fied date) in a form which can be employed in the practice of either a subject invention or the specific subject matter of the research. In the latter case licensing is not required. The contractor may, of course, grant an unlimited license under his background patents.

(1) It should be noted that where a contractor employs an embodiment of his patent in work on a specific work object for convenience only, there being other functionally equivalent substitutes available, he would not be required to license the patent for use with the specified work object. Should a subject invention be made which is dominated by such patent, then licensing would be required if an embodiment is not commercially available.

(2) The background requirements are satisfied if a contractor makes his dominating background patent available through the commercial sale of a product in which the background patent, together with the foreground developments are joined. However, march-in rights are reserved to assure availability of the results of the research and development work.

(3) Where a contractor's parent or affiliated company controls a patent, not a commercial item, which would be background if held by the contractor, the patent clause at § 14R-9.101-9(d) (8) requires the contractor to aid in securing a license for qualified applicants.

(c) License to the Government. (1) Where the embodiment of a background patent is not available commercially, the Government should not be obligated to pay royalties to do pilot plant, test bed or test module work in the field of technology of the contract using such background patents since, if successful, the result of such work will enhance the value of contractor's background.

(2) Since in many cases the purpose of the Government-sponsored research is to further develop a contractor's background invention, the Government should receive some recognition for its contribution if it wishes to employ such invention for any U.S. Government use. Accordingly, the patent clause provides that the Government will obtain a license on such background patent at a reasonable royalty which shall recognize the Government's contributions toward the commercial development or enhancement of the patent. Section 14R-9.101-9 (d) (4) of the patent clause covers these aspects.

(d) Limitations on use of background patent to a process. Where the research and development work involves the employment of a contractor's background patent in a process under parameters and conditions different from those which are employed in his commercial process, the requirement to license such background patent to the public for use in conjunction with the specified work object is limited to the conditions and parameters reasonably equivalent to those employed in the work under the contract. This would avoid the possibility of a license being acquired under the background patent which would enable the practice of contractor's commercial process, although the work under the contract called for different operating parameters.

(e) Antitrust. While agreements pursuant to the background and foreign rights clauses would not in the great majority of cases be violative of the antitrust laws, it may be possible to devise an arrangement thereunder which would be in restraint of trade. Accordingly, nothing herein is to be construed as relieving any person from the operation of the antitrust laws as regard a specific agreement entered into pursuant to these regulations and contract provisions.

(a) In many cases a contractor conducts research on his own account parallel to that conducted under a Government contract during the same period, and sometimes with the same personnel. In order to enable the Government to determine whether or not an invention made by the contractor in the field of research contemplated by the contract is a subject invention, the patent article provides for reporting, during prescribed periods, all inventions made by the contractor which are related to the work under the contract. Additional information is to be furnished to the Government on request. Failure to report or to supply the information requested places on the contractor the duty of going forward with the evidence under any subsequent proceeding.

(b) If the contractor alleges that the reporting of related inventions would result in excessive administrative costs because of his large size and far-flung organization or other valid reasons, the contracting officer may limit the reporting requirement to a more limited segment of the organization conducting the research. However, the contractor will still be required to furnish information concerning any invention at the specific request of the contracting officer. This subject matter is covered by the patent clause in § 14R-9.101-9(f).

§ 14R-9.101-9 Patent clause.

(a) Definitions. (1) "Background Patent" means a foreign or domestic patent (regardless of its date of issue relative to the date of this Contract):

(i) Which the Contractor, but not the Government, has the right to license to others, and

(ii) Infringement of which cannot be avoided upon the practice of a Subject Invention or Specified Work Object.

(2) "Commercial Item" means:

(i) Any machine, manufacture or composition of matter which, at the time of a request for a license pursuant to paragraph (d) of this section, has been sold, offered for sale or otherwise made available commercially to the public in the regular course of business, at terms reasonable in the circumstances, and

(ii) Any process which, at the time of a request for a license, is in commercial use, or is offered for commercial use, so the results of the process or the products produced thereby are or will be accessible to the public at terms reasonable in the circumstances.

