Board Resolution: Implementation of Patent Portfolio Monitoring & Risk Disclosure System

WHEREAS, the Company’s intellectual property, including its patent portfolio, is a material asset that impacts its valuation, competitive position, and regulatory disclosures;

WHEREAS, federal securities laws (including Section 11 of the Securities Act and Rule 10b-5 under the Exchange Act) impose liability for material misstatements or omissions regarding patents in SEC filings;

WHEREAS, recent litigation (e.g., In re Akorn, In re Marvell Tech) demonstrates that defects in patent enforceability or undisclosed litigation risks can lead to significant legal and financial exposure;

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby directs management to implement and maintain a Patent Portfolio Monitoring & Risk Disclosure System (“System”) with the following components:

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1. System Requirements

The System shall include:

A. Centralized IP Dashboard

• Automated tracking of key patent risks, including:
  • Pending USPTO proceedings (e.g., IPRs, ex parte reexaminations)
  • Foreign patent office challenges
  • Litigation (assertions, invalidity suits)
  • Maintenance fee deadlines and expiry dates
• Integration with SEC disclosures to flag inconsistencies between patent status and public filings.

B. Materiality Thresholds & Escalation Protocols

• Mandatory reporting to the Audit Committee if any of the following occur:
  • A patent covering ≥5% of revenue is challenged in court or at the USPTO.
  • A top-tier licensee disputes validity or terminates an agreement.
  • Prior art emerges that could invalidate a core patent.
• Quarterly IP risk reports to the full Board.

C. Independent Audits

• Annual third-party review of the patent portfolio’s strength by a qualified firm (e.g., PatenTrack, Ocean Tomo, IP valuation experts).
• “Stress testing” of key patents to model financial impact if invalidated.

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2. Governance & Accountability

• Designated Oversight: The Audit Committee shall oversee the System’s implementation and effectiveness.
• Management Certification: The CFO and General Counsel shall certify annually that:
  • All material patent risks have been disclosed in SEC filings.
  • The System is functioning as designed.
• D&O Training: Directors and officers shall receive training on patent-related securities risks within 90 days of adoption.

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3. Budget & Resources

• The Board approves an initial budget of $[X] for:
  • IP management software (e.g., Anaqua, PatenTrack, Clarivate).
  • External legal/valuation reviews.

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4. Review & Updates

• The System shall be reviewed annually by the Audit Committee, with adjustments made for:
  • Changes in patent law (e.g., USPTO/PTO policy shifts).
  • New business lines or acquisitions impacting IP risk.

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ADOPTED by the Board of Directors on [Date].

[Secretary’s Certification]

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Supporting Document: Audit Committee Charter Amendment

Section [X] – Patent Oversight Duties
The Audit Committee shall:

1. Review the Patent Portfolio Monitoring & Risk Disclosure System quarterly.
2. Receive immediate alerts of material patent defects (per thresholds above).
3. Ensure external auditor scrutiny of IP-related financial assumptions (e.g., impairment testing).