Intellectual property is yet another area caught in the SOx net.
In an article at the Sarbanes-Oxley Compliance Journal website, Hogan & Hartson partner Kenneth Hautman describes some of the issues that arise when examining the controls surrounding how a company maintains its IP portfolio. While the method described by Mr. Hautman is directly applicable to SEC registrants, it also forms a best practices checklist that is helpful to all companies with material IP assets.
Here are Mr. Hautman’s five steps:
Step 1 â€“ Inventory Intellectual Property Assets
Step 2 â€“ Determine the Value of Each IP Asset
Step 3 – Establish an IP Protection Plan
Step 4 â€“ Implement the Plan and Audit/Monitor Compliance
Step 5 â€“ Establish Internal Procedures to Ensure Material Changes to IP Assets Materially Affecting Financial Performance are Reported
Mr. Hautman’s conclusion is familiar to any attorney seeking to comply with regulations before they have been adequately explained by an agency or extensively interpreted by the courts:
“… [I]n the absence of any clear direction from the Act, the courts or the SEC, the prudent course for a public company to follow is to adopt IP â€œbest practices,â€ including implementation of adequate disclosure controls and procedures, and assume reporting responsibility to the companyâ€™s management regarding material changes in the value or other features of IP Assets that could materially affect the companyâ€™s business and financial performance.”