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required by this paragraph (d) have been followed throughout the reporting period;
(B) All Subject Inventions have been disclosed or that there are no such inventions;
(C) All subcontracts containing a Patent Rights clause have been reported or that no such subcontracts have been awarded; and
(iii) A final report on Form DI-1216 within 3 months after completion of the contract work listing all Subject Inventions and all subcontracts awarded containing a Patent Rights clause and certifying that:
(A) All Subject Inventions have been disclosed or that there were not such inventions; and
(B) All subcontracts containing a Patent Rights clause have been reported or that no such subcontracts have been awarded.
(3) The Contractor shall obtain patent agreements to effectuate the provisions of this clause from all persons in its employ who perform any part of the work under this contract except nontechnical personnel, such as clerical employees and manual laborers.
(4) The Contractor agrees that the Government may duplicate and disclose Subject Invention disclosures and all other reports and papers furnished or required to be furnished pursuant to this clause. If the Contractor is to file a foreign patent application on a Subject Invention, the Government agrees, upon written request, to use its best efforts to withhold publication of such invention disclosures until the expiration of the time period specified in paragraph (d)(1) of this clause, but in no event shall the Government or its employees be liable for any publication thereof.
(f) Publication. It is recognized that during the course of the work under this contract, the Contractor or its employees may from time to time desire to release or publish information regarding scientific or technical developments made or conceived in the course of or under this contract. In order that public disclosures of such information will not adversely affect the patent interests of the Government, or the Contractor, patent approval for release or publication shall be secured from the Solicitor prior to any such release or publication.
(g) Forfeitures of rights in unreported Subject Inventions. (1) The Contractor shall forfeit to the Government, at the request of the Secretary or his designee, all rights in any Subject Invention which the Contractor fails to report to the Contracting Officer within six months after the time the Contractor:
(i) Files or causes to be filed a United States or foreign patent application thereon; or
(ii) Submits the final report required by paragraph (e)(2)(iii) of this clause, whichever is later.
(2) However, the Contractor shall not forfeit rights in a Subject Invention if, within the time specified in (1)(i) or (1)(ii) of this paragraph (g), the Contractor:
(i) Prepared a written decision based upon a review of the record that the invention was neither conceived nor first actually reduced to practice in the course of or under the contract and files the same with the Solicitor; or
(ii) Contending that the invention is not a Subject Invention, the contractor nevertheless discloses the invention and all facts pertinent to this contention to the Solicitor; or
(iii) Establishes that the failure to disclose did not result from the Contractor's fault or negligence.
(3) Pending written assignment of the patent applications and patents on a Subject Invention determined by the Secretary or his designee to be forfeited (such determination to be a final decision under the Disputes Clause), the contractor shall be deemed to hold the invention and the patent applications and patents pertaining thereto in trust for the Government. The forfeiture provision of this paragraph (g) shall be in addition to and shall not supersede other rights and remedies which the Government may have with respect to Subject Inventions.
(h) Examination of records relating to in. ventions. (1) The Contracting Officer or his authorized representative, until the expiration of 3 years after final payment under this contract shall have the right to examine any books (including laboratory notebooks), records, documents, and other supporting data of the Contractor which the Contracting Officer or his authorized representative reasonably deem pertinent to the discovery or identification of Subject Inventions or to determine compliance with the requirements of this clause.
(2) The Contracting Officer or his authorized representative shall have the right to review all books (including laboratory notebooks), records, and documents of the Contractor relating to the conception or first actual reduction to practice of inventions in the same field of technology as the work under this contract to determine whether any such inventions are Subject Invention, if the Contractor refuses or fails to:
(1) Establish the procedurs of paragraph (e)(1) of this clause; or
(il) Maintain and follow such procedures; or
(iii) Correct or eliminate any material deficiency in the procedures within thirty (30) days after the Contracting Officer notifies the Contractor of such a deficiency.
