FAR 27.304-1—General.
Plain-English Summary
FAR 27.304-1 explains the procedural safeguards and decision points that apply when the Government deals with patent rights under contracts involving small business concerns and nonprofit organizations. It covers: questioning a contractor’s small business or nonprofit status; using exceptions under FAR 27.303(e)(1) and the required procedures in 37 CFR part 401; administrative review rights for small businesses and nonprofits; requests for greater rights in inventions when the Government owns the default rights; retention of rights by an inventor when the contractor declines title; assignment or licensing of Government employee co-inventor rights to the contractor; notice, show-cause, and appeal rights before revoking or modifying a contractor’s minimum license rights; march-in procedures; and special approval requirements for nonprofit contractors under the patent rights clause. In practice, this section is about due process, consistency with Bayh-Dole implementing regulations, and protecting both Government interests and contractor/inventor rights. It tells contracting officers when they may question status, when they must follow specific regulatory procedures, and how to handle ownership, licensing, and enforcement decisions involving subject inventions. For contractors, it identifies when they can seek greater rights, defend against revocation or modification, and challenge the use of certain exceptions. For nonprofits, it also signals that some licensing and assignment actions require agency approval.
Key Rules
Question status when needed
If the agency has reason to doubt a prospective contractor’s small business or nonprofit status, it may require evidence of nonprofit status or file a size protest under FAR 19.302. This gives the agency a formal way to verify eligibility before relying on status-based patent rights rules.
Follow Bayh-Dole procedures for exceptions
Before using the exceptions in FAR 27.303(e)(1) for a small business concern or nonprofit organization, and before using the exception in 27.303(e)(1)(ii) for any contractor, the agency must follow the procedures in 37 CFR 401. These procedures are mandatory and control how the exception is applied.
Allow administrative review
Small business concerns and nonprofit organizations are entitled to administrative review of the use of the exceptions in 27.303(e)(1)(i) through (iv), under agency procedures and 37 CFR part 401. This provides a formal challenge process when the Government uses those exceptions.
Greater rights may be granted
When the contract includes the Government-ownership patent rights clause or a modified patent rights clause, the contractor or an employee-inventor may request greater rights in an identified invention within the time allowed by the clause. The contracting officer may grant the request only if doing so better serves the interests of the United States and the general public.
Consider public-interest objectives
In deciding greater-rights requests, the contracting officer must consider the policy objectives listed in 37 CFR 401.3(b) and 401.15, including utilization of federally supported inventions, open competition, public availability of U.S.-made inventions, and adequate Government rights to protect against nonuse or unreasonable use.
Inventor retention is possible
If the contractor does not elect to retain title to a subject invention, the agency may consider and, after consulting with the contractor, grant the inventor’s request to retain rights. Any such retention is subject to the specified conditions in the contractor patent rights clause.
Government employee co-inventor rights may be assigned
When a Government employee is a co-inventor on an invention made under a contract with a small business concern or nonprofit organization, the employing agency may license or assign its rights to the contractor, subject to 35 U.S.C. 202-204. This allows the contractor to consolidate rights where appropriate.
Notice before revoking minimum rights
Before revoking or modifying a contractor’s minimum license rights under FAR 27.302(i)(2), the contracting officer must give written notice and allow at least 30 days to show cause, unless a different period is authorized for good cause. The contractor also has appeal rights under 37 CFR part 404 and agency licensing regulations.
March-in must follow CFR procedures
If the agency exercises march-in rights, it must follow the procedures in 37 CFR 401.6. March-in is therefore not a discretionary shortcut; it is a regulated process with required steps.
Nonprofit approvals are required
For nonprofit organizations, paragraph (i) of the clause at 52.227-11 requires agency approval for certain contractor actions. This adds an extra control layer over licensing and assignment decisions involving nonprofit contractors.
Responsibilities
Contracting Officer
Verify or question contractor status when there is reason to doubt it; ensure the correct Bayh-Dole and CFR procedures are followed before using exceptions; evaluate and decide greater-rights requests based on the public-interest factors; provide written notice and a show-cause period before revoking or modifying minimum rights; and follow the required march-in procedures.
Agency
Support status verification and size protests when appropriate; apply the procedures in 37 CFR part 401 before using patent-rights exceptions; provide administrative review processes for small businesses and nonprofits; consult with contractors before considering inventor retention requests; and obtain required approvals for nonprofit contractor actions under the patent rights clause.
