---
kind: "section"
citation: "48 C.F.R. § 31.205-37"
title: "48"
number: "31.205-37"
heading: "Royalties and other costs for use of patents."
url: "https://uscodex.org/cfr/48/31.205-37"
---

# §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 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.

## Notes

### Authority

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.

### Source

Source: 48 FR 42301, Sept. 19, 1983, unless otherwise noted.