ing upon the subject of the contract, the agreement with the foreign country concerned, and any permissive deviations from clauses and procedures described in the ASPR and the APP. Generally, the contract forms and clauses employed in any specific foreign country are the result of bilateral agreements negotiated by the United States and the country concerned. Actually, the variety of contract types can be grouped within two general classifications, namely: government-to-government contracts in which the other party is a particular foreign government or government agency, and the more familiar type of government-to-other-than-government contracts in which the other contracting party is a private person or legal entity other than the foreign government. Wherever possible, standard forms and clauses are employed both for offshore "military" procurements and offshore "assistance" procurements whether the contract is government-to-government or otherwise. However, bilateral agreements between the United States and foreign governments are, in many aspects, not uniform. Accordingly, contracts in each foreign country must be tailored to meet the laws, regulations and policies of the country involved.

31

12. Disputes. The use of the "Disputes" clause 30 in offshore procurement contracts normally is limited to contracts other than those between the U.S. and the foreign government for the obvious reason that the foreign sovereign will not agree to be bound by the determinations made solely by administrative agents of the United States. However, in contracting with private individuals and concerns, the clause is required. Under the provisions of APP, each commanding general of a major overseas command has constituted a Board of Contract Appeals to hear, consider and decide on appeals under contracts having a disputes clause in which the contracting officer has made a finding of fact under the clause.31 It should be noted that determinations of fact are final and conclusive unless fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith or are not supported by substantial evidence.3 32 There can be no "final" administrative determination regarding a question of law.33 Final resolutions on questions of law would have to be made by a court of competent jurisdiction and, from the viewpoint of the United States, this would involve a United States Federal Court as it is only here that the United States has waived its sovereign immunity from suit by private citizens or businesses.34

30 ASPR 7-103.12 (Jan 1958).

"APP 7-103.12c (2) (5 August 1960).

83 41 U.S.C. § 321.

33 Ibid.

428 U.S.C. § 1346, 1491 (1958).

See The Schooner Exchange v. M'Fadon, 11 U.S.

(7 Cranch) 116 (1812), for a statement of the traditional doctrine of the immunity of

one sovereign power from the jurisdiction of another.

Example: A Japanese contractor contended that the finality of the disputes clause would deprive him of a constitutional right granted by Article 32 of the Constitution of Japan in that it intended to oust the jurisdiction of the Japanese courts. Therefore, the contractor contended the disputes clause was void as against the public policy in Japan. The Far East Command Board of Contract Appeals, while agreeing that a contract of the United States Government entered into in Japan and performed there is controlled by the laws, customs and usages in Japan, stated that the question presented was a matter for a court of competent jurisdiction to decide.35

The basic question involved in most of the disputes is the determination of just what law, custom, or usage is to be followed. The general rule in the United States has been stated to be:

While the performance of a contract is governed by the law of the place where it is to be performed and the remedy by the law where the suit is brought, all matters which bear upon the execution, interpretation, and validity of the contract are determined by the laws of the place where it is made.

36

In the absence of any agreement concerning the laws, customs, or usages intended by contracting parties, such laws, customs, or usages in effect where the contract is made have been given proper consideration in determining such disputes."

III. Patents

The patent law aspects of Government contracts are affected by statute and Executive Order, implemented by detailed contract clauses.

13. Clauses pertaining to patent infringement. Government contractors would be as liable to patent infringement suits as any other persons were it not for the provisions of 28 U.S.C. § 1498 38 which reads in pertinent part as follows:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manu

35 Nissan Motor Company, Limited, FEBCA No. 88. With respect to lex loci contractus, see also Philippine Sawmill Co., ASBCA No. 569; Appeal of Vonks, ASBCA No. 621. 36 Brown v. Ford Motor Co., 48 F.2d 732 (1931).

37 Appeal of Vonks, ASBCA No. 621; Philippine Sawmill Co., ASBCA No. 569; Fuji Motors, FEBÇA No. 46; Nissan Motor Co., Ltd., FEBCA No. 88; Tomoji Miklya, FEBCA No. 91; Nihon Sekitan Hanbai Co., AFFE BCA Nos. 4 and 5.

38 The predecessor of this act (act of 25 Jun 1910, 36 Stat. 851, as amended; 35 U.S.C. § 68) is interpreted in SPJGP 1943/881, 8 Feb. 1943, II Bull JAG 75. See APP 9-105. See 10 U.S.C. 2386 (1958):

Funds appropriated for a military department available for making or procuring supplies may be used to acquire any of the following if the acquisition relates to supplies or processes produced or used by or for, or useful to, that department:

(1) Copyrights, patents, and applications for patents.

