FAR 27.304-3—Subcontracts.
Plain-English Summary
FAR 27.304-3 addresses how the patent and invention policies in FAR Subpart 27.3 apply when work is performed through subcontracts, not just prime contracts. It makes clear that the subpart’s policies and procedures reach all subcontract tiers, so a requirement does not stop with the first subcontractor but flows down through lower-tier arrangements as appropriate. It also establishes a dispute-resolution role for the contracting officer, working with counsel, when a prime contractor or subcontractor believes a patent-related clause is inappropriate for a subcontract or when a subcontractor refuses to accept the clause. Finally, it states a government policy against using subcontract award leverage to pressure subcontractors into giving the contractor rights in inventions arising from subcontract work. In practice, this section is about controlling patent-rights treatment across the supply chain, preventing improper bargaining tactics, and ensuring clause disputes are handled by the Government rather than left to private leverage.
Key Rules
Applies to all tiers
The policies and procedures in this subpart apply to all subcontracts at any tier. Contractors must therefore consider flowdown and patent-rights issues not only in first-tier subcontracts, but also in lower-tier subcontracting arrangements where the subpart’s requirements are relevant.
CO resolves clause disputes
If a prime contractor or subcontractor thinks a particular clause is inappropriate for a subcontract, or if a subcontractor refuses to accept the clause, the contracting officer must resolve the matter. The contracting officer must do so in consultation with counsel, which means legal review is part of the decision-making process.
No leverage for invention rights
Contractors may not use their ability to award subcontracts as economic leverage to obtain rights for themselves in inventions resulting from subcontracts. The Government’s policy is to prevent coercive bargaining over invention ownership or rights as a condition of subcontract award.
Responsibilities
Contracting Officer
Resolve disputes over whether a patent-related clause is appropriate for a subcontract when a prime contractor or subcontractor objects or when a subcontractor refuses the clause. Do so in consultation with counsel to ensure the clause treatment is legally and policy-wise correct.
Prime Contractor
Apply the subpart’s policies and procedures to subcontracts at any tier as required, and avoid using subcontract award authority as leverage to secure rights in subcontractor inventions. Raise clause appropriateness issues through the contracting officer rather than forcing the issue through bargaining power.
Subcontractor
Comply with applicable patent-policy requirements that flow down to subcontract tiers, and if a clause is considered inappropriate, raise the issue for resolution rather than simply refusing without further process. Do not assume the prime contractor can unilaterally settle the matter if Government policy is implicated.
Counsel
Advise the contracting officer in resolving disputes over subcontract clause appropriateness or refusal, helping ensure the final decision aligns with FAR policy and applicable patent law considerations.
Government/Agency
Maintain the policy that contractors may not use subcontracting leverage to obtain rights in inventions resulting from subcontract work, and ensure the contracting officer process protects subcontractors from coercive rights-grabs.
Practical Implications
Patent and invention-rights clauses can matter deep in the supply chain, so contractors should review subcontract language carefully at every tier instead of assuming only first-tier subcontracts are affected.
If a subcontractor objects to a clause, the prime contractor should not treat the issue as purely private contract negotiation; the contracting officer must be brought in to resolve it with counsel.
A common pitfall is overreaching on invention rights by conditioning subcontract awards on assignment or broad license terms that go beyond what policy allows.
Contractors should document clause disputes and resolution steps, because the contracting officer’s involvement is required and may affect downstream subcontract timing.
This section is a reminder that subcontracting power cannot be used to extract intellectual property concessions unrelated to legitimate FAR patent-policy requirements.
Official Regulatory Text
(a) The policies and procedures in this subpart apply to all subcontracts at any tier. (b) Whenever a prime contractor or a subcontractor considers including a particular clause in a subcontract to be inappropriate or a subcontractor refuses to accept the clause, the contracting officer, in consultation with counsel, shall resolve the matter. (c) It is Government policy that contractors shall not use their ability to award subcontracts as economic leverage to acquire rights for themselves in inventions resulting from subcontracts.