[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR31.205-37]

[Page 607-608]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents
 
          Subpart 31.2--Contracts With Commercial Organizations
 
Sec. 31.205-37  Royalties and other costs for use of patents.

    (a) Royalties on a patent or amortization of the cost of purchasing 
a patent or patent rights necessary for the proper performance of the 
contract and applicable to contract products or processes are allowable 
unless--
    (1) The Government has a license or the right to a free use of the 
patent;
    (2) The patent has been adjudicated to be invalid, or has been 
administratively determined to be invalid;
    (3) The patent is considered to be unenforceable; or
    (4) The patent is expired.
    (b) Care should be exercised in determining reasonableness when the 
royalties may have been arrived at as a result of less-than-arm's-length 
bargaining; e.g., royalties--
    (1) Paid to persons, including corporations, affiliated with the 
contractor;
    (2) Paid to unaffiliated parties, including corporations, under an 
agreement entered into in contemplation that a Government contract would 
be awarded; or
    (3) Paid under an agreement entered into after the contract award.
    (c) In any case involving a patent formerly owned by the contractor, 
the

[[Page 608]]

royalty amount allowed should not exceed the cost which would have been 
allowed had the contractor retained title.
    (d) See 31.109 regarding advance agreements.