information required by this clause. 

(3) The Government will not make final payment under this contract before the Contractor delivers to the Contracting Officer—

(i) All disclosures of subject inventions required by paragraph (c)(1) of this clause;

(ii) An acceptable final report pursuant to paragraph (e)(7)(ii) of this clause; and

(iii) All past due confirmatory instruments.

(4) The Contracting Officer may decrease or increase the sums withheld up to the maximum authorized in paragraph (k)(1) of this clause. No amount shall be withheld under this paragraph while the amount specified by this paragraph is being withheld under other provisions of the contract. The withholding of any amount or the subsequent payment thereof shall not be construed as a waiver of any Government right.

                                (l)                                 *Subcontracts*.                            

(1) The Contractor—

(i) Shall include the substance of the Patent Rights—Ownership by the Contractor clause set forth at 52.227-11 of the Federal Acquisition Regulation (FAR), in all subcontracts for experimental, developmental, or research work to be performed by a small business concern or nonprofit organization; and

(ii) Shall include the substance of this clause, including this paragraph (l), in all other subcontracts for experimental, developmental, or research work, unless a different patent rights clause is required by FAR 27.303.

(2) For subcontracts at any tier—

(i) The patents rights clause included in the subcontract shall retain all references to the Government and shall provide to the subcontractor all the rights and obligations provided to the Contractor in the clause. The Contractor shall not, as consideration for awarding the subcontract, obtain rights in the subcontractor's subject inventions; and

(ii) The Government, the Contractor, and the subcontractor agree that the mutual obligations of the parties created by this clause constitute a contract between the subcontractor and the Government with respect to those matters covered by this clause. However, nothing in this paragraph is intended to confer any jurisdiction under the Contract Disputes Act in connection with proceedings under paragraph (h) of this clause.

(End of clause)

#### ALTERNATE I (XXX 2004)

As prescribed in 227.303(2)(ii), add the following paragraph (b)(2)(v) to the basic clause:

                                (v) The license shall include the right of the Government to sublicense foreign governments, their nationals, and                                       ( print page 58382)                                    international organizations pursuant to the following treaties or international agreements: ___                            

*[* Contracting Officer to complete with the names of applicable existing treaties or international agreements. This paragraph is not intended to apply to treaties or agreements that are in effect on the date of the award but are not listed.]*

#### ALTERNATE II (XXX 2004)

As prescribed in 227.303(2)(iii), add the following paragraph (b)(2)(v) to the basic clause:

(v) The agency reserves the right to—

(A) Unilaterally amend this contract to identify specific treaties or international agreements entered into or to be entered into by the Government after the effective date of this contract; and

(B) Exercise those license or other rights that are necessary for the Government to meet its obligations to foreign governments, their nationals, and international organizations under any treaties or international agreement with respect to subject inventions made after the date of the amendment.

6. Section 252.227-7039 is amended by revising the introductory text to read as follows:

252.227-7039 

As prescribed in 227.303(1)(ii), use the following clause:

* * * * *

[FR Doc. 04-21853 Filed 9-29-04; 8:45 am]

BILLING CODE 5001-08-P