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Intellectual Property Rights and Divorce

QUESTION

Are intellectual property rights divisible in a divorce?

ANSWER

Intellectual rights themselves, if created by only one party and absent any related contractual right establishing a value of the rights, while negotiable between parties in a settlement, are probably not divisible by a family court in Colorado.  For example, copyright to a book completed by one spouse during the marriage but not yet under any contract to be sold or published, is probably not marital property.  Intellectual property rights, in order to generate monetary value, generally require further effort or investment; so a bare copyright, trademark, patent, or trade secret, without more, has no fixed value for a court to allocate at permanent orders.  While contractual rights (e.g., publishing agreements) entered into during the marriage are generally able to be valued and divided, it is settled law that contractual rights regarding future services or commitments are not divisible.[1]  Additionally, courts attempt to sever all possible legal ties between divorcing spouses, which means that a court will not maintain joint or split ownership of an ongoing concern, such as a partnership or joint venture that holds intellectual property rights.

Applying the law as laid out above may lead to unfair results if one spouse supports another in creating intellectual property “on spec,” and later receives nothing from the eventual sale or license of the property.  Colorado courts have dealt with similar inequity in the context of one spouse supporting the other in obtaining an educational degree.  The Colorado Supreme Court has repeatedly ruled that educational degrees are not property for purposes of division in divorce.  As the Court of Appeals has noted:

Often a spouse’s pursuit of higher education during marriage represents a common goal of both parties to increase their economic standing.  Both marital partners may expect to share in the rewards of such education, and it is not unusual for one spouse to assist the other in the accomplishment of that goal by providing a level of financial support as well as assuming responsibility for the tasks of everyday life.[2]

REMEDIES & LIMITATIONS

Even if a work of intellectual property is not subject to division, one spouse’s contributions (i.e., through support) to the other spouse’s development of intellectual property can and should be considered in both the general equitable division of property and in the awarding of any maintenance.

Maintenance.  In an important case called In re Marriage of Olar,[3] the supreme court emphasized that a trial court has broad discretion to fashion an equitable award of maintenance, and established a flexible approach to maintenance, encouraging trial courts to consider the contribution of one spouse to “the increased earning potential of the other” when dividing marital property and awarding maintenance.

Where divorce occurs shortly after the degree is obtained, traditional alimony analysis would often work hardship because, while both spouses have modest incomes at the time of divorce, the one is on the threshold of a significant increase in earnings.  Moreover, the spouse who sacrificed so the other could attain a degree is precluded from enjoying the anticipated dividends the degree will ordinarily provide . . . .  In such cases, alimony analysis must become more creative to achieve fairness, and an award of ‘rehabilitative’ or ‘reimbursement’ alimony, not terminable upon remarriage, may be appropriate.”[4]

The ruling in Olar indicates that a maintenance order comprised at least in part to “reimburse” one party for material sacrifices made during the marriage may be proper.

Limitation: In the maintenance context, if a party made sacrifices in supporting the unpaid creative efforts of his spouse, it is almost certainly a necessity to establish that there were reasonable expectations regarding the “appropriate employment” of the spouse.[5]  For example, if a wife began writing a book or inventing a machine during the marriage, without any contracts in place, the goal of the parties may have been to generate revenue, but this expectation would likely have to pass the reasonableness test before a court would consider placing a monetary value on the sacrifices of either party.

Property division.  Colorado case law provides that a spouse’s “contribution to the professional education and career of the other spouse must be considered in the distribution of property.”[6]  Limitation: If the creation of any particular work of intellectual property doesn’t fit within “the professional education and career” of the spouse, a party’s contributions probably will not be considered by the court.

Final note.  If you contributed to the creation of your ex-spouse’s intellectual property during a marriage that became, after dissolution, a best-seller or the next iPhone, you might have a remedy outside the family law courtroom.  “Unjust enrichment” claims may be pursued as a civil action by a party who has parted with something of value, yet receives less than a fair reward or compensation in return.

 

“Family Law Q+A” is meant to entertain and generally inform readers about interesting issues in Colorado family law.  Nothing in this blog post represents legal advice or creates an attorney-client relationship.  The views here do not represent the formal legal opinions of Carrigan Law, LLC.  Furthermore, the law is constantly changing, so any particular discussion of a legal issue may presently be outdated or erroneous.  Readers are directed to contact a Colorado family law attorney regarding the specifics of any case.



[1] IRM Anderson, 811 P.2d 419 (Colo.App. 1990) (holding that a contractual right for future services and commitments is not marital property, but “mere expectancy”).

[2] IRM Speirs, 956 P.2d 622 (Colo.App. 1997).

[3] 747 P.2d 676 (Colo. 1987).

[4] Olar, 747 P.2d at n.3 (quoting a foreign case) (emphasis added).

[5] See IRM Marshall, 781 P.2d 177 (Colo.App. 1989).

[6] IRM Speirs, 956 P.2d 622 (Colo.App. 1997).