Written by Jonathan Breeden
A divorce concludes a couple’s financial dealings and divides their property fairly. You can easily imagine how this process works with houses or bank accounts. But what about high-equity and high-value assets like intellectual property?
These assets might produce significant income or play a critical role in a family business. Learn more about intellectual property and how it works with North Carolina divorces.
Intellectual property (IP) covers four types of intangible property:
A patent protects an inventor’s rights involving an invention under federal patent law. These rights do not spring into existence on their own; the inventor must file a patent application with the U.S. Patent Office.
Patents are typically used to protect new technologies like electronic devices or chemical formulas, among others.
A copyright protects the rights of an author or artist in their original, creative work. The subject matter of a copyright can include literary works, source code, visual works, movies, music, or sound recordings.
Trade secrets cover any information that has value because the public does not know it. Trade secrets are often applied to information that businesses cannot protect with a patent or copyright.
Subject matter for trade secrets might include recipes, data processes, or customer lists.
Trademarks protect anything that identifies the source of products or services. Consumers use trademarks to determine where a product or service has come from. In their minds, the source is tied to certain characteristics, like quality.
Thus, trademarks protect the link between the source of goods or services and its meaning to consumers. Examples of trademarks include product names, logos, products, or packaging shapes.
Property division in a North Carolina divorce proceeding has one goal: to establish which spouse owns each asset of marital property.
In other words, at the end of the divorce, there should be no confusion about who owns what.
North Carolina judges use equitable distribution to divide marital property. Property owned by spouses is called marital; anything they owned or created by themselves before the marriage is called separate property. During property division, the judge uses equitable distribution to divide the estate fairly, rather than equally.
A North Carolina divorce lawyer must argue for a fair disposition of the couple’s property based on many factors, including the length of the marriage.
Often, businesses rather than individuals own IP. If the IP has been assigned to an outside business, it will not be divided in a divorce. If it has been assigned to a family-owned business, it will get divided with the rest of the business assets.
Bear in mind that a creator can own a stream of license fees or royalties without owning the underlying IP. For example, you may have transferred ownership of your song to a music publisher. You will receive a royalty based on a percentage of the money the publisher earns. This royalty stream may be considered in the divorce.
One factor in property distribution is when the property was acquired or created. If the IP was developed before marriage, the developer can argue that it is separate property and only belongs to them. Any prenuptial agreements can support that claim.
If the IP was created during the marriage, ownership is not as simple. A court will weigh how much each spouse contributed to the asset’s creation or the marriage during the creation. For instance, if you wrote a novel while your spouse maintained the household, they could claim partial ownership of the novel’s value.
Protecting your claim to property starts with evidence of ownership. Your ability to develop, expand, or maintain property gives you credible claim to it. Any supporting documents that attach you to the asset are also helpful.
It’s possible you could retain full ownership, but you might have to release other property to your spouse to offset your IP’s value.
Here are some answers to questions people ask about IP and divorce:
High-asset divorce lawyers have two primary advantages in your case. First, they have experience handling these types of cases. As a result, they will consider possible hurdles and be prepared to deal with them. Second, they can connect you with with expert witnesses. When divorces involve equitable IP holdings, an expert is critical for explaining your case to a judge.
Judges are often reluctant to break up a business during a divorce. Instead, they may leave the asset with the business, give the business to one spouse, and order them to buy out the other spouse.
Under IP law, trademarks exist when they are used. If you created the mark but it was used by a family business, the business owns it. You may be entitled to a share of its value insofar as you are entitled to a share of the business.
IP issues do not arise often in divorces. When they do, you need a North Carolina division of property lawyer with experience handling these cases. Contact Jonathan Breeden and his team at Breeden Law Office to discuss your Raleigh divorce and how you can protect rights in your IP. Call (919) 661-4970.