act upon any such claim asserted at any time prior to final payment under this contract. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes". However, nothing in this clause shall excuse the contractor from proceeding with the contract as changed. § 2-7.350-3 Assignment of claims.

Insert the clause set forth in § 1-30.703 of this title. However, the "no set-off" provision should not be included in contracts where the contractor is indebted to the Government or its omission appears appropriate to protect the interests of the Government.

§ 2-7.350-4 Examination of records. Insert the clause set forth in § 1-7.10110 of this title.

§ 2-7.350-5 Termination for convenience of the Government.

Insert the clause set forth in § 1-8.701 of this title where a profit is contemplated. Insert the clause in § 1-8.704-1 of this title in any contract with an educational or non-profit institution on a no-fee or no-profit basis.

Insert the clause set forth in § 1-7.10112 of this title.

§ 2-7.350-7 Notice and assistance regarding patent and copyright infringement.

Insert the clause set forth in § 1-7.10113 of this title.

§ 2-7.350-8 Buy American Act.

Insert the clause set forth in § 1-6.1045 of this title under the conditions contained therein.

§ 2-7.350-9 Convict labor.

Insert the clause set forth in § 1-12.203 of this title under the conditions contained in § 1-12.202 of this title.

§ 2-7.350-10 Contract Work Hours Standards Act-Overtime Compensation.

Insert the clause set forth in § 1-12.303 of this title (modified as set forth in FAPM 2-7.101-16) under the conditions contained in § 1-12.302 of this title. § 2-7.350-11 Walsh-Healey Public Contracts Act.

Insert the clause set forth in § 1-12.605 of this title under the conditions contained in § 1-12.602 of this title.

The contractor shall be paid, upon submission of proper invoices or vouchers, the prices stipulated herein for work delivered or rendered and accepted, less deductions, if any, as herein provided. Unless otherwise specified, payment will be made upon acceptance of any portion of the work delivered or rendered for which a price is separately stated in the contract.

§ 2-7.350-20 Inspection.

(a) the following clause shall be used where the primary contract objective is delivery of end items other than designs, drawings, or reports, except where the contracting officer determines that the use of such clause is impracticable. Where this clause is not used, the clause in paragraph (b) of this section shall be used.

INSPECTION

(a) All work under this contract shall be subject to inspection and test by the Govern

ment, to the extent practicable, at all times (including the period of performance) and places, and in any event prior to acceptance. The Government through any authorized representative may inspect the premises of the contractor or any subcontractor engaged in the performance of this contract.

(b) The Government may reject any work that is defective or otherwise not in conformity with the requirements of this contract. If the contractor fails or is unable to correct or to replace such work, the contracting officer may accept such work at a reduction in price which is equitable under the circumstances. Failure to agree on the reduction in price shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes".

(c) If any inspection or test is made by the Government on the premises of the contractor or a subcontractor, the contractor shall provide, without additional charge, all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance of their duties. If the Government inspection or test is made at a point other than the premises of the contractor or subcontractor, it shall be at the expense of the Government. All inspections and tests by the Government shall be performed in such a manner as not unduly to delay the work. Final inspection and acceptance or rejection of the work shall be made as promptly as practicable after delivery except as otherwise provided in this contract; but failure to inspect and accept, or reject the work shall neither relieve the contractor from responsibility for such of the work as is not in accordance with the contract requirements nor impose liability on the Government therefor.

(d) The inspection and test by the Government of any work shall not relieve the contractor from any responsibility regarding defects or other failures to meet the contract requirements which may be discovered prior to acceptance. Except as otherwise provided in this contract, acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud.

(e) The contractor shall provide and maintain an inspection system acceptable to the Government covering the work hereunder. Records of all inspection work by the contractor shall be kept complete and available to the Government during the performance of this contract and for such longer period as may be specified elsewhere in this contract.

(b) The following clause shall be inserted in all contracts subject to this subpart where the clause in paragraph (a) of this section is not used.

