IP Control from the Grave
By Cody Ross, Esq., Intern for
AnnMichelle G. Hart, Esq.
April 22, 2021
As shown through the deaths of celebrities like Eddie Van Halen and Prince, a person’s most valuable asset may not even be tangible, it could be their intellectual property (IP). Intellectual property refers to property rights that are intangible and relate to a person’s rights in a certain item or work. This article will focus on why your intellectual property needs to be included in your estate plan, and some of the best ways to ensure that your intellectual property is protected after your death. Even though this issue mainly arises in the news when a celebrity dies, any person can own IP and it is crucial that it is considered in your estate plan.
What is IP?
Before we can discuss why it is important to include your IP in your estate plan, it is important to discuss what IP is. The three most common types of IP are patents, trademarks, and copyrights. Each will be analyzed and discussed in the following paragraphs.
Patents are the IP related a person’s inventions or creations. When a person receives a patent from the United States Patent and Trademark Office (USPTO) they receive the exclusive ability to create and sell that invention for a certain amount of time. The length of the patent can last for 14 or 20 years, depending on the type of patent that is received. Patents are personal property that may be transferred, sold, or licensed during the inventor’s lifetime or at the inventor’s death according to their will. The only requirement is that if an inventor gives someone else the patent, that change must be registered with the USPTO.
A trademark is anything that can be used to identify a good or service being sold. This can be logos, jingles, shapes, numbers, etc. Examples can range from the name Coca-Cola to the Tony the Tiger mascot for Frosted Flakes. Trademarks do not need to be filed to be protected, as there is limited protection once the goods or services are being sold; but registration provides for additional rights and protections. Trademarks can last indefinitely, so long as it is timely renewed every ten years and the goods or services are still being sold. Trademarks are also personal property and can be devised or sold during or after the lifetime of the trademark holder. Any trademark related to a business can also be sold or devised separately from the business if the trademark owner so wishes. Any change in ownership of a trademark must also be registered with the USPTO.
Lastly, a copyright is the right to exclusive use and benefit from any artistic works. This can range from literary works (such as books, poems, and movie scripts) to music, photographs, and computer software. The only requirement to receive a copyright is that it is an “original work of authorship.” Copyrights do not need to be registered to receive protection but registration creates additional rights and protections for the copyright holder (similar to trademarks). Additionally, a person cannot sue for copyright infringement without registering their copyright. Copyrights allow the holder to prevent others from reproducing the copyrighted work for the life of the creator plus 70 years.
Why is IP important for estate planning?
Even though IP rights are intangible, they may be the most valuable part of a person’s estate. A clear example is copyrights. The length of the copyright extends for 70 years after the death of the original creator (called the author). This means that the estate of the author or whoever the author gives the copyright to, owns the copyright and has powers over the copyright after the author’s death. Not only do IP rights holders receive the powers that come with IP after the person’s death, but they can also receive income from those IP rights. This can come in the form of royalties for sales of copyrights or patented goods, licensing deals for patents or trademarks, and adaptations of copyrighted works into other forms (such as a book being turned into a movie). These income streams can become increasingly valuable, and potentially even more valuable than when the author was alive.
Because of the powers and incomes that IP holders can receive, it is vital to consider IP when creating an estate plan. If the IP is not mentioned in a will or trust agreement, the IP rights will fall to the residue of the estate and pass to the residuary beneficiary. This means that whoever gets what is not specifically mentioned in the will can receive vastly powerful and profitable property. If a will is not created, the IP rights are lumped with all other property and pass through intestacy. Again, a person can end up with vastly powerful and profitable IP. This is a problem for two reasons. First, the person that ends up with the IP, either through residuary or intestacy, may not have been the one that the testator wished to have received the IP. The other, and more dangerous, problem is that it takes effort and work to keep IP profitable and valid. If a person that does not have the ability or time to maintain the IP receives it, the IP can become worthless.
How to properly devise IP
Because of the two problems above, it becomes critical to contact an estate planning attorney regarding your IP. The estate planning attorney may even retain an IP lawyer to properly value and take care of your IP to ensure it passes according to your wishes.
The simplest way to pass IP is through a specific devise (gift) through your will. All this requires is that you name the specific person that you wish to receive your IP rights. That person will then only need to supply documentation, such as your will and death certificate, to the appropriate office and will become the new owner of your IP. The main problem with this however is that the person you wish to benefit from the IP may not have the necessary knowledge and ability to maximize the benefits of the IP.
One way to get around this is to have your IP placed in a trust and the person you want to benefit being named as a beneficiary of that trust. This allows for someone experienced in IP (the trustee) to maximize the use of the IP while your intended beneficiary receives all of the benefits. This allows for your beneficiary to reap the rewards of the IP, without having to bear the burdens of maintaining it. However, the appointed trustee must be paid, and that payment will likely come out of the profits of the IP.
Another, similar, way to protect your IP is to appoint a literary executor in your will. A literary executor is a person that is solely charged with dealing with all of your IP, and its various tasks, that are in your will. This is different from a trustee because the trustee is created through a trust agreement, not a will, and the literary executor is charged with assisting of transferring of title to IP and licensing of said IP. Both work to assist the intended beneficiary of your IP, but there are slight differences between the two positions.
Because of the complexities of IP and how it relates to your estate planning, it is crucial to retain a knowledgeable and experienced estate planning lawyer when creating your estate plan. The lawyer can help you decide if you want a literary executor or trustee, which works best for you, and how to best go about getting your final wishes accomplished.