We submitted an article to a SCI journal 5 months ago. In the article there is a section which is based on a patent which we had submitted to our institute's internal patent system. We cited the patent application in manuscript as under review patent. However, our institute has rejected our patent application so we converted patent application into an article and published into an international conference. Meanwhile, we received the acceptance letter for our SCI journal article. As the cited patent application has been rejected and we already published a conference paper based on patent application. Now should we replace the patent application citation with the published conference paper? and do we need to report about this issue to editor?
You certainly should update the citation if it is still possible, so readers can follow up on your references without wasting time searching for an inexistent patent.
Contact the editor. Typically such minor changes can be done in the proof editing stage, but publishers are usually happiest to hear of such changes as soon as possible.
And congratulations on the acceptance of your paper!