As you prepare your estate plan, the most obvious assets that jump to mind are likely things like heirlooms, real estate, and bank accounts. However, you may be overlooking some of your most valuable assets. Your intellectual property has value, and it is just as important to include in an estate plan as any other asset you own. The copyrights, patents, and trademarks you own will continue to live on after you die, and they may even be a source of income for future generations. Like any other asset you wish to protect and preserve for your heirs, intellectual property must be properly managed in order to maximize its value.
Brief Intellectual Property Review
Before we dive into how to transfer your valuable intellectual property as a part of your estate plan, we should first take a step back for a brief review of the three main categories of intellectual property: copyrights, patents, and trademarks. Each kind of intellectual property carries with it a different set of ownership rights and different lifespans of those rights.
A copyright is the intellectual property associated with “original works of authorship.” These include literary works (both published and unpublished), songs, plays, artwork, photography, software, video and sound recordings, etc. Some copyright privileges come automatically to the author/creator of a work: if you made the work, you own the copyright, which gives you the exclusive right to make and distribute copies of that work. These basic rights are conferred through common law. However, you can also register a copyright, giving you further legal rights to enforce your copyright and prevent infringers from stealing your intellectual property. For works that were created after January 1, 1978, a copyright lasts throughout the author’s lifetime, and then extends for an additional 70 years after the author’s death.
Patents, by contrast, do not come with any automatic rights. Patents are the intellectual property protections for inventions. To own a patent, you must apply to the U.S. Patents and Trademarks Office (USPTO) and be granted a patent. The majority of patents are “utility patents,” meaning that the intellectual property being claimed is the functionality of the invention, or the way it works. There are also, more rarely, design patents. In addition to being the most limited in terms of when intellectual property rights are granted for a patent (only after being accepted by the USPTO), but they are also the shortest lived intellectual property rights. Utility patents expire after 20 years, and design patents last 14 years.
Finally, trademarks are the intellectual property that every business owner is familiar with. These are the marks that are used to identify a business: it’s name, logo, product names, product visual identity. Like copyrights, there are some common law rights that are extended to trademarks when they are created. However, they are much easier to defend and enforce if you have registered your marks with the USPTO. Trademarks are unique in that their intellectual property rights can be extended indefinitely under two conditions: 1) the trademark must still be in use, and 2) the ongoing maintenance documents must be filed with the USPTO on time.
What Do You Own?
If you want to include any intellectual property in your estate plan, first start by making a list:
Copyrights: If you have been creating original works of writing, recording, or visual art throughout your lifetime, this could potentially be a very long list. Focus on works that are likely to have monetary value. If you created the work, you own the copyright (unless you transferred the copyright to someone else or created the work as a part of your employment). If you sold a work (like a painting), you still own the copyright to the work, unless you specifically transfer the copyright.
Patents: The patent registration will show who owns it.
Trademarks: These may belong to you personally or to your business. If your business is incorporated or an LLC, it is likely that your business owns the trademark. Make a list of all trademarks you or your business owns, and specify which have been registered with the USPTO.
If you know, make an estimate of the value of each asset on your list. If you are concerned about the exact value of your intellectual property, you can have individual assets valued by an independent valuation expert. Any person you choose should have experience and expertise in valuing patents, trademarks, and/or copyrights (depending on which apply to you).
Bring this list of all of your intellectual property assets with you when you meet with your estate planning attorney.
How Can IP Rights be Passed Down?
Intellectual property is just like any other property. It can pass by Will, Trust, or through intestacy (no will). A good estate plan should include all assets, so make sure that yours includes your valuable intellectual property.
As we have discussed elsewhere, using a Trust rather than a Will gives the grantor more control over how the assets are used and for what purpose. The same rules apply for intellectual property. If you want to pass the copyright of your hit play or the trademark of your widely-known business logo to your children, but you do not want the play turned into a movie or the logo sold to a competitor, those instructions can be carried out in a Trust. A Revocable Living Trust gives you the power to retain control over these assets during your lifetime and control passed to a named trustee when you die. The trustee is then responsible for ensuring that your beneficiaries receive the assets in accordance with your instructions.
An Irrevocable Trust, on the other hand, takes ownership of assets as soon as it is created and funded, and you no longer exercise control over that property. If your intellectual property requires a lot of maintenance (whether through monitoring for infringers, sending cease and desist letters, or enforcing your intellectual property rights in court), you may be tired of managing all of this upkeep. By placing these needy assets into an Irrevocable Trust, you are no longer responsible for their maintenance, and the trustee will be required to protect and preserve the asset on your beneficiary’s behalf.
Using Power of Attorney to Manage IP
Like other assets, there may be a need for someone else to take on the management and administration of your property during your lifetime, if you become unable to do so. A durable power of attorney gives a specified individual authority to transact business on your behalf. If you own intellectual property that is involved in regular business, such as your logo or a book currently in publication, you may want to create a power of attorney giving a certain trusted individual power to manage these important assets in the case of your incapacity.
Ask the Question: What Should I Do Now to Protect My IP in the Future?
Failure to include intellectual property in your estate plan means that these assets will pass in accordance with the default – whether your will or state law if you die intestate. By default, they may not pass to who you would choose, and your intellectual property may not be protected. At the Tyra Law Firm, we are know estate planning, as well as creative work and entrepreneurship. Give our office a call at (301) 315-0811 to get started protecting your intellectual property.