FAR 52.227-7—Patents-Notice of Government Licensee.
Plain-English Summary
FAR 52.227-7, Patents—Notice of Government Licensee, is a solicitation provision used when the Government already has a license agreement with a patent owner that requires payment of a royalty for the contemplated acquisition. The provision tells offerors that the Government will incur a royalty cost tied to a specific patent, identifies the patent number and royalty rate to be inserted by the contracting officer, and asks the offeror to state whether it is the patent owner or a licensee under that patent. Its main purpose is to support fair price evaluation by making sure offers are compared on an equal basis when a royalty cost will be part of the Government’s acquisition cost. In practice, this clause alerts the market that a patent-related cost exists, gives the offeror a chance to identify itself as the party entitled to the royalty or otherwise affected by it, and allows the Government to add the royalty amount to an offer that does not show such status. It is a pricing/evaluation tool, not a general patent rights clause, and it matters because failure to complete the form correctly can affect evaluated price and award outcome.
Key Rules
Government royalty obligation
The provision applies only when the Government is obligated to pay a royalty under a license agreement with the patent owner for the proposed acquisition. The contracting officer must insert the patent number and royalty rate so offerors know the specific patent-related cost involved.
Offeror must identify patent status
If the offeror is the patent owner or a licensee under the patent, it must indicate that status on the solicitation provision. This lets the Government understand whether the offeror may already have rights connected to the patent and whether the royalty should be treated differently in evaluation.
Failure to identify status affects evaluation
If an offeror does not indicate that it is the owner or a licensee of the patent, the Government will evaluate the offer by adding an amount equal to the royalty. This prevents an offer from appearing artificially low when a patent royalty cost is expected to apply.
Contracting officer must complete blanks
The contracting officer is responsible for filling in the patent number and royalty rate before issuing the solicitation. An incomplete provision can create ambiguity in pricing and evaluation and may undermine the intended comparison of offers.
Provision is for solicitation use
This is a solicitation provision, not a contract clause governing performance after award. Its function is to inform offerors and establish the evaluation method for offers affected by a known patent royalty obligation.
Responsibilities
Contracting Officer
Insert the correct patent number and royalty rate in the solicitation, ensure the provision is used when prescribed, and apply the evaluation adjustment by adding the royalty amount to offers where the offeror does not identify itself as the patent owner or a licensee.
Offeror
Review the patent information in the solicitation and indicate whether it is the patent owner or a licensee under the identified patent. If it does not make that indication, it risks having its offer evaluated with the royalty amount added.
Government
Recognize and account for the royalty obligation created by the existing license agreement so that acquisition pricing reflects the Government’s actual cost exposure.
Patent Owner or Patent Licensee
If it is the offeror, disclose its status as owner or licensee so the Government can evaluate the offer appropriately in light of the patent royalty arrangement.
Practical Implications
This provision can change the evaluated price, so a missing checkbox or omitted status statement may make an otherwise competitive offer look more expensive after the royalty is added.
Contracting officers should verify the patent number and royalty rate before solicitation release; incorrect entries can lead to disputes over evaluation and pricing.
Offerors should not assume the Government will infer patent ownership or license status from other parts of the proposal; the provision requires an explicit indication.
Because the clause addresses evaluation, not patent infringement liability, contractors still need to assess broader intellectual property and licensing issues separately.
When multiple offers are close in price, the royalty adjustment can be decisive, so both sides should treat this provision as a material pricing term rather than a formality.
Official Regulatory Text
As prescribed at 27.202-5 (b) , insert the following provision: Patents-Notice of Government Licensee (Apr 1984) The Government is obligated to pay a royalty applicable to the proposed acquisition because of a license agreement between the Government and the patent owner. The patent number is ____ [ Contracting Officer fill in ] , and the royalty rate is ____ [ Contracting Officer fill in ] . If the offeror is the owner of, or a licensee under, the patent, indicate below: □ Owner □ Licensee If an offeror does not indicate that it is the owner or a licensee of the patent, its offer will be evaluated by adding thereto an amount equal to the royalty. (End of provision)