(3) "Contract" means any contract, agreement, grant, or other arrangement, or subcontract entered into with or for the benefit of the Government where a purpose of the contract is the conduct of experimental, developmental, or research work.

(4) "Contractor" means any individual, partnership, public or private corporation, association, institution or other entity which is a party to the contract and includes entities controlled by the contractor. The term "controlled" means the direct or indirect ownership or more than 50 percent of the outstanding stock entitled to vote for the election of directors, or a directing influence over such stock: Provided, however, That foreign entities not wholly owned by the contractor shall not be considered as "controlled" for purposes of this patent clause. For the purposes of the patent clause grantees are deemed contractors.

(5) "Domestic" and "foreign" refer, respectively, (1) to the United States of America, including its territories and possessions, Puerto Rico and the District of Columbia and (ii) to countries other than the United States of America.

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(6) "Government" means the Federal Government of the United States of America. (7) "Governmental purpose", as used herein, means the right of the Government to practice throughout the world by or on its behalf for any and all Government uses.

(8) "Made", when used in connection with any invention, means the conception or first actual reduction to practice of such invention.

(9) To "practice an invention or patent" means the right of a licensee on his own behalf to make, have made, use or have used, sell or have sold, or otherwise dispose of according to law, any machine, design, manufacture or composition of matter physically embodying the invention, or to use or have used the process or method comprising the invention.

(10) "Secretary" means the Secretary of the Interior, or his authorized representative. (11) "Specified Work Object" means the specific process, method, machine, manufacture or composition of matter (including relatively minor modifications thereof) which is the subject of the experimental, developmental, or research work performed under this contract.

(12) "Subcontract" means any agreement made or purchase order executed by a Contractor or Subcontractor where the supplies or services covered by such agreement or purchase order are being obtained for use in the performance of this contract and a purpose of the subcontract is the conduct of experimental, developmental or research work.

(13) "Subcontractor" means any person holding a subcontract under this contract or any lower-tier subcontract under this contract.

(14) "Subject Invention" means any invention, discovery, improvement or development (whether or not patentable) made in the course of or under this contract or any subcontract (of any tier) thereunder.

(15) "Saline water" as used herein includes sea water, brackish water, mineralized ground or surface water, irrigation return flows and other chemically contaminated waters which contain chemicals susceptible to removal by desalting processes.

(16) "Desalination of saline water" means the treatment of saline water to remove chemical constituents therefrom and produce water having a quality suitable for beneficial consumptive uses. The term does not include (1) treatment of milk, fruit and vegetable or other plant juices, alcoholic beverages, tea, coffee, oil, etc., wherein the desired product is a concentrate or a dewatered material and the water removed is at most of secondary importance, (ii) treatment of potable water meeting either Federal or local public standards for human consumption to produce water intended for a private, industrial or commercial use in excess of these standards and (iii) treatment of water used in an industrial process to

recover valuable minerals or chemicals introduced by such process.

(b) Domestic patent rights in Subject Inventions. (1) The Contractor agrees that he will promptly disclose to the Contracting Officer in writing each Subject Invention in a manner sufficiently complete as to technical details to convey to one skilled in the art to which the Invention pertains a clear understanding of the nature, purpose, operation and, as the case may be, the physical, chemical, biological, or electrical characteristics of the Invention. However, if any Subject Invention is obviously unpatentable under the patent laws of the United States, such disclosure need not be made thereon. On request of the Contracting Officer, the Contractor shall comment respecting the differences or similarities between the Invention and the closest prior art drawn to his attention.

(2) The Contractor agrees to grant and does hereby grant to the Government the full and entire domestic right, title and interest in the Subject Invention. The Government agrees to grant to the Contractor and does hereby grant a royalty-free and nonexclusive license to practice the Subject Invention. The license shall extend to any existing and future companies, controlled by, controlling or under common control with the Contractor and shall be assignable to the successor of the part of the Contractor's business to which such invention pertains.

