Valuing Intellectual Property in Divorce

hidden assets

Typically, when most people begin a divorce, they imagine dividing the property to consist of the house, cars, other tangible personal property, and bank accounts or retirement and pension funds. But business interests accrued during the marriage by a spouse also qualify as marital property, and some of these business interests can be hard to locate or value, as discussed in this article in the St. Louis Business Journal.

Many people today find themselves part of the Internet or high-tech revolution, through employment or ownership. Some may be software engineers, some business investors, some just employees at a startup. But each may have an asset that counts as marital property and may be hard to divide.

For example, a spouse may have a part in some intellectual property. What is intellectual property? Property that flows from creativity, from music and art to an invention like an iPod or medical device to software coding. Sometimes, people protect their intellectual property through a patent or a copyright. In other situations, people sell or contract away their intellectual property rights to a funder or employer. So, in the simplest situation where a spouse owns a patent, if the patent was developed during the marriage it is a marital asset subject to division. But how does one divide a patent? That can be a very detailed discussion, but for our purposes we would note that first the asset has to have a value assigned, which may require professional experts, and then a form of division, from a one-time buyout to an ongoing percentage ownership of the patent.

But intellectual property can be underwritten or sold, in which case it has a specific value to the holder of the patent, from which a marital portion may be derived. Also, it can be converted to shares in a company, which can be divided as a percentage at the time of divorce or a lump sum purchase. In situations where the value of the asset is fluid or iffy, it may make more sense to hold onto shares of the company for a big payout (just think Facebook in its initial public offering).

Perhaps the hardest part of handling intellectual property during a divorce is determining its existence. How do you know if your spouse has a patent or copyright? What if it took place through his employment and he has a separate contract through the employer for future value if the product goes to market? These and other questions all mean that you have to know if your spouse might be in an IP field with these types of interests. If you are at all suspicious of that fact, you should be sure to fully investigate and seek disclosure of these interests prior to any final entry of divorce.

If you have other questions about intellectual property and divorce, contact us – we can help.

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