Sarbanes-Oxley and Trademark Portfolio Management: Establishing Internal Controls for Compliance and Preventing Infringement Book

The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002. Although vastly complex, the legislation has a fairly simple aim, namely, to reform a number of business and accounting practices that significantly distorted the economic performance of Enron and WorldCom to the detriment of their investors. Corporate America is now spending millions of dollars complying with the requirements of Sarbanes-Oxley.

The prevention of consumer confusion as to either source of origin or sponsorship has historically been viewed as trademarks' primary raison d'être. However, trademarks afford their owners far more than just the legal right stop newcomers from using similar marks in ways that are likely to cause confusion. Competitors constantly challenge customer loyalty and trademarks are often the only way to effectively meet this challenge. No longer seen simply as a legal right to exclude newcomers, trademarks are increasingly viewed as valuable intangible assets. Like fixed assets such as buildings and equipment, trademarks must be managed, protected, valued and reported in financial statements.

Sarbanes-Oxley does not specifically mention trademarks (or any other intellectual property for that matter). However, if the trademarks of companies subject to the reporting requirements of the Securities and Exchange Commission are material assets, internal controls should be in place to assure that the risks inherent in the use and registration of the trademarks are effectively managed and reported.

Although the restoration of investor confidence in corporate reporting and accountability is clearly a worthwhile goal, the return-on-investment in complying with Sarbanes-Oxley is often hard to see. However, Sarbanes-Oxley and Trademark Portfolio Management makes the return-on-investment in a well managed and maintained trademark portfolio plain to see.