In what ways is intellectual property important during a divorce? Is it something that may be divided by the court between the parties?
Intellectual property and domestic relations:
Intellectual property includes patents, trademarks, copyrights, trade secrets, and trade dress. Each of those categories may present property to be considered by the court as part of a couple’s marital estate. Therefore, during a divorce, it is important to consider any intellectual property holdings in property assignment.
Equitable division:
The Massachusetts Probate and Family Courts use a process called equitable distribution to divide marital property in general. Here, the term “equitable” means “fair,” and not necessarily equal; the court will determine how best to divide marital property. It will use the fairest manner possible in each particular case. Intellectual property, like all other property, will be divided in this manner.
Future income from intellectual property:
In addition to present property values, future income must also be considered. For example, royalties from copyrighted work or licensing fees from patents and trademarks may present considerable future income opportunities.
In one 2015 case, [1] the Appeals Court held that future royalties derived from a wife’s tremendously successful novel should be divided equitably between the parties. In that case, the trial judge noted the husband supported his wife financially and emotionally while she wrote the novel. The judge also noted that the wife’s earnings from the novel neared $3,000,000 at the time of the divorce; he ordered that she pay the husband a lump sum of $570,000. As for future royalties, the trial judge held them as too speculative; therefore, the husband did not have entitlement to them. The husband appealed, seeking equitable distribution of future royalties obtained by the wife.
Appeal:
The Appeals Court agreed with the husband. It held that the wife’s “contractual rights to future royalty and other payments do not, in our view, involve mere expectancies as described in the foregoing cases. While the amount of the royalty and other payments to be received by [the wife] in the future cannot yet be ascertained, the right to receive those royalties and other payments was contractually established at the time of the divorce. Indeed, [her] interests in the present case are, in certain respects, analogous to a party’s interest in the payment of pension rights which has been recognized as marital property subject to division.” [2]
The Court suggested that future royalties were particularly suited to “division on an “if and when received” basis, with the judge determining the percentages of any future payments to be assigned to [wife and husband.]” [3]
Valuing intellectual property during a divorce:
In many cases, it may be possible to establish the value of intellectual property; this may be through past royalties or payments or expert valuation. In those cases, the court may use those reasonable values in calculating marital property division.
The value of intellectual property may be too speculative to consider, however. Then, the judge may opt to exclude the property from marital property calculations. In one case, for example, [4] the court considered a husband’s invention where he held patents on artificial skin. The trial judge held that future income from those patents was very speculative; thus, the judge did not have to include them as part of the property assignment. The Supreme Judicial Court agreed that the judge did not abuse his discretion in his division of the marital assets.
Rationale:
The high court noted the judge did not have to put a value on the husband’s royalties, patents, or copyrights; thus, he correctly found the value of the husband’s patents on artificial skin uncertain. “The judge could have concluded on the evidence that the present value of the husband’s future income from this source was too speculative to consider. The asset was not one which obviously has current value but is difficult to appraise (such as a close corporation).” [5]
Contact us:
Are you looking for an experienced Newburyport or Andover divorce lawyer or family law attorney? Have questions about family law in general or looking for more info? Need help with an issue dealing with marital property division? Call our offices to schedule a free consultation with one of our competent family law attorneys. We are here to help.
1 Canisius v. Morgenstern, 87 Mass. App. Ct. 759 (2015).
2 Id., at 767.
3 Id., at 771.
4 Yannas v. Frondistou-Yannas, 395 Mass. 704 (1985).
5 Id., at 714.