Let’s say you have been working on a novel that might become Oprah’s next book club pick and sell a million copies. Or maybe you’ve been developing an app for the past year without any income but it might sell like gangbusters next year. You will certainly have your share of copyright, trademark, related IP issues to work through when the time comes to bring your product to the marketplace, but what happens to your intellectual property if you are going through a divorce? Taking that a step further, should intellectual property be included in a prenuptial agreement?
A Primer on Separate and Marital Property
Before getting into how intellectual property is treated, it’s important to understand some basics on property in a divorce. Divorce is based on your state’s laws, and most states incorporate either community property laws or equitable distribution laws, which are related but distinct approaches.
What community property and equitable distribution have in common is that any property that is earned or acquired by either spouse during the marriage is considered “marital property” part of the “marital estate.” In a community property state, that property is split 50/50 between the spouses upon a divorce (even if one spouse did 100% of the work in earning/acquiring it), whereas, in an equitable distribution state, a court will incorporate a variety of factors in dividing the estate, but there will still the result that the spouses will share in each other’s property (Pennsylvania is an equitable distribution state). On the other hand, property earned or acquired by a spouse prior to a marriage is considered “separate property” which stays with that spouse after a divorce.
How Intellectual Property Might Be Treated in a Divorce
So where does this leave intellectual property created by one spouse? That can be a highly complicated analysis, but, in general, if one spouse created intellectual property during the marriage, then that property should be treated as marital property subject to distribution between both spouses. Such property could include:
- Novels, books, plays, screenplays, etc.
- Songs and recordings
- Software applications (e.g. smartphone apps)
- Trademarks associated with businesses
Oftentimes, the profits off these ventures do not come until years after the work is put in, but if that work was put in during the marriage, then there is a strong argument that the other spouse should share in the profits even if the profits occur after the marriage. After all, if one spouse worked 60 hours a week to pay the bills while the other spouse spent every day working on creating the next hit board game, the law will deem it fair that they should both share in the board game profits.
Where Things Get Complicated
As if this was not already complicated enough, there are a number of issues that can come up that will even further complicate matters, such as:
- How do attorneys or the court valuate a piece of intellectual property that may never earn a profit?
- What happens when the creating spouse was also working on the property before or after the marriage in addition to during the marriage?
- What about when the “non-creating” spouse played a role in the development of the property, e.g. giving feedback and suggestions?
These are only a few of the many complicating issues that might come up when dealing with intellectual property in a divorce. Keep in mind that division of property in a divorce is a whole other issue from whose name is on a copyright, patent, or trademark, so simply arguing that one spouse holds title to intellectual property does not end the issue in family law.
How a Prenup Can Help
By having a prenuptial agreement which covers issues such as intellectual property created by one or both spouses, you can avoid long delays and litigation costs down the road in dealing with these complicated issues. With a prenuptial agreement, both spouses can know from the start who will own what following a divorce. An experienced family law attorney can examine your particular situation and the potential intellectual property at stake and help you craft a prenuptial agreement that serves both spouse’s needs and desires and that will also be enforceable in any potential divorce proceeding.
Schedule a Consultation with a PA Family Law Attorney Today
At The Martin Law Firm, P.C., in Montgomery County, we are committed to serving your family law needs in a compassionate manner. Call us today for a no-hassle consultation regarding any questions you have about prenuptial agreements in Pennsylvania.