Property Division in Missouri Divorce: Don’t Forget the IP

By Paule, Camazine & Blumenthal, P.C. of Paule, Camazine & Blumenthal, P.C. posted in Intellectual Property on Friday, January 20, 2012.

By Bernard W. Gerdelman

One of the elemental issues in any divorce is the division of “marital property,” that is, property in which both spouses are deemed to have an interest.  The Statement of Property form which must be filed with the St. Louis County Circuit Court in connection with each divorce heard in that jurisdiction lists the various types of property, both marital and separate, which the parties are required to disclose.  Included on this list are properties as basic as real estate, bank accounts, motor vehicles and household goods and as esoteric as “future interests” and “any interest in a contract made but not yet performed.”  However, conspicuously absent from the list is Intellectual Property (“IP”).

IP refers to creations of the mind such as inventions, literary and artistic works and works of industrial design. Two of the most well recognized forms of IP are patents and copyrights.

A U.S. patent exists solely as a result of making appropriate filings with the United States Patent and Trademark Office. The owner of a U.S. patent is granted by the U.S. government the exclusive right to commercially exploit (use or sell) the patented invention within the US for a period of twenty years.  A patent protects inventions such as mechanical or electronic devices, chemical compounds and articles of manufacture.

A copyright protects expression of ideas, both artistic, such as painting, photographs, musical scores, and sculptures, and utilitarian, such as software and architectural designs.  A copyright exists in a work from the moment the work is created is sufficiently creative to be a subject of copyright.  A copyright registration with the United States Copyright Office does not create the copyright, but the registration is necessary to enforce the copyright.  The owner of a US Copyright has the exclusive rights to display, perform, copy, distribute and make derivate works from the protected work for the life of the creator plus 70 years.

Because IP is intangible and somewhat esoteric in nature it is often overlooked by many parties to divorce in connection with the negotiation of the property settlement even though IP can have substantial present or future value. However, where one or both spouses are doctors, professors, engineers, authors, software developers, photographers, painters, sculptors, musicians, architects, or other types of artists or designers, the parties and their attorneys should be attuned to the distinct possibility that IP may form a significant part of the property to be considered in the divorce.

If it is determined that one or both spouses own IP, then many questions arise that must be addressed.  If the IP was developed both before the marriage and during the marriage, is the IP all marital property or part marital property and part non-marital property?  What methodology will be used for valuing the IP for purposes of divorce?  If the spouse who developed the property has granted a license to a third party to commercially exploit the property and pay royalties to the IP owner, what bearing does that have on the value of the IP, both present and future, and whether the IP is separate or marital property?  Can ownership of these royalty interests be separated from the ownership of the IP itself?

In many instances the value of a particular article of IP is impossible to determine with certainty.  The extent of the market for a new invention or design may be unknown.  Or it may be that the novelty of a particular article of IP which is currently successful will rapidly wane.  For these reasons it may not be of benefit to either party to attempt to establish the value of the IP as of the date of the divorce and have the creating spouse “buy out” the interest of the non-creating spouse. Patents and copyrights are creatures of federal law, and federal law is clear that partial or entire interests in these forms of IP may be transferred or assigned by written agreement.  Therefore it may often be better to include in the Separation Agreement a contractual right in the non-creating spouse to the future revenue generated by the IP and vest in the creating spouse the right to commercially exploit the IP for the benefit of both parties.

If you are aware that either you or your spouse may have an interest in IP, you should bring this to the attention of your divorce lawyer as early as possible in the process.

Disclaimer

Bernard W. Gerdelman

Bernard W. Gerdelman

With over 35 years as a practicing attorney with experience in a variety of areas, St. Louis attorney Bernard Gerdelman's approach to legal work includes an analysis of the legal problems clients face with a holistic perspective of the issue, allowing him to identify and resolve issues not often apparent to other attorneys.

Leave a Reply