(2) Licenses under copyrights, patents, and applications for patents.
(3) Designs, processes, and manufacturing data.

(4) Releases, before suit is brought, for past infringement of patents.

facture the same, the owner's remedy shall be by action against the United States in the Court of Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

The effect of this section is to prevent patentees from petitioning for an injunction or damages or both in an action against a Government contractor or his subcontractors. In order to insure that contractors may avail themselves of the protection of the statute, Armed Services contracts for supplies (including contracts for construction work) are required to contain the following clause:39 AUTHORIZATION AND CONSENT

The Government hereby gives its authorization and consent (without prejudice to its rights of indemnification, if such rights are provided for in this contract) for all use and manufacture, in the performance of this contract or any part hereof or any amendment hereto or any subcontract hereunder (including any lower-tier subcontract), of any patented invention (i) embodied in the structure or composition of any article the delivery of which is accepted by the Government under this contract, or (ii) utilized in the machinery, tools, or methods the use of which necessarily results from compliance by the Contractor or the using subcontractor with (a) specifications or written provisions now or hereafter forming a part of this contract, or (b) specific written instructions given by the Contracting Officer directing the manner of performance. The contractor's entire liability to the Government for patent infringement shall be determined solely by the provisions of the indemnity clause, if any, included in the contract and the Government assumes liability for all other infringement to the extent of the authorization and consent hereinabove granted.

Because the effect of the statute and clause quoted above is to preclude the institution of suits or presentation of claims against the contractor (or subcontractors) and because the statute authorizes claims against the Government, contracts for supplies, construction, research, development or experiment are required to contain the following clause:40

NOTICE AND ASSISTANCE REGARDING PATENT INFRINGEMENT

The provisions of this clause shall be applicable only if the amount of this contract exceeds $10,000.

(a) The Contractor shall report to the Contracting Officer, promptly and in reasonable written detail, each notice or claim of patent infringement based on the performance of this contract of which the Contractor has knowledge.

ASPR 9-102.1 (Jan. 1955). The requirement that this clause be used is also found in ASPR 7-103.22 (1 July 1960) for fixed-price supply contracts and ASPR 7-203.23 (1 July 1960) for cost-reimbursement supply contracts. Because of the "greater latitude" in the use of patented inventions desirable in the case of research developmental or experimental contracts, such contracts are required to contain the clause set out in ASPR 9-102.2 (Jan. 1955).

40 ASPR 9-104 (Oct 1958). Procedures for the processing of infringement claims are covered in APP 9-105 et seq. (Jan 1959). Cf. footnote 38, supra. The requirement that

the ASPR 9-104 clause be used is also found in ASPR 7-103.23 (1 July 1960) for fixed-price supply contracts and in ASPR 7-203.24 (1 July 1960) for cost-reimbursement type supply contracts.

(b) In the event of any suit against the Government, or any claim against the Government made before suit has been instituted, on account of any claim of patent infringement arising out of the performance of this contract or out of the use of any supplies furnished or work or services performed hereunder, the Contractor shall furnish to the Government, upon request, all evidence and information in possession of the Contractor pertaining to such suit or claim. Such evidence and information shall be furnished at the expense of the Government except in those cases in which the Contractor has agreed to indemnify the Government against the claim being asserted.

Because the Government is exposed to liability for patent infringement, Armed Services contracts for construction or for supplies which normally are or have been sold or offered for sale by any supplier to the public in the open commercial market (or the same supplies with relatively minor modifications) may include a "Patent Indemnity" clause providing for reimbursement to the Government (including costs) for any liability borne by it on account of patent infringement.11

14. Acquisition of patent rights. In connection with many Government contracts, the contractor or subcontractors may develop inventions which are capable of being patented. Generally, the Government takes the position that it is entitled to an interest in such inventions. Inventions may be developed by the contractor or subcontractors in connection with two kinds of contracts: contracts for research, developmental and experimental work and contracts for personal services. Under any contract or contract modification having research, experimental or developmental work as its main purpose or as one of its purposes, the Government should receive a royalty-free nonexclusive license to practice or have practiced any inventions conceived or first actually reduced to practice in the course of performing such work or in the course of performing any prior experimental, developmental or research work done upon the understanding in writing that a contract should be awarded.*2 Such contracts or modifications are required to contain the clause (Patent Rights) set out in ASPR 9-107.2(b) (March 1960). Certain inventions of the contractor may be excluded by the Contracting Officer from the operation of the clause. This clause provides for: a grant of the mentioned type of license to the Government; for disclosure of patentable inventions to the Government; specification of rights of the Government and the contractor in connection with United States and foreign patent applications, including the case where the contractor does not prosecute or seek to prosecute any patent application to the point where he is granted a patent; that the Government shall have the right to withhold a stipulated portion of the contract price for failure of the contractor to perform certain of his duties under the clause; that the contractor shall "exert all

