IP in a Divorce Context -- A Case Study
An excerpt from IP Valuation and Management
By Weston Anson
Divorce. The very word sends shivers down the spines of all parties involved. The spouses, the lawyers, the accountants, the finders of fact. Emotional, expensive, time consuming, and often acrimonious, divorce can be a major part of a general practitioner’s work.
Now, add to that divorce environment a new element -- the newness and uncertainty of another expanding group of assets: IP and intangible assets. There are indeed multiple possible assets held in many divorces today, including the following:
In this last case, rights of publicity, it’s further complicated because the divorce estate may contain rights of publicity for both real people and the characters they create. Consider, for example, Ian Fleming and James Bond. Both have valuable rights of publicity. Or, consider more recently, Tom Clancy and his Jack Ryan character, which have been the subject of one of the most acrimonious and long-term divorce proceedings in recent history.
Intellectual property and the assets listed above in general meet the key elements of property as identified for divorce purposes. They are, in fact, transferable from one person to another, and these days there is an increasingly open market for the purchase and sale of such assets. The fact that there is an actual market for intellectual property and intangible assets shows that their value not only can be computed with a reasonable degree of certainty in most cases, but the intellectual property interest may consist not only of current but also future value creation by providing a steady stream of income or new and subsidiary additions of technology, copyrighted materials, brands and trademarks.
In various cases in various states, all of the following have been ruled to be marital property to one degree or another, including:
Further complicating the valuation and importance of intellectual property in divorce is that it’s rarely a simple case of an invention or literary work conceived, created, and marketed entirely during the marriage. In that case, the asset would probably be ruled entirely as joint marital property. However, as we know from our discussions in this book, the world of intellectual property is rarely so simple. Works of real value, such as books, trademarks, and patents take time to develop, produce and market. Additionally, where the value of the intellectual property or intangible asset is going to continue beyond the term of the marriage, depending on how it’s developed and who continues to develop it, the issues become even more complex.
Then there’s the issue of post-marital development of additional books or other IP that may continue for many years. When a book, play, movie, television series, etc., continues after a marriage and the material used to enable continuation is based upon IP that was part of the divorce estate, then there’s probably a marital interest in that intellectual property.
This, however, is not -- as we’ve mentioned several times -- a book on legal precedents. Instead, it is a book on intellectual property valuation and management. Therefore, one final caveat is necessary: The rules surrounding intellectual property in a divorce are constantly changing, and different cases affect different types of intellectual property, ranging from rights of publicity to trade secrets and copyrighted works of fiction. Also, the law governing patents, copyrights and trademarks in general continue to be modified and amended on a regular basis. Even more so, the areas of rights of publicity and trade secret law are also constantly evolving -- in fact, rights of publicity have grown substantially in importance over the last two decades. And, have figured increasingly in the value and valuation of those rights in divorces.
We’ll conclude this brief section with a case study. However, some important final comments before looking at the case study are critical. First, when a marriage ends, the intellectual property contained in the estate of each person has to be identified. Secondly, each intangible asset and piece of IP must be accurately valued for both current and future value. Third, while current IP may be obvious, future intellectual property that flows from what has been created during the marriage is also important and has to be considered in valuing and apportioning the estate.
In the end, any final divorce settlement has to be analyzed to determine how the intellectual property was identified and allocated between the two parties, regardless of what state law may exist. It is unfortunate, however, that too many attorneys overlook some or all of the intellectual property assets when drafting divorce settlements. Again, this particular context, divorce, illustrates the need for truly professional IP valuation expertise as well as experience in the identification and commercialization of future iterations of intellectual property. The general practitioner that has the good sense to reach outside to at least have the estate reviewed for intellectual property elements is doing his or her client a great service.
Finally, as electronic gaming has grown, so has the Tom Clancy franchise and his IP: his very successful games include “Ghost Recon” and the “Rainbow Six” series, the rights to which were purchased in 2008 for a reported $90+ million by a company called Ubisoft.