Intellectual Property Rights - Commercial Exploitation Levy

This page is an extract from the full topic guidance on Intellectual Property Rights (Commercial Exploitation Levy (IPR (CEL)) [134KB PDF]. It details any Constraints associated with IPR CEL, provides a summary of the Authoritative Guidance and lists any essential reading, further reading or associated documents.

If you have any queries on this topic, please contact the Sponsor by email: DGDC-CS-2D-ASST HD for this guidance or DGDC DIPR DEP-HD-1 for IPR CEL policy.

Constraints

None.

Authoritative Guidance Summary

Contracts fully funded by the Ministry of Defence (MOD) under which defence equipment (including software) is designed and developed normally require the contractor to pay an appropriate exploitation levy to MOD for any commercial use of the design and / or jigs and tools (whether by manufacture and sale or in the granting of licences). Levy is also payable in respect of spares or parts, including sale as part of a maintenance agreement.

Levy arrangements must be the subject of a formal Agreement with the contractor and/or subcontractor and should be negotiated concurrently with the contract to which they relate. Specimen Agreements are provided under Authoritative Guidance.

Commercial officers may sign Levy Agreements, provided that the value of the sale to which they relate is no greater than their delegated powers as defined in their Commercial Licence, subject to all approvals being given at no lower than Band C2 level.

Levy may be determined as a fixed percentage of the commercial selling price (generally applicable only to sales below 15M in value); or as a profit-sharing arrangement for sales in excess of 15M in value; or under a levy abatement arrangement providing for profit to be shared to a pre-determined formula. Each arrangement is described in detail under Authoritative Guidance.

Director Financial Management, Financial Management Shared Service Centre, Invoicing and Revenue IP1-11 (DFM-FMSSC-IR-IP1-11) is responsible for administrating the Agreements supported by acquisition team commercial officers and Defence Intellectual Property Rights (DIPR).

Acquisition teams must:

maintain records of all levy Agreements for which they are responsible;
ensure that DFM-FMSSC-IR-IP1-11 receive copies and are advised of any subsequent changes to those Agreements; and
conduct a quarterly review of Agreements that have shown a 'NIL' return for five successive years and consider placing such Agreements in 'abeyance'.

Cost Assurance and Analysis Services (CAAS) conduct random verifications of contractor statements and auditors' certificates. Defence Internal Audit (DIA) and National Audit Office (NAO) may audit contractors' as well as acquisition team records relating to levy arrangements and sums due and recovered.