(c) Foreign rights and obligations. (1) Subject to the waiver provisions of subparagraph (2) of this paragraph, it is agreed that the entire foreign right, title and interest in any Subject Invention shall be in the Government, as represented for this purpose by the Secretary. The Government agrees to grant and does hereby grant to the Contractor a royalty-free nonexclusive license to practice the Invention under any patent obtained on such Subject Invention in any foreign country. The license shall extend to existing and any future companies controlled by, controlling or under common control with the contractor, and shall be assignable to the successor of the part of the Contractor's business to which such Invention pertains.

(2) The Contractor may request the foreign rights to a Subject Invention at any time subsequent to the reporting of such Invention. The response to such request and notification thereof to the Contractor will not be unreasonably delayed. The Government will waive title to the Contractor to such Subject Invention in foreign countries in which the Government will not file an application for a patent for such Invention, or otherwise secure protection therefor. Whenever the contractor is authorized to file in any foreign country the Government will not thereafter proceed with filing in such country except on the written agreement of the Contractor, unless such authorization has been revoked pursuant to subparagraph (3) of this paragraph.

(3) In the event the Contractor is authorized to file a foreign patent application

on a Subject Invention, the Government agrees that it will use its best efforts not to publish a description of such Invention until a United States or foreign application on such invention is filed, whichever is earlier, but neither the Government, its officers, agents or employees shall be liable for an inadvertent publication thereof. If the Contractor is authorized to file in any foreign country, he shall, on request of the Contracting Officer, furnish to the Government a patent specification in English within six (6) months after such authorization is granted, prior to any foreign filing and without additional compensation. The Contracting Officer may revoke such atuhorization on failure on the part of the Contractor to file any such foreign application within nine (9) months after such authorization has been granted.

(4) If the Contractor files patent applications in foreign countries pursuant to authorization granted under subparagraph (2) of this paragraph, the Contractor agrees to grant to the Government an irrevocable, nonexclusive, royalty-free license to practice the Invention under any patents which may issue thereon in any foreign country, including the power to issue sublicenses, either for governmental purposes or pursuant to any existing or future treaties or agreement between the Government and a foreign government for governmental purposes of said foreign government, or both. The Contractor further agrees to grant under such foreign patents a nonexclusive, nontransferable, royalty-free license to any applicant therefor who is a licensee of the Government under a corresponding U.S. patent, patent application or invention, to sell and to use, but not to make, any composition of matter, article or manufacture, apparatus or system, made by such applicant under the license granted by the Government. Said applicant must be a U.S. citizen or a U.S. corporation in which 75 percent of the voting stock is owned by U.S. citizens.

(5) In the event the Government or the Contractor elects not to continue prosecuting any foreign application or to maintain any foreign patent on a Subject Invention, the other party shall be notified not less than sixty (60) days before the expiration of the response period or maintenance tax due date, and upon written request, shall execute such instruments (prepared by the party wishing to continue the prosecution or to maintain such patent) as are necessary to enable such party to carry out its wishes in this regard.

(d) License under Background Patents. (1) Contractor agrees that he will make his Background Patent available for use in conjunction with a Subject Invention or Specified Work Object for water desalination purposes. This may be done (i) by making available an embodiment of the Subject Invention or Specified Work Object, which incorporates the invention covered by the Background Patent, as a Commercial Item, or (ii), by the sale of an embodiment of a

Background Patent as a Commercial Item in a form which can be employed in the practice of a Subject Invention or Specified Work Object or can be so employed with relatively minor modifications, or (iii), by the licensing of the domestic Background Patent at reasonable royalty to responsible applicants on their request.

(2) If the Secretary determines after a hearing that the quality, quantity, or price of embodiments of the Subject Invention or Specified Work Object sold or otherwise made available commercially as set forth in subparagraph (1)(1) of this paragraph is unreasonable in the circumstances, he may require the Contractor to license such domestic Background Patent to a responsible applicant at reasonable terms, including a reasonable royalty, solely for water desalination purposes for use in connection with (1) a Specified Work Object, or (ii) a Subject Invention.

