Intellectual Property Developed During a Marriage
Under New York divorce law, the division of intellectual property rights can be complex. Intellectual property (IP) may be considered marital property if created or acquired during the marriage. This means that it can be subject to equitable distribution.
During equitable division, a judge may consider the following factors:
- Length of the marriage
- The income and property of each spouse
- The contributions of each spouse to the marriage
- Circumstances surrounding the creation or acquisition of the IP
What About IP Brought Into the Marriage?
However, IP owned by one spouse prior to the marriage or inherited by one spouse during the marriage is typically considered separate property and not subject to division.
If intellectual property developed before the marriage becomes intertwined with marital assets or if both spouses significantly contribute to its development or enhancement, it may be considered commingled with marital property. This commingling can lead to the IP, or at least a portion of it, being subject to division during a divorce.
Determining the Value of IP During a Divorce
Intellectual property (IP)refers to legally recognized and protected creations of the mind. IP rights allow creators to control and profit from their creations, granting them exclusive rights to use and distribute their work. Depending on the nature of the IP, someone may enjoy an ongoing income from their creation, extending into their marriage and beyond.
Examples of intellectual property include:
- Patents for new inventions
- Trademarks for brand names, logos, and slogans
- Copyrights for literature, music, and art
- Trade secrets such as formulas, practices, and processes
- Design rights for the visual design of objects
Intellectual property must be assessed thoroughly to accurately value it during a divorce. To accomplish this, intellectual property needs to be identified as separate from other assets. Furthermore, though it is an intangible asset, there must be clear evidence of its existence, such as contracts, registration documents, or financial records.
When assessing the monetary value of IP during a divorce, several approaches may be taken:
- Market approach: This method evaluates comparable IP assets sold or licensed in the marketplace.
- Income approach: This examines the expected income the IP will generate, discounted back to present value.
- Cost approach: This calculates the cost to recreate or replace the IP, considering its age, condition, and functionality.
How to Protect IP During a Divorce
Protecting intellectual property during a divorce can be challenging, especially if the IP was created during the marriage or income from the IP was commingled with your shared property. The first step is to seek legal representation from an experienced attorney who understands the unique challenges of protecting intellectual property during a divorce.
Other potential ways to protect your intellectual property from division during a divorce include:
- Document and register your IP: Ensure that all intellectual property is appropriately documented and, where applicable, registered with the relevant authorities. This includes keeping detailed records of creation dates, contracts, patents, trademarks, copyrights, and other essential documents.
- Evaluate and classify your IP: Work with a legal professional to identify which IP assets are considered marital property or separate property. Proper classification can help in arguing that certain assets should not be subject to division.
- Negotiate and/or attend mediation: Where possible, aim to resolve intellectual property division through negotiation or mediation, avoiding litigation. This can often lead to more favorable outcomes and help avoid the unpredictability of court decisions.
- Consider postnuptial and prenuptial agreements: If you have significant intellectual property, consider discussing postnuptial or prenuptial agreements to clearly outline ownership and division during a divorce.
Going through a divorce is never easy. Worrying about how your intellectual property will be affected can increase your stress exponentially. The team at the Law Office of Tzvi Y. Hagler, P.C. is here to help. We have extensive experience managing high-net-worth divorces, including those with complex assets like intellectual property. Schedule a consultation with us today.