Protecting Intellectual Property Rights During a Divorce

If you’re in the midst of a divorce, you’re likely concerned about the division of your marital assets and debts. This is one of the most contentious topics for many couples since your assets will determine how financially stable you are after your divorce. Certain assets are far more difficult to divide than others—for example, intellectual property can be challenging to value and split up.

Not sure how to protect your best interests as you prepare for life after divorce? It’s important to work with an experienced family law attorney in Louisville. Call John H. Ruby & Associates at 502-373-8044 to get started.

Common Types of Intellectual Property

The term “intellectual property” covers several types of creations and assets. Some of the most common types of IP include:

• Copyrights: Copyrights are automatic when someone makes a creative work. Commonly copyrighted creations include books, art pieces, music, and software. If a copyrighted piece is created during the course of a marriage, it will likely be considered a marital asset—even if only one person created it.
• Trademarks: Trademarks protect your logos, symbols, and brands. They prevent others from using the same logos or ones similar enough to cause confusion among consumers. For couples who own businesses, ownership of trademarks can be a tough battle during divorce.
• Trade secrets: Trade secrets are essential in many successful businesses. If something is confidential, proprietary, and a crucial part of a business’s success, it may be considered a trade secret. Spouses who own trade secrets need to get a fair value for them and determine how to divide them.
• Patents: Patents protect a party’s inventions. If you or your spouse hold a patent, its value may be subject to division during your divorce.
• A business’s IP: When you and your spouse own one or more businesses, there’s a good chance that there’s substantial intellectual property involved. This significantly complicates an already complex part of divorce.

Valuation of Intellectual Property

There are several ways to secure a fair valuation of intellectual property. The most common way used by investors and professionals is the income method. It involves looking at the amount of income that intellectual property generates or is expected to generate. This method is useful for IP that already brings in income and doesn’t have a history of volatility.

Another option is the market method. This looks at the price one would pay for a transfer of rights for a similar asset on the open market. Rather than basing the value on income or potential income, this method relies on market conditions and data from actual IP sales.

A less commonly used valuation method is the cost method. You calculate the cost of reproducing the asset or one similar to it. This method is generally reserved for instances in which the earning potential of the asset is difficult to assess. It also doesn’t take into consideration anything that sets the asset apart from others similar to it.

Ensuring a Fair Division of IP

Like most other states, Kentucky is an equitable distribution state. Intellectual property created during the marriage is likely subject to fair division between the divorcing spouses. This can be a significant hurdle to clear since both parties likely have different levels of attachment to the IP assets and varying beliefs on the assets’ value.

A fair division begins with a fair valuation. Both parties may agree on an appraiser or secure their own appraisals and then meet in the middle. From there, they can begin negotiations. If one party is more committed to using the IP and expanding upon it in the future, they may wish to give up other assets in exchange for keeping the intellectual property in its entirety.

If one party wants to retain full ownership while still compromising with their spouse, they may consider revenue-sharing agreements or temporary use of licensing rights.

Prepare for Your Divorce with the Team at John H. Ruby & Associates

There are numerous factors to consider when dividing intellectual property during divorce. Working with a trusted divorce attorney can help you make the best choices for your future and financial success. Set up a time to talk to our team now by calling us at 502-373-8044 or filling out our online contact form.