41 Exceptions to the requirement as well as the text of approved clauses are set out in ASPR 9-103 (1 July 1960).

43 ASPR 9-107.1 (a) (1 July 1960). 43 ASPR 9-107.2(a) (1 July 1960).

reasonable efforts" to obtain patent rights (through the use of the "Patent Rights" clause) for the Government as third party beneficiary under his research, developmental or experimental subcontracts; for appropriate extension of the contract or modification of the contract price where the contractor has been delayed because of his inability to obtain subcontracts granting the required patent rights to the Government; and as an alternative for waiver by the Government of the requirement that a patent rights clause be included in subcontracts or for termination of contract for convenience of the Government. In a personal services contract," the contractor is required to agree to be bound by the provisions of Executive Order 10096 and to make disclosure to the Government of all inventions of the contractor which are conceived or first reduced to practice during the term of the contract. The mentioned Executive Order establishes Government policy relating to the acquisition by the Government of the entire right, title and interest to certain employee inventions, and the acquisition of royalty-free licenses in other inventions.45

For the purposes of this requirement, the term "personal services contract" is defined to mean: "a contract entered into with an individual, other than an alien scientist, for personal services to be performed by that individual under Government supervision and paid for on a time basis. It does not apply to contracts with firms or organizations." ASPR 7-502 (1 July 1960).

45 Ex. Ord. No. 10096, 23 Jan 1950, 15 Fed. Reg. 389; as amended by Ex. Ord. 10695, 17 Jan 1957, 22 F.R. 365; 35 U.S.C. § 266 Note (1958), provides in pertinent part:

"1. The following basic policy is established for all Government agencies with respect to inventions hereafter made by any Government employee:

"(a) The Government shall obtain the entire right, title, and interest in and to all inventions made by any Government employee (1) during working hours, or (2) with a contribution by the Government of facilities, equipment, materials, funds, or information, or of time or services of other Government employees on official duty, or (3) which bear a direct relation to or are made in consequence of the official duties of the inventor.

"(b) In any case where the contribution of the Government, as measured by any one or more of the criteria set forth in paragraph (a) last above, to the invention is insufficient equitably to justify a requirement of assignment to the Government of the entire right, title and interest in such invention, or in any case where the Government has insufficient interest in an invention to obtain entire right, title and interest therein (although the Government could obtain some under paragraph (a), above), the Government agency concerned, subject to the approval of the Chairman of the Government Patents Board (provided for in paragraph 3 of this order and hereinafter referred to as the Chairman), shall leave title to such invention in the employee, subject, however, to the reservation to the Government of a nonexclusive, irrevocable, royalty-free license in the invention with power to grant licenses for all governmental purposes, such reservation, in the terms thereof, to appear, where practicable, in any patent, domestic or foreign, which may issue on such invention.

(c) In applying the provisions of paragraphs (a) and (b), above, to the facts and circumstances relating to the making of any particular invention, it shall be presumed that an invention made by an employee who is employed or assigned (1) to invent or improve or perfect any art, machine, manufacture, or composition of matter, (11) to conduct or perform research, development work, or both, (111) to supervise, direct, coordinate, or review Government financed or conducted research, development work, or both, or (iv) to act in a liaison capacity among governmental or nongovernmental agencies or individuals engaged in such work, or made by an employee included within any other category of employees specified by regulations issued pursuant to section 4(b) hereof, falls within the provisions of paragraph (a), above, and it shall be presumed that any invention made by any other employee falls within the provisions of paragraph (b), above. Either presumption may be rebutted by the facts or circumstances attendant upon the conditions under which any particular invention is made and, notwithstanding the foregoing, shall not preclude a determination that the invention falls within the provisions of paragraph (d) next below.

"(d) In any case wherein the Government neither (1) pursuant to the provisions of paragraph (a) above, obtains entire right, title and interest in and to an invention nor (2) pursuant to the provisions of paragraph (b) above, reserves a non-exclusive, irrevocable, royalty-free license in the invention with power to grant licenses for all governmental purposes, the Government shall leave the entire right, title and interest in and to the invention in the Government employee, subject to law." See United States v. Dubilier Condenser Corp., 289 U.S. 178 (1932); Shoak v. U.S., 238 F.2d 952 (6th Cir. 1956).