Sarbanes-Oxley Compliance Checklist for Patent Reporting

Use this to prepare for executive certification (SOX 302) and to support internal controls assessments (SOX 404).

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🔍 1. Patent Asset Verification

• Maintain a centralized, up-to-date inventory of all reported patents (issued and pending).

• Confirm each listed patent is active and not expired, with maintenance fees paid.

• Ensure each patent is properly assigned to the reporting entity (with full title history).

• Flag patents under USPTO reexamination, IPR, or opposition proceedings.

• Review jurisdictional coverage (domestic vs. international filings) for reported portfolios.

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🧾 2. Financial Statement Alignment

• Reconcile the patent inventory with the balance sheet’s intangible assets line item.

• Ensure reported patent values are backed by supportable valuation methods.

• Link licensing or royalty revenue directly to confirmed, enforceable patents.

• Adjust valuation assumptions when patents are invalidated, challenged, or expire.

• Ensure impairment testing procedures include legal status checks.

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🛡 3. Risk Factor and MD&A Disclosures

• Identify patents that are critical to current or future revenue.

• Disclose known risks to enforceability (e.g., litigation, regulatory challenges).

• Clearly explain expiration timelines for foundational patents.

• Avoid generic statements about “strong IP portfolios” without specifics.

• Update forward-looking statements to reflect IP-related uncertainty.

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🔐 4. Internal Control Procedures (SOX 404)

• Include patent data in your ICFR documentation and risk assessment matrix.

• Assign responsibility for IP reporting to named individuals or departments.

• Require quarterly certifications or attestation from internal IP counsel or asset managers.

• Integrate IP audits into external audit prep and compliance testing cycles.

• Maintain audit trails for any changes to reported patent lists or valuations.

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✍️ 5. Executive Certification Support (SOX 302)

• Ensure CEOs/CFOs receive pre-certification briefings that include patent asset updates.

• Provide a summary of IP-related risks, changes, and control effectiveness to executive officers prior to signing 10-K or 10-Q.

• Document the basis for certifying accuracy of patent-related disclosures in public filings.

• Disclose to audit committee any known control weaknesses or inaccuracies involving IP assets.

• Maintain a record of internal sign-offs from legal, accounting, and business units on patent data.

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📌 Final Tip: Test Your Controls Annually

Consider conducting a mock SOX review focused solely on IP-related reporting. Simulate scenarios such as:

• Expired patent mistakenly reported as active

• Licensing revenue attributed to an invalidated patent

• Patent litigation omitted from risk disclosures

This kind of scenario testing can expose hidden vulnerabilities before they trigger a certification or filing failure.