Protecting Intellectual Property Rights During a Divorce

Divorce is always difficult, but certain types of assets make the process even more complicated. If you and your spouse own intellectual property rights, you may find that this significantly draws out the divorce process and complicates the division of assets.

However, intellectual property may be some of the most valuable property you own. It is crucial that you take this part of your divorce seriously and protect your financial future. Call John H. Ruby & Associates at 502-895-2626 to set up a consultation with our team now.

Identification and Valuation of Intellectual Property Assets

Early on in the divorce process, it’s important to create a thorough inventory of your intellectual property assets. This is key to getting a fair value for each asset, which then lays the groundwork for a fair division of assets. Both parties should make their own list; this ensures that all marital and separate assets are accounted for. Ensure that you have all necessary documentation, such as licensing agreements, trademark applications, and patents.

The next step is valuation, and that can be a time-consuming part of this process. There are several different ways you may value intellectual property assets. Depending on the type of intellectual property you own, you may consider these approaches:

• Income approach: Companies utilizing this method look at the potential future income that could be earned with the intellectual property in question. For example, patents and trademarks often bring in fairly consistent income, and assessing their value this way makes sense.
• Market approach: The market approach compares the intellectual property to similar pieces of intellectual property that have been sold on the free market recently. The price is adjusted to account for differences in value, age, and uniqueness.
• Cost approach: When you use this method, you look at how much money it would cost to recreate the intellectual property from scratch. This option is often used when the others don’t make sense for the IP being valued.

Legal Considerations

There are a number of legal factors to keep in mind as you evaluate your intellectual property. Prenuptial and postnuptial agreements are often utilized in marriages involving substantial assets, particularly those with intellectual property that serves as its own income stream. Assuming that the prenup or postnup is fair, the terms laid out within will dictate how the IP is divided.

You may also want to look at each party’s contributions to the intellectual property and their willingness to maintain it over time. This isn’t relevant for all types of intellectual property, but when IP is a key part of a business, it doesn’t necessarily make sense for it to stay with a spouse with zero interest in continuing the business. You’ll want to consider who can help the IP preserve or even increase its value over time.

How to Protect Your IP Rights

There are numerous ways your attorney may help you protect your intellectual property and preserve its value after you divorce. Options to explore include:

• Strategy-based negotiations: Before you begin negotiating the division of assets, you should have a strategy in mind. If your IP is your top priority, you’ll have to think about which other assets you are willing to give up in order to get what you want. In many marriages, particularly those with one business-minded individual and one who isn’t interested in business ownership, this is the easiest option.
• Planning for future income and royalties: In some situations, the spouse who had less of a role in developing the IP may want to retain the income that comes with it without the stress of ownership. One compromise you may consider is licensing rights. This allows the other spouse to benefit from the IP for a set period of time without you having to give up ownership.
• Confidentiality agreements: Regardless of how your intellectual property is divided, you have to protect your rights. Confidentiality agreements, NDAs, and other legally binding contracts can ensure that your spouse doesn’t interfere in the future.

Choose John H. Ruby & Associates for Your Divorce Needs

The sooner you begin working with the Louisville divorce attorneys at John H. Ruby & Associates, the sooner you can start planning for life after divorce. Reach out online or call us at 502-895-2626 to set up a consultation now.