[Federal Register Volume 84, Number 178 (Friday, September 13, 2019)]
[Rules and Regulations]
[Pages 48503-48504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19562]



Defense Acquisition Regulations System

48 CFR Part 252

[Docket DARS-2019-0045]
RIN 0750-AK55

Defense Federal Acquisition Regulation Supplement: Modification 
of DFARS Clause ``Reporting and Payment of Royalties'' (DFARS Case 

AGENCY: Defense Acquisition Regulations System, Department of Defense 

ACTION: Final rule.


SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to update an existing DFARS 
clause to clarify instructions to contracting officers when completing 
the clause, pursuant to action taken by the Regulatory Reform Task 

DATES: Effective September 13, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571-372-


I. Background

    DoD is amending the DFARS to update the fill-in instructions for 
contracting officers contained in the clause at DFARS 252.227-7009, 
Reporting and Payment of Royalties. DFARS clause 252.227-7009 is 
available for use in all contracts that contain patent release and 
settlement agreements, license agreements, and/or assignments, executed 
by the Government, under which the Government acquires rights, and 
provide for payment of a running royalty. The clause addresses the 
terms and conditions for DoD reporting of annual royalties accrued 
under the contract and the contractor's resultant submission of a 
royalty payment request.
    When applicable, DFARS 227.7009-4(d)(1) requires contracting 
officers to specify the name of the designated office within the 
applicable department or agency that is responsible for managing and 
reporting the extent of use of the licensed subject matter for the 
entire department or agency. The annual report generated by the 
designated office is provided to the contractor, in accordance with the 
clause. Depending on department or agency procedures, this report may 
be provided directly to the contractor by the designated office or to 
the contracting officer for further distribution.
    Upon award of a contract that incorporates the DFARS clause, the 
contracting officer must fill in the clause with the name of the office 
or individual that will provide the annual report directly to the 
contractor. The clause includes parenthetical instructions to 
contracting officers on the information required in the clause. 
Currently, these instructions reference the ``procuring office'' as the 
entity to be named in the clause, but this guidance is no longer 
    This rule updates the parenthetical guidance to direct contracting 
officers to insert the name of the designated office or contracting 
officer, in accordance with agency procedures. As a result, this rule 
intends to clarify for contractors the source of the report provided 
under the clause and avoid any miscommunication or misunderstanding 
between the Government and contractor when complying with the clause.

II. Discussion and Analysis

    The modification of this DFARS text implements a recommendation 
from the DoD Regulatory Reform Task Force. On February 24, 2017, the 
President signed Executive Order (E.O.) 13777, ``Enforcing the 
Regulatory Reform Agenda,'' which established a Federal policy ``to 
alleviate unnecessary regulatory burdens'' on the American people. In 
accordance with E.O. 13777, DoD established a Regulatory Reform Task 
Force to review and validate DoD regulations, including the DFARS. A 
public notice of the establishment of the DFARS Subgroup to the DoD 
Regulatory Reform Task Force, for the purpose of reviewing DFARS 
provisions and clauses, was published in the Federal Register at 82 FR 
35741 on August 1, 2017, and requested public input. One public comment 
was received on this clause.
    Comment: The respondent advised that the clause is never used and 
should be deleted from the DFARS. Instead, the respondent advised that 
a policy statement that permits DoD to enter into settlement agreements 
where patent and copyright infringement is alleged by a third party 
owner of a patent or copyright would suffice, in lieu of the clause.
    Response: DFARS clause 252.227-7009 serves as an agreement, through 
incorporation in the contract, between DoD and the contractor that, by 
execution of the contract, DoD and the contractor agree to the terms, 
conditions, and timeframes imposed for the reporting and payment of 
royalties, as they apply to the requirements and content of the 
specific contract. A general statement of policy does not fulfill the 
intent of this clause.
    Additionally, the clause is available for use when applicable and 
necessary. As such, this clause is beneficial to DoD by facilitating a 
standard and uniform incorporation of more common terms and conditions 
associated with patent and license agreements and assignments into 
applicable contracts, without having to draft the language of these 
more common terms and conditions with each contract. This approach also 
ensures the same language is incorporated into each contract, which 
helps DoD avoid miscommunications or misunderstanding and maintain

[[Page 48504]]

consistency in negotiating such terms and conditions DoD-wide.
    The DoD Task Force reviewed the requirements of DFARS clause 
252.227-7009 and determined that only the instructions of the clause 
should be modified.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This proposed rule does not create any new provisions or clauses. 
The rule updates fill-in instructions to contracting officers within 
the existing clause. This rule does not change the applicability of the 
affected clause, which applies to those valued at or below the SAT, if 
applicable, but not to commercial or COTS items.

IV. Publication of This Final Rule for Public Comment Is Not Required 
by Statute

    The statute that applies to the publication of the Federal 
Acquisition Regulation is Office of Federal Procurement Policy statute 
(codified at title 41 of the United States Code). Specifically, 41 
U.S.C. 1707(a)(1) requires that a procurement policy, regulation, 
procedure or form (including an amendment or modification thereof) must 
be published for public comment if it relates to the expenditure of 
appropriated funds, and has either a significant effect beyond the 
internal operating procedures of the agency issuing the policy, 
regulation, procedure, or form, or has a significant cost or 
administrative impact on contractors or offerors. This final rule is 
not required to be published for public comment, because DoD is not 
issuing a new regulation; rather, this rule merely updates the 
instructions for contracting officers provided for in an existing 

V. Executive Orders 12866 and 13563

    E.O.s 12866 and 13563 direct agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). E.O. 13563 emphasizes the 
importance of quantifying both costs and benefits, of reducing costs, 
of harmonizing rules, and of promoting flexibility. This is not a 
significant regulatory action and, therefore, was not subject to review 
under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated 
September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

VI. Executive Order 13771

    This rule is not subject to E.O. 13771, because this rule is not a 
significant regulatory action under E.O. 12866.

VII. Regulatory Flexibility Act

    Because a notice of proposed rulemaking and an opportunity for 
public comment are not required to be given for this rule under 41 
U.S.C. 1707(a)(1) (see section IV. of this preamble), the analytical 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
are not applicable. Accordingly, no regulatory flexibility analysis is 
required, and none has been prepared.

VI. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Part 252

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
    Therefore, 48 CFR part 252 is amended as follows:


1. The authority citation for part 252 continues to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

252.227-7009   [Amended]

2. Amend section 252.227-7009 by--
a. Removing the clause date of ``(AUG 1984)'' and adding ``(SEP 2019)'' 
in its place; and
b. In paragraph (a), removing ``(procuring office)'' and adding 
``[insert the Contracting Officer or the name of the designated office, 
in accordance with agency procedures]'' in its place.

[FR Doc. 2019-19562 Filed 9-12-19; 8:45 am]