Whether you can reach a marital settlement agreement or your case goes to litigation, property division can be one of the most significant, thorniest parts of your divorce process—and very emotionally taxing.
California is a community property state, which means that in a straightforward divorce, all assets acquired during the marriage are considered shared and will be distributed equally between the spouses (divided 50/50). Assets acquired individually before the marriage are not considered community property, although they may be commingled (initially separate assets that became mixed with the marital property). Certain gifts and inheritances are the exceptions—they’re usually considered separate property.
Community property applies to physical objects like the family home, cars, jewelry, land, vacation house, etc., and financial assets like cash, stocks, investments, pensions, or retirement funds.
You may be surprised to learn, especially if you are a creative type or inventor, that intangible assets like intellectual property (IP) also fall under community property rules. Copyrights, trademarks, and patents are considered shared marital assets subject to equal division in divorce.
Disputes involving IP can have enormous implications and get quite complex. It can also feel very fraught if you’re a creator of books, plays, screenplays, photos, artwork, music, inventions, designs, software, or plant varieties, for example. The knowledge, experience, imagination, ingenuity, and effort you put into making something unique are a source of deep attachment and make it feel like your “baby.” Your intellectual property may lead to a significant source of revenue at some point, even if it’s not profitable at the moment. This issue can have particular relevance in a state like California, which is home to an unusually high number of creative professionals.
Intellectual property is a complicated area of the law, even when it’s not part of a divorce. It’s crucial to work with an experienced attorney. But here are some basics you should know about intellectual property in a California divorce.
Copyright applies to any original work of authorship. It begins when the work is fixed in a tangible medium of expression and lasts for the creator’s lifetime plus 70 years. Copyright holders have exclusive print rights to publish, perform, record, film, and display. They also have the right to license the work to others for commercial use and collect royalties even if the copyright is not registered. However, registration with the U.S. Copyright Office allows the owner to collect damages in the event of copyright infringement.
Under California law, spouses have equal rights to the value of copyrights acquired during the marriage (meaning you were married when the work was fixed in a tangible medium of expression). If so, in a divorce, the court can order that both partners split royalty proceeds and any damages from infringement.
Trademark protects a logo, name, or phrase that identifies the source of goods or services. Like copyright, a trademark is a form of IP that grants the owner exclusive rights for its use. The owner has trademark protections as soon as the mark is used to identify a product, even if the mark is not registered with the U.S. Patent and Trademark Office (USPTO). Still, again, registration enables the owner to sue for statutory damages if there is infringement.
It’s important to understand that businesses created during the marriage are considered community property. Trademarks are usually associated with a business, and their status as community or separate property typically depends on when the trademark was first used.
Patents are a specific type of intellectual property, giving the owner exclusive rights to use and manufacture a novel invention. Patents do not arise automatically like copyrights and trademarks; they need to be evaluated and approved, passing the criteria of the USPTO. Courts have held that patents—and in some cases, pending applications for patents—are subject to community property laws, and the parties in a divorce can be ordered to split profits or damages stemming from the patent.
Because certain types of IP could gain value over time or have additional value derived from them—for example, a book that gets turned into a movie—the court will generally have to conduct a valuation. Determining whether an ex-spouse has rights to future profits from their ex’s IP can get very complicated.
If you’re going through a divorce and have high-value or intangible assets such as intellectual property at stake, the skilled attorneys at SFLG can provide expert advice and advocacy and help you obtain a fair resolution.
By Debra Schoenberg