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Dividing intellectual property in a divorce

On Behalf of | Jun 28, 2021 | Family Law |

When people read about intellectual property, they may get the idea of Coca-Cola or Disney — big companies with big brands under big protections. But every person has these protections depending on what they create. If that creation has value, and a person created it during their marriage, that value is still subject to marital property division.

Much like a house or a car, the courts need to determine the appropriate value of an IP to divide it correctly. In Connecticut, that means an equitable distribution.

What is intellectual property?

The World Intellectual Property Organization defines intellectual property as creations of the mind like inventions, artistic works and symbols. These creations have protections through patents, copyrights and trademarks.

How is intellectual property evaluated?

According to Marsh insurance broking, there are three methods of valuing IP:

  • Income-based valuation
  • Market-based valuation
  • Cost-based valuation

Income valuation looks at what an IP already generates in order to determine expected future earnings. Market evaluation looks at comparable market transactions. Cost valuation looks at how much the asset cost to create and estimate how much it would cost to recreate.

This process may be simple in the case of past record sales over several decades. There are other IPs like homegrown brands made by one spouse or another.

The process may also happen after a divorce if one spouse or another created an artwork during a marriage and made money off it later. Getting the other spouse to sign off on any future revenues from unfinished pieces may help avoid that conflict.

Knowing what is and is not marital property is key to knowing the total value of these creations of the mind. Keeping a thorough inventory and paper trail may help the process go smoothly.