(i) Withholding of payment. (Not applicable to subcontracts). (1) Any time before final payment of the amount of this contract, the Contracting Officer may, if he deems such action warranted, withhold payment until a reserve not exceeding $10,000 or 10 percent of the amount of this contract, whichever is less, shall have been set aside if in his opinion, the contractor fails to:
(i) Establish, maintain, and follow effective procedures for identifying and disclosing Subject Inventions pursuant to paragraph (e)(1) of this clause; or
(ii) Disclose any Subject Inventions pursuant to paragraph (e)(2)(i) of this clause; or
(iii) Deliver the Interim Reports pursuant to paragraph (e)(2)(ii) of this clause; or
(iv) Provide the information regarding subcontracts pursuant to paragraph (j)(5) of this clause; or
(v) Convey to the Government in a Solici. tor-approved form the title and/or rights of the Government in each Subject Invention as required by this clause.
(2) The reserve or balance shall be withheld until the Contracting Officer has determined after consultation with the Solicitor that the contractor has rectified whatever deficiencies exist and has delivered all reports, disclosures, and other information required by this clause.
(3) Final payment under this contract shall not be made by the Contracting Officer before the Contractor delivers to the Contracting Officer all disclosures of Subject Inventions and other information required by (e)(2)(i) of this clause, the final report required by (e)(2)(iii) of this clause, and the Solicitor has issued a patent clearance certification to the Contracting Officer.
(4) The Contracting Officer may, in his discretion, decrease or increase the sums withheld up to the maximum authorized above. If the Contractor is a nonprofit organization, the maximum amount that may be withheld under this paragraph shall not exceed $10,000 or 5 percent of the amount of this contract, whichever is less. 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 subsequent payment thereof shall not be construed as a waiver of any rights accruing to the Government under this contract.
(j) Subcontracts. (1) For the purpose of this paragraph, the term "Contractor" means the party awarding a subcontract and the term “Subcontractor" means the party being awarded a subcontract, regardless of tier.
(2) Unless otherwise authorized or directed by the Contracting Officer, the Contractor shall include the Patent Rights clause of 41 CFR 14R-9.107-5(a) or 41 CFR 14R9.107-6 as appropriate, modified to identify the parties in any subcontract hereunder. In the event of refusal by a Subcontractor to
accept this clause, or if in the opinion of the Contractor this clause is inconsistent with OWRT's patent policies, the Contractor:
(i) Shall promptly submit written notice to the Contracting Officer setting forth reasons for the Subcontractor's refusal and other pertinent information which may expedite disposition of the matter; and
(ii) Shall not proceed with the subcontract without the written authorization of the Contracting Officer.
(3) The Contractor shall not, in any subcontract except as may be otherwise provided in this clause, or by using a subcontract as consideration therefor, acquire any rights in its Subcontractor's Subject Invention for the Contractor's own use (as distinguished from such rights as may be required solely to fulfill the Contractor's contract obligations to the Government in the performance of this contract).
(4) All invention disclosures, reports, instruments, and other information required to be furnished by the Subcontractor to OWRT or the Solicitor, under the provision of a Patent Rights clause in any subcontract hereunder may, in the discretion of the Contracting Officer, be furnished to the Contractor for transmission to OWRT or the Solicitor.
(5) The Contractor shall promptly notify the Contracting Officer in writing upon the award of any subcontract containing a Patent Rights clause by identifying the Subcontractor, the work to be performed under the subcontract, and the dates of award, and estimated completion. Upon the request of the Contracting Officer, the Contractor shall furnish a copy of the subcontract.
(6) The Contractor shall identify all Subject Inventions of the Subcontractor of which it acquires knowledge in the performance of this contract and shall notify the Contracting Officer promptly upon the identification of the inventions.
(7) It is understood that the Government is a third party beneficiary of any subcontract clause granting rights to the Government in Subject Inventions and Background Patents, and the Contractor hereby assigns to the Government all rights that the Contractor would have to enforce the Subcontractor's obligations for the benefit of the Government and the public with respect to Subject Inventions and Background Patents. The Contractor shall not be obligated to enforce the agreements of any Subcontractor hereunder relating to the obligations of the Subcontractor to the Government with regard to Subject Inventions and Background Patents.
