FAR 52.227-3—Patent Indemnity.
Plain-English Summary
FAR 52.227-3, Patent Indemnity, is the clause that shifts certain patent-infringement risk to the contractor when the Government acquires supplies, services, or construction work. It requires the contractor to indemnify the Government, its officers, agents, and employees against liability and costs for infringement of any U.S. patent arising from manufacture or delivery of supplies, performance of services, or construction, alteration, modification, or repair of real property, as well as from the Government’s use or disposal of those supplies or construction work. The clause also explains important limits on that indemnity: it does not apply to patents withheld from issue under a secrecy order, it depends on prompt notice and an opportunity for the contractor to help defend the claim, and it does not cover infringement caused by Government-directed changes, post-delivery changes, or unreasonable settlements made without the contractor’s consent. The clause includes two tailoring alternates that let the contracting officer exclude specific items from indemnity or affirmatively include specific items. A third alternate, added in 2020, narrows the clause’s application for certain communication service subcontracts at any tier, limiting coverage to individual communication service authorizations over the simplified acquisition threshold and only for certain types of services or facilities. In practice, this clause matters because it allocates patent risk, affects pricing and subcontract flowdown decisions, and can determine whether the Government can recover defense and settlement costs when a patent claim arises.
Key Rules
Contractor indemnifies Government
The contractor must protect the Government and its personnel from liability and costs for infringement of any U.S. patent arising from the contract work or from the Government’s use or disposal of the resulting supplies or construction work. This is a broad risk-allocation clause, but it applies only within the clause’s stated scope.
Secrecy-order patents excluded
The indemnity does not apply to patents issued on applications that are or may be withheld from issue under a secrecy order under 35 U.S.C. 181. This exception removes certain classified or sensitive patent matters from the contractor’s indemnity obligation.
Prompt notice and defense participation
The Government must inform the contractor of the infringement suit or action as soon as practicable and give the contractor a fair opportunity, under applicable law and procedure, to participate in the defense. If the contractor is not given that chance, the indemnity may not apply.
Government-directed changes excluded
The indemnity does not cover infringement caused by compliance with specific written instructions from the contracting officer that change the supplies, materials, equipment, or manner of performance in a way not normally used by the contractor. This protects the contractor from patent risk created by Government-directed deviations.
Post-delivery changes excluded
The clause does not cover infringement resulting from additions to or changes in supplies, components, or construction work made after delivery or performance. Once the Government or another party alters the item or work, the contractor is not responsible for infringement caused by that later change.
Unreasonable settlements excluded
The indemnity does not apply to a claimed infringement that is settled unreasonably without the contractor’s consent, unless a final court decree requires the settlement. The contractor must generally have a say before the Government resolves the claim in a way that triggers indemnity.
Tailoring by alternate
Alternate I lets the contracting officer list items excluded from indemnity, and Alternate II lets the contracting officer list items included under indemnity. These alternates allow the clause to be tailored to the acquisition and the patent-risk profile of specific items.
Communication services limitation
Alternate III limits the clause for subcontracts at any tier involving communication service authorizations over the simplified acquisition threshold. It applies only to certain communications services and facilities that are sold or offered to the public, can be provided over commercially available equipment, or involve relatively minor modifications.
Responsibilities
Contractor
Indemnify the Government and its officers, agents, and employees against covered patent infringement liability and costs. The contractor should also monitor patent risk, respond promptly to infringement claims, and participate in the defense when notified.
Contracting Officer
Insert the clause when prescribed, decide whether to use Alternate I, Alternate II, or Alternate III as applicable, and identify any items to be excluded from or included under the indemnity. The contracting officer must also issue specific written instructions carefully, because Government-directed changes can affect whether indemnity applies.
Government / Agency
Provide the contractor notice of any infringement suit or action as soon as practicable and give the contractor an opportunity to participate in the defense. The Government should also avoid unreasonable settlement actions without contractor consent unless a court decree requires otherwise.
Subcontractors at any tier for communication services
When Alternate III applies, comply with the narrowed scope of patent indemnity for individual communication service authorizations over the simplified acquisition threshold and understand that coverage is limited to the specified categories of communications services and facilities.
Practical Implications
This clause can create significant financial exposure for contractors, so patent clearance and supplier diligence matter before award and during performance.
Government-directed design or performance changes can shift patent risk; contractors should document when a change was specifically ordered in writing.
If a patent claim arises, notice timing and defense participation are critical. Missing the opportunity to help defend or object to a settlement can affect indemnity rights.
The alternates are not boilerplate choices; contracting officers should use them deliberately to match the acquisition’s actual patent-risk profile.
For communication service work, Alternate III can materially narrow coverage, so contractors and subcontractors should not assume full patent indemnity applies at every tier or for every communications-related item.
Official Regulatory Text
As prescribed in 27.201-2 (c)(1) , insert the following clause: Patent Indemnity (Apr 1984) (a) The Contractor shall indemnify the Government and its officers, agents, and employees against liability, including costs, for infringement of any United States patent (except a patent issued upon an application that is now or may hereafter be withheld from issue pursuant to a Secrecy Order under 35 U.S.C. 181 ) arising out of the manufacture or delivery of supplies, the performance of services, or the construction, alteration, modification, or repair of real property (hereinafter referred to as "construction work") under this contract, or out of the use or disposal by or for the account of the Government of such supplies or construction work. (b) This indemnity shall not apply unless the Contractor shall have been informed as soon as practicable by the Government of the suit or action alleging such infringement and shall have been given such opportunity as is afforded by applicable laws, rules, or regulations to participate in its defense. Further, this indemnity shall not apply to— (1) An infringement resulting from compliance with specific written instructions of the Contracting Officer directing a change in the supplies to be delivered or in the materials or equipment to be used, or directing a manner of performance of the contract not normally used by the Contractor; (2) An infringement resulting from addition to or change in supplies or components furnished or construction work performed that was made subsequent to delivery or performance; or (3) A claimed infringement that is unreasonably settled without the consent of the Contractor, unless required by final decree of a court of competent jurisdiction. (End of clause) Alternate I (Apr 1984) . As prescribed in 27.201-2 (c)(2), add the following paragraph (c) to the basic clause: (c) This patent indemnification shall not apply to the following items: __________________________________________________ [ Contracting Officer list and/or identify the items to be excluded from this indemnity .] Alternate II (Apr 1984) . As prescribed in 27.201-2 (c)(2), add the following paragraph (c) to the basic clause: (c) This patent indemnification shall cover the following items: __________________________________________________ [ List and/or identify the items to be included under this indemnity .] Alternate III (Jun 2020) . As prescribed in 27.201-2 (c)(3), add the following paragraph (c) to the basic clause: ( ) As to subcontracts at any tier for communication service, this clause shall apply only to individual communication service authorizations over the simplified acquisition threshold, as defined in Federal Acquisition Regulation 2.101 on the date of subcontract award, issued under this contract and covering those communications services and facilities- (1) That are or have been sold or offered for sale by the Contractor to the public, (2) That can be provided over commercially available equipment, or (3) That involve relatively minor modifications.