(3) (1) When a license to practice a domestic Background Patent in conjunction with a Subject Invention or Specified Work Object is requested, in writing, for water desalination by a responsible applicant, and such Background Patent is not available as set forth in subparagraph (1)(i) or (ii) of this paragraph, the Contractor shall have 6 months from the date of his receipt of such request to decide whether to make such Background Patent so available. The Contractor shall promptly notify the Contracting Officer of any request in writing for a license to practice a Background Patent in conjunction with a Subject Invention or Specified Work Object, which the Contractor or his exclusive licensee wish to attempt to make available as set forth in subparagraph (1) (i) or (ii) of this paragraph.

(ii) If the Contractor decides to make such domestic Background Patent so available either by himself or by an exclusive licensee, he shall so notify the Secretary within the said six (6) months, whereupon the Secretary shall then designate the reasonable time within which the Contractor must make such Background Patent available in reasonable quantity and quality, and at a reasonable price. If the Contractor or his exclusive licensee decides not to make such Background Patent so available, or fails to make it available within the time designated by the Secretary, the Background Patent shall be licensed to a responsible applicant at reasonable terms, including a reasonable royalty, in conjunction with (a) a Specified Work Object, or (b) a Subject Invention, and may be limited by the licensor to water desalination purposes solely.

(iii) The Contractor agrees to grant or have granted to a designated applicant, upon the written request of the Government, a nonexclusive license at reasonable terms, including reasonable royalties, under any foreign Background Patent in furtherance of any treaty or agreement between the Government of the United States and a foreign government for the governmental pur

poses of such foreign government if an embodiment of the Background Patent is not commercially available in that country. Such license may be limited by the licensor to the practice of such Background Patent in conjunction wtih the Subject Inventions or Specified Work Objects for water desalination.

(iv) The Contractor agrees it will not seek injunctive relief or other prohibition of the use of the invention in enforcing its rights against any responsible applicant for such license and that it will not join with others in any such action. It is understood and agreed that the foregoing shall not affect the Contractor's right to injunctive relief or other prohibition of the use of Background Patents in areas not connected with the practice of a Subject Invention or Specified Work Object for water desalination, or where the Contractor has made available a Commercial Item as set out in subparagraph (1) (1) or (ii) of this paragraph.

(4) For use in water desalination in conjunction with a Subject Invention or a Specified Work Object, the Contractor agrees to grant to the Government a license under any Background Patent. Such license shall be nonexclusive, nontransferable, royalty-free and worldwide to practice such Patent which is not available as a Commercial Item as specified in subparagraph (1) (ii) of this paragraph for use of the Government in connection with pilot plants, test beds, and test modules. Subject to the royalty-free license provided for in this subparagraph and to any license provisions set forth elsewhere in this patent clause, or in other contracts or agreements, any royalty charged the Government under such license shall be reasonable and shall give due credit and allowance for the Government's contribution, if any, toward the making, commercial development or enhancement of the invention (s) covered by the Background Patent.

(5) Any license granted under a process Background Patent for use with a Specified Work Object may be additionally limited by the Contractor to employment of the Background Patent under conditions and parameters reasonably equivalent to those called for or employed under the contract.

(6) It is understood and agreed that the Contractor's obligation to grant licenses under Background Patents shall be limited to the extent of the Contractor's right to grant the same without breaching any unexpired contract it had entered into prior to this contract or prior to the identification of a Background Patent, or without incurring any obligation to another solely on account of said grant. However, where such obligation is the payment of royalties or other compensation, the Contractor's obligation to license his Background Patents shall continue and the reasonable license terms shall include such payments by the applicant as will at least fully compensate the Contractor under said obligation to another.

(7) On the request of the Contracting Officer the Contractor shall identify and describe any license agreement which would limit his right to grant a license under any Background Patent.