(k) Dominating Background Patents. (1) Definitions. (i) "Background Patent" means a foreign or domestic patent (regardless of its date of issue relative to the date of this contract):
(A) Which the Contractor, but not the Government, has the right to license to others; and
(B) Infringement of which cannot be avoided upon the practice of a Subject Invention or Specified Work Object.
(ii) “Commercial Item" means:
(A) Any machine, manufacture, or composition of matter which, at the time of a request for a license pursuant to this section, is offered for sale or otherwise made available commercially to the public in the regular course of business, at terms reasonable in the circumstances; and
(B) 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.
(iii) To “practice an invention or patent" means the right of a licensee on his own behalf to make or 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.
(iv) “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.
(2) Contractor agrees that he will make the Background Patent available for use in conjunction with (A) any Subject Invention, and (B) any Specified Work Object, which is in the field of technology where the work of the contract falls. This may be done:
(i) By making available an embodiment of the Subject Invention or the Specified Work Object, which incorporates the invention covered by the Background Patent, as a Commercial Item of reasonable quality, in sufficient quantity and at reasonable prices to satisfy market needs; or
(ii) By the sale of an embodiment of the Background Patent as a Commercial Item in a form which can be employed in the practice of the Subject Invention or the Specified Work Object or can be so employed with relatively minor modifications, or demonstrating to the satisfaction of the Solicitor that a competitive alternative to such an embodiment is offered for sale, or otherwise made available commercially to the public, which is of reasonable quality, in sufficient quantity and at reasonable prices to satisfy market needs; or
(iii) By the licensing of the domestic Background Patent at reasonable terms, includ
ing reasonable royalties, to responsible applicants on their request.
(3)(i) When a license to practice a domestic Background Patent in conjuction with any Subject Invention or any Specified Work Object for the technology where the work of the contract falls is requested, in writing, by a responsible applicant, and such Background Patent is not available as set forth in subparagraphs (k)(2)(i) or (ii) of this clause, the Contractor shall have six (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, in writing within the said six months, of any such request for a license to practice a Background Patent in conjunction with a Subject Invention or specified Work Object, which the Contractor or his licensee wishes to attempt to make available as set forth in subparagraphs (k)(2)(i) or (ii) of this clause. The Secretary or his designee shall then designate the reasonable time within which the Contractor must make such Background Patent available in reasonable quantity and quality, and at a reasonsble price. If the Contractor or his licensee decides not to make such Background Patent so available, or fails to made it available within the time designated by the Secretary or his designee, the Background Patent shall be licensed to a responsible applicant at reasonable terms, includ. ing a reasonable royalty, in conjunction with (A) the Specified Work Object, or (B) the Subject Invention; and may be limited by the licensor for practice in the field of technology where the work of the contract falls.
(ii) 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 governmental purposes of such foreign government if an em. bodiment 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 with the Subject Inventions or Specified Work Objects in the field of technology where the work of the contract falls.
(iii) 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 Subject Inventions or Specified Work Objects in the field of technology where the work of the contract falls, or where the Contractor has made available the Commercial Item as set out in Subparagraphs (k)(2)(i) or (ii) of this clause.
(4) For use in the field of technology where the work of the contract falls in conjuction with (A) any Specified Work Object, or (B) any Subject Invention, the Contractor agrees to grant to the Government a li. cense 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 subparagraphs (k)(2)(i) or (ii) of this clause for use of the Government in connection with research, development, and demonstration work only. Subject to the royalty-free license provided for in this paragraph 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 compensations, the Contractor's obligation to license his Background Patent 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 Of. ficer, 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 subparagraphs
(k)(2)(i) or (ii) of this clause, and a qualified applicant requests a license under such patent for practice in the field of technology where the work of the contract falls in connection with the use of any Subject Invention or any 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 paragraph:
(i) a parent company is one which owns or controls, through direct or indirect ownership of more that 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.