INSPECTION

The Government, through any authorized representatives, has the right, at all reasonable times, to inspect, or otherwise evaluate the work performed hereunder and the prem

ises in which it is being performed hereunder and the premises in which it is being performed. If any inspection, or evaluation is made by the Government on the premises of the contractor or a subcontractor, the contractor shall provide and shall require his subcontractors to provide all reasonable facilities and assistance for the safety and convenience of the Government representatives in the performance of their duties. All inspections and evaluations shall be performed in such a manner as will not unduly delay the work.

§ 2-7.350-21 Federal, State, and local

§ 2-7.350-33 Collection of information. Insert the clause set forth in § 27.150-11.

§ 2-7.350-34 Suspension of work.

Insert the clause set forth in § 27.150-8 under the conditions described therein.

§ 2-7.350-35 Dissemination of contract information.

Insert the clause set forth in § 27.250-38.

§ 2-7.350-36 Gratuities.

Insert the clause set forth in § 27.150-21.

§ 2-7.350-37 Interpretation or modification.

Insert the clause set forth in § 27.150-2.

§ 2-7.350-38 Rights in data.

Insert the appropriate clause set forth in § 2-9.5302 or § 2-9.5303 of this chapter, in accordance with the instructions for their use as described in § 2-9.5301-1 of this chapter.

§ 2-7.350-39 Patent rights.

Insert the clause set forth in § 29.5102 of this chapter in accordance with the instructions for its use.

§ 2-7.350-40 Recovery of costs.

Insert the clause set forth in § 29.5202(b) of this chapter in accordance with the instructions for its use as described in § 2-9.5202 (a) of this chapter.

In all cost-reimbursement type contracts for design, research, development, test, or experimental work calling for delivery or completion of work within the United States, its possessions, or Puerto Rico, insert the clauses set forth in §§ 2-7.250-1 through 2-7.250-41, 2-7.250-47, and those in this subpart unless otherwise indicated by the specific instructions for their use.

§ 2-7.450-1 Rights in data.

Insert the appropriate clause set forth in § 2-9.5302 or § 2-9.5303 of this chapter, in accordance with the instructions for its use as described in § 2-9.5301-1 of this chapter.

§ 2-7.450-2 Patent rights.

Insert the clause set forth in § 29.5102-1 of this chapter in accordance with the instructions for its use.

§ 2-7.450-3 Recovery of costs.

Insert the clause set forth in § 29.5202(b) of this chapter in accordance with the instructions for its use as described in § 2-9.5202(a) of this chapter. § 2-7.450-4 Authorization and consent. Insert the following clause.

AUTHORIZATION AND CONSENT

The Government hereby gives its authorization and consent for all use and manufacture of any invention described in and covered by a patent of the United States in performance of this contract or any part

hereof or any amendment hereto or any subcontract hereunder (including any lowertier subcontract).

§ 2-7.450-5 Negotiated overhead rates.

When negotiated overhead rates are to be used pursuant to § 2-3.704 of this chapter, insert the appropriate "Negotiated Overhead Rates" clause in §§ 23.704-1 and 2-3.704-2 of this chapter, as well as the appropriate interim payment clause set forth in § 2-3.704-3 of this chapter. § 2-7.450-6

Indirect costs (actual).

When settlement of overhead is to be provided by audit determination, the clause entitled "Indirect Costs (actual)" in § 2-3.704-4 of this chapter shall be inserted in the contract in lieu of the negotiated overhead rate clauses prescribed in §§ 2-3.704-1 and 2-3.704-2 of this chapter.

§ 2-7.450-7 Background patents (license).

Insert the clause set forth in § 29.5103-1 of this chapter in accordance with the instructions for its use as described in § 2-9.5103 of this chapter.

AUTHORITY: The provisions of this Part 2-9 issued under secs. 303, 813, 72 Stat. 747, 752; 49 U.S.C. 1344, 1354.