Contractor
Provide evidence of nonprofit status if requested; respond to size protests or administrative review processes; timely request greater rights if desired; show cause against proposed revocation or modification of minimum rights; and comply with any approval requirements that apply under the patent rights clause, especially for nonprofit organizations.
Employee-Inventor
After consulting with the contractor, may request greater rights where permitted and may request retention of rights if the contractor does not elect to retain title, subject to the clause conditions and agency decision-making.
Government Employee Co-Inventor’s Employing Agency
May license or assign its acquired rights in the subject invention to the contractor when the invention is made under a contract with a small business concern or nonprofit organization, subject to statutory limits and conditions.
Practical Implications
This section is a process-control section: most disputes here are not about the substance of patent ownership alone, but about whether the agency followed the required procedures before acting.
Contracting officers should not treat status questions, exceptions, march-in, or revocation/modification as informal decisions; each has a required regulatory path and, in some cases, notice and appeal rights.
Small businesses and nonprofits should watch for agency attempts to use exceptions under FAR 27.303(e)(1) and should be prepared to invoke administrative review if those exceptions are applied.
Contractors and inventors should track the deadlines in the patent rights clause for requesting greater rights or retention of rights, because missing the timing can forfeit the opportunity.
Nonprofit contractors need extra attention because certain licensing and assignment actions require agency approval, which can delay transactions if not planned early.
Official Regulatory Text
(a) Status as small business concern or nonprofit organization . If an agency has reason to question the size or nonprofit status of the prospective contractor, the agency may require the prospective contractor to furnish evidence of its nonprofit status or may file a size protest in accordance with FAR 19.302 . (b) Exceptions. (1) Before using any of the exceptions under 27.303 (e)(1) in a contract with a small business concern or a nonprofit organization and before using the exception of 27.303 (e)(1)(ii) for any contractor, the agency shall follow the applicable procedures at 37 CFR 401 . (2) A small business concern or nonprofit organization is entitled to an administrative review of the use of the exceptions at 27.303 (e)(1)(i) through (e)(1)(iv) in accordance with agency procedures and 37 CFR part 401 . (c) Greater rights determinations . Whenever the contract contains the clause at 52.227-13 , Patent Rights-Ownership by the Government, or a patent rights clause modified pursuant to 27.303 (e)(2), the contractor (or an employee-inventor of the contractor after consultation with the contractor) may request greater rights to an identified invention within the period specified in the clause. The contracting officer may grant requests for greater rights if the contracting officer determines that the interests of the United States and the general public will be better served. In making these determinations, the contracting officer shall consider at least the following objectives (see 37 CFR 401.3(b) and 401.15): (1) Promoting the utilization of inventions arising from federally supported research and development. (2) Ensuring that inventions are used in a manner to promote full and open competition and free enterprise without unduly encumbering future research and discovery. (3) Promoting public availability of inventions made in the United States by United States industry and labor. (4) Ensuring that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions. (d) Retention of rights by inventor . If the contractor elects not to retain title to a subject invention, the agency may consider and, after consultation with the contractor, grant requests for retention of rights by the inventor. Retention of rights by the inventor will be subject to the conditions in paragraphs (d) (except paragraph (d)(1)(i)), (e)(4), (f), (g), and (h) of the clause at 52.227-11 , Patent Rights-Ownership by the Contractor. (e) Government assignment to contractor of rights in Government employees’ inventions . When a Government employee is a co-inventor of an invention made under a contract with a small business concern or nonprofit organization, the agency employing the co-inventor may license or assign whatever rights it may acquire in the subject invention from its employee to the contractor, subject at least to the conditions of 35 U.S.C. 202 -204. (f) Revocation or modification of contractor’s minimum rights . Before revoking or modifying the contractor’s license in accordance with 27.302 (i)(2), the contracting officer shall furnish the contractor a written notice of intention to revoke or modify the license. The agency shall allow the contractor at least 30 days (or another time as may be authorized for good cause by the contracting officer) after the notice to show cause why the license should not be revoked or modified. The contractor has the right to appeal, in accordance with applicable regulations in 37 CFR part 404 and agency licensing regulations, any decisions concerning the revocation or modification. (g) Exercise of march-in rights . When exercising march-in rights, agencies shall follow the procedures set forth in 37 CFR 401.6 . (h) Licenses and assignments under contracts with nonprofit organizations . If the contractor is a nonprofit organization, paragraph (i) of the clause at 52.227-11 provides that certain contractor actions require agency approval.