(1) Effectuating agreements. Except as otherwise authorized in writing by the Contracting Officer, the Contractor will obtain patent agreements to effectuate the provisions of this clause from all persons who perform any part of the work under this contract, except such clerical and manual labor personnel as will not have access to technical data.
(b) Background Patents. (1) It will normally be the case that a contractor qualified to perform work under an OWRT contract will have developed a degree of expertise in the general field of activity to which the contract relates. Accordingly, it will not be unusual for a prospective contractor to have an established patent position relating to the general field of work to be performed under an OWRT contract and to have ongoing research and development programs in that general field which could result in patentable inventions. Since the contractor is obligated to apply its best efforts to accomplishing the objectives of the contract work, it is to be expected that inventions owned or controlled by the contractor at any time during the contract period may be utilized in connection with the work performed under the contract. If such inventions are or become the subject of a patent, such patented inventions may control a sub
ject of the contract or the contract results.
(2) It is usually the case that at the time an OWRT contract is negotiated, such inventions, if any, of the contractor are not known to the Government and may not be known to the contractor either. Use by the contractor of such inventions in connection with the contract work does not necessarily result in a need for rights in those inventions by the Government or others. However, failure of OWRT to obtain limited rights on behalf of the Government and/or third parties in a narrow class of those inventions, defined as “Bacl und Patent” could frustrate the objectives of OWRT to promptly make the benefits of its programs widely available to the public and to promote the commercial utilization of the technology developed or demonstrated under OWRT programs. Therefore, it is OWRT's policy to obtain limited license rights in Background Patents on a basis that is reasonable under the circumstances of the particular contract and takes into account the relative equities of the contractor, the Government, and the general public.
(3) Paragraph (k) of the Patent Rights clause of $ 14R-9.107-5(a) sets out the Background Patent provision that will be appropriate for OWRT contracting situations by balancing the needs of OWRT programs with the equities of the contractor. This clause obtains a nonexclusive, royaltyfree license for the Government for research, development, and demonstration work only. Also in the absence of an available commercial alternative for the invention of a Background Patent, or where there is a failure on the part of the contractor itself or with its licensees in action to supply the market in sufficient quantities and reasonable prices, the contractor is required to license responsible parties on reasonable terms for use of the background invention with Subject Inventions and Specified Work Object in the field of technology specifically contemplated in the contract effort. The Background Patent provisions, however, are only applicable insofar as infringement of the Background Patent cannot be avoided in order to
effectively utilize the results of the contract work. Additionally, the clause is not effective if the contractor can demonstrate to the satisfaction of the Secretary or his designee that commercial alternatives are available, or that the contractor or its licensees are supplying the market in sufficient quantities and at reasonable prices or have taken effective steps or within a reasonable time are expected to take effective steps to supply the market. In determining whether to request such licensing. OWRT will recognize the need, where appropriate, to limit licensing to preserve the commercialization incentives provided by the patent, and also to meet the needs of the public for early availability of the technology.
(4) Paragraph (k)(1) provides a definition of those inventions which will fall within the area of what constitutes a Background Patent, while paragraphs (k)(2) and (k)(3) define Contractor's alternatives to licensing, as well as the scope or field of use of any license granted. Although OWRT as explained in paragraph (b)(3) of this section may control the requesting of licenses to responsible parties, the final resolution of questions regarding the scope of such licenses, the terms thereof including reasonable royalties are then left to the negotiation of the parties with final resolution of the issues being made by a court of competent jurisdiction if necessary. Any decision not to apply the licensing requirement of paragraphs (k)(2) and (k)(3), however, is subject to the final decision of the Secretary or his designee because the determinations are dependent in substantial part on the requirements of OWRT's statutory mission.
(5) Balancing of the respective equities in particular contracting situations, however, may require that paragraph (k) be modified. Paragraph (k) may be deleted for contracts up to $50,000 with the advice of the Solicitor. For example, paragraph (k) may not be appropriate in study contracts, planning contracts, and contracts for specialized equipment not intended for use by the public.
(6) On the other hand, there will be situations where the equities between