(8) In the event the Contractor has a parent or an affiliated company, which has the right to license a patent which would be a Background Patent if owned by the Contractor, but which is not available as a Commercial Item as specified in subparagraph (1) (i) or (ii) of this paragraph, and a qualified applicant requests a license under such patent for the purpose of water desalination in connection with the use of a Subject Invention or Specified Work Object, the Contractor shall, at the written request of the Government, recommend to his parent company, or affiliated company, as the case may be, the granting of the requested license on reasonable terms, including reasonable royalties, and actively assist and participate with the Government and such applicant, as to technical matters and in liaison functions between the parties, as may reasonably be required in connection with any negotiations for issuance of such license. For the purpose of this subparagraph, (i) a parent company is one which owns or controls, through direct or indirect ownership of more than 50 percent of the outstanding stock entitled to vote for the election of directors, another company or other entity and, (ii) affiliated companies are companies or other entities owned or controlled by the same parent company.

(e) Subcontracts.

(1) The Contractor, shall, unless otherwise authorized or directed by the Contracting Officer, include a patent clause containing provisions that correspond to those of this clause, except for the "withholding of payment" provision, in any subcontract hereunder where a purpose of the subcontract is the conduct of experimental, developmental or research work. In the event of refusal by a subcontractor to accept this clause, the Contractor:

(1) Shall promptly submit a written report to the Contracting Officer setting forth the subcontractor's reasons for such refusal or the reasons the Contractor is of the opinion that the inclusion of this clause is inappropriate, and other pertinent information which may expedite disposition of the matter; and

(ii) Shall not execute the subcontract without the written authorization of the Contracting Officer.

The Contractor shall not in any subcontract, or by using such subcontract as consideration therefor, acquire any rights to Subject Inventions for his own use (as distinguished from such rights as may be required solely to fulfill his contract obligations to the Government in the performance of this contract). Reports, instruments and other information required to be furnished by a subcontractor to the Contracting Officer un

der the provisions of a patent clause in a subcontract hereunder may, upon mutual consent of the Contractor and the subcontractor (or by direction of the Contracting Officer) be furnished to the Contractor for transmission to the Contracting Officer.

(2) The Contractor, at the earliest practicable date, shall also notify the Contracting Officer in writing of any subcontract containing a patent clause, furnish him a copy of such clause and notify him when such subcontract is completed. It is understood that the Government is a third party beneficiary of any subcontract clause granting rights in Subject Inventions, Background Patents, and pursuant to paragraph (f) of this section, and the Contractor hereby assigns to the Government all rights that the Contractor would have to enforce the subcontractor's obligations with respect to Subject Inventions, Background Patents, and pursuant to paragraph (f) of this section. The Contractor shall join with the Government at the Government's request and expense in any legal action to secure the Government's rights.

(1) Related inventions. (1) The Contractor shall submit to the Contracting Officer within six (6) months after the submission of the final report required by paragraph (g) (6) of this section, written information concerning the conception of actual reduction to practice, or both, as may be applicable, of every invention made by the Contractor pertaining to the work called for in this contract which was conceived or first actually reduced to practice within the period of three (3) months prior, during, or three (3) months subsequent to the term of this contract, which invention would be a Subject Invention if made under this contract, but which the Contractor believes was made outside the performance of work required under this contract. The Contracting Officer may require additional information to be furnished in confidence by the Contractor. At the request of the Contracting Officer made during or subsequent to the term of the contract, including any extensions for additional research and development work, the Contractor shall furnish information concerning any other invention which appears to the Contracting Officer to reasonably have the possibility of being a Subject Invention.

(2) All information supplied by the Contractor hereunder shall be of such nature and character as to enable the Contracting Offcer reasonably to ascertain whether or not the invention concerned is a Subject Invention. Failure to furnish such information called for herein shall, in any subsequent proceeding, place on the Contractor the burden of going forward with the evidence to establish that such invention is not a Subject Invention. If such evidence is not then presented the invention shall be deemed to be a Subject Invention. After receipt of information furnished pursuant hereto, the Contracting Officer shall not unduly delay