FAR 31.205-30—Patent costs.
Plain-English Summary
FAR 31.205-30 addresses which patent-related costs a contractor may charge to the Government as allowable indirect or direct costs. It covers three main subject areas: costs of preparing invention disclosures, reports, and related documents; costs of searching prior art to support those disclosures; and costs of filing and prosecuting a U.S. patent application when title or a royalty-free license will be conveyed to the Government. It also allows general patent counseling services, such as advice on patent laws, regulations, contract clauses, and employee agreements. The section’s purpose is to distinguish patent costs that are required by a Government contract from patent costs that are primarily for the contractor’s own business interests, which are unallowable unless they fall within the narrow counseling exception. In practice, this rule matters because patent expenses can be significant, and allowability depends on the contract’s patent requirements and the specific purpose of the work. Contractors must be able to tie the cost to a Government contract requirement and keep adequate support, while contracting officers and auditors must verify that the claimed patent costs are not broader than the regulation permits.
Key Rules
Contract-required patent costs allowed
Patent costs are allowable only to the extent they are incurred as requirements of a Government contract. The key question is whether the contract actually requires the patent-related work, not whether the work is useful or desirable to the contractor.
Invention disclosure costs allowed
Costs of preparing invention disclosures, reports, and similar documents are allowable when the contract requires them. This includes the administrative work needed to document an invention for Government purposes.
Prior art search costs allowed
Costs of searching the art are allowable only to the extent necessary to prepare the required invention disclosures. The search must be tied to the contract-driven disclosure process, not to broader commercial patent strategy.
U.S. patent filing costs conditionally allowed
Costs connected with filing and prosecuting a U.S. patent application are allowable only when title or a royalty-free license will be conveyed to the Government. If the Government is not receiving that interest, these costs generally are not allowable under this section.
General patent counseling allowed
General counseling services on patent matters are allowable, including advice on patent laws, regulations, clauses, and employee agreements. This is a narrow exception for advisory services, not for patent prosecution or business-development patent work.
Nonrequired patent costs unallowable
Patent costs other than general counseling are unallowable if they are not required by the contract. This includes patent work undertaken solely for the contractor’s own protection, commercialization, or portfolio management.
Related cost principles still apply
This section must be read with FAR 31.205-33 and FAR 31.205-37, which may further limit or affect allowability. Contractors should check those provisions before treating a patent-related expense as allowable.
Responsibilities
Contractor
Identify whether the Government contract actually requires the patent-related activity, and charge only those patent costs that fit the rule. Maintain documentation showing the connection between the cost, the contract requirement, and any Government title or royalty-free license obligation.
Contracting Officer
Specify patent-related requirements clearly in the contract when such costs are intended to be allowable, and review claimed costs for consistency with the contract and applicable FAR cost principles. Ensure the contract language supports any claimed patent cost allowability.
Auditor/Contracting Activity
Examine whether patent costs were incurred because of a Government contract requirement and whether the claimed costs are limited to allowable categories. Question costs that appear to support the contractor’s own patent strategy rather than a contract-driven obligation.
Agency
Define patent rights and reporting obligations in the solicitation and contract so contractors know when patent-related work is required. Coordinate patent clauses and technical reporting requirements to avoid ambiguity about cost allowability.
Practical Implications
Contractors should separate contract-required patent work from internal patent portfolio work, because only the former is generally allowable. Mixed-purpose legal or technical bills are a common audit issue and should be allocated carefully.
The phrase "required by a Government contract" is the central gatekeeper. If the contract does not require invention disclosures, prior art searches, or patent prosecution tied to Government rights, the cost is likely unallowable.
General patent counseling can be allowable, but only as counseling. Once the work shifts into filing, prosecution, or broader patent strategy, the cost may fall outside the exception.
Documentation matters. Contractors should retain the contract clause or requirement, the invention disclosure package, billing records, and any evidence that title or a royalty-free license is being conveyed to the Government.
Watch for overlap with other FAR cost principles, especially those that may disallow legal, organizational, or other patent-related expenses in different circumstances. A cost that seems allowable under one paragraph may still be limited elsewhere in Subpart 31.2.
Official Regulatory Text
(a) The following patent costs are allowable to the extent that they are incurred as requirements of a Government contract (but see 31.205-33 ): (1) Costs of preparing invention disclosures, reports, and other documents. (2) Costs for searching the art to the extent necessary to make the invention disclosures. (3) Other costs in connection with the filing and prosecution of a United States patent application where title or royalty-free license is to be conveyed to the Government. (b) General counseling services relating to patent matters, such as advice on patent laws, regulations, clauses, and employee agreements, are allowable (but see 31.205-33 ). (c) Other than those for general counseling services, patent costs not required by the contract are unallowable. (See also 31.205-37 .)