SOURCE: The provisions of this Part 2-9 appear at 31 F.R. 16456, Dec. 23, 1966, unless otherwise noted.

§ 2-9.5000 Scope of part.

This part sets forth policies, instructions, and contract clauses pertaining to patents, data, and copyrights in connection with the procurement of supplies and services.

§ 2-9.5001

Introduction.

Agency procurements often involve important rights in patents, data, and proprietary information. It is important for procurement personnel to be familiar with the basic policies in these areas because they are called upon to include appropriate terms for them in solicitations, and subsequently to negotiate and administer the terms under contracts. The legal complexities of these subjects requires procurement personnel to work closely with patent counsel when problems arise that need interpretation of, or departure from, established Agency patent and data policies.

§ 2-9.5002

§ 2-9.5002-1

Descriptions of terms.
Patents.

(a) Patents are rights in inventions, protected by Federal law in the case of these filed in the United States. A patent is a Government grant to an inventor. It lasts for seventeen years, during which time it gives the inventor, or his assignee, the right to exclude anyone else from making, using, or selling the invention. The patent holder thus has a property right, which is, in effect, a monopoly. He may sell or assign the patent; he may grant licenses to practice the invention; and if his patent is infringed, he is protected by law. He may obtain an injunction restraining the infringement against anyone but the Government, and he may also receive damages for the economic injury already sustained.

(b) Patentable inventions fall into five categories:

(1) Processes or methods;

(2) Machines or articles of manufacture;

(3) Compositions of matter;

(4) Improvements in processes, devices, articles of manufacture, or compositions of matter; and

(5) Designs for articles of manufacture.

To be patentable, however, an invention must be both novel and useful. It must reflect a creative originality and have a practical application.

The term "data" applies to various written information and graphical representations that may be acquired with a procurement. For a given purchase, they may be a description of an invention; plans and specifications for an end item; a maintenance manual for operational equipment; a research report, or some other body of information related to the contract. If the data qualify as literary or artistic works under Federal copyright law, they may be copyrighted, which gives the owner exclusive rights in the data for a given period of time. § 2-9.5002-3 Royalties.

Royalties are payments to a patent holder for the use or sale of his invention. § 2-9.5003 Agency policy on retention of patent and royalty rights.

Agency Order RD 4450.1 sets forth the Agency policy with respect to the re

tention of rights and recovery and costs in connection with negotiated contracts involving research or development. The Agency policy states: "In negotiating contracts under which the Government pays a part or all of the costs of research or development, it is the policy of the Federal Aviation Agency to retain, for the benefit of the United States, rights to data and patent rights, in reasonable proportion to the contributions of the Agency and the contractor; and to recover the FAA's contribution toward such research and development through royalties to the Government upon commercial exploitation of the products developed thereby."

Subpart 2-9.51-Patents

§ 2-9.5100 Scope of subpart.

This subpart prescribes contract clauses and instructions with respect to patents and royalties.

Insert the following clause in contracts involving design, research, development, test, or experimental work. It may be included in other contracts where appropriate. The contracting officer may alter the clause to suit a particular situation. However, any such alterations must be in accordance with Agency regulations on patent rights, including Agency policy set forth in § 2-9.5003 and the Presidential Statement of Government Patent Policy, hereafter referred to as "Presidential Policy Statement", dated October 10, 1963 (see § 2-9.5120).

PATENT RIGHTS

(a) Whenever any invention, improvement, or discovery (whether or not patentable) is made or conceived or for the first time actually or constructively reduced to practice, by the contractor or its employees, in the course of, in connection with, or under the terms of this contract, the contractor shall immediately give the contracting officer written notice thereof, and shall promptly thereafter furnish the contracting officer with complete information thereon; and the Administrator shall have the sole and exclusive power to determine whether or not and where a patent application shall be filed, and to determine the disposition of all rights in such invention, improvement, or discovery, including title to and rights under any patent application or patent that may issue thereon. The determination of the Administrator on