Unlike physical property, intellectual property appreciates over time through licensing, sales or brand development. But because it is intangible (you can’t touch it), it is difficult to value and protect in legal disputes. In the absence of a well-defined agreement regarding the ownership of IP rights, neither party owns the IP until after divorce.
This may have extensive implications for businesses, creative careers and financial health, especially where IP ownership is transferred to an ex-spouse as part of the settlement.
It isn’t unromantic — it’s the smart thing to do to protect the fruits of your labor, and ensure the future of your attempts.
Prenuptial Agreements: Protecting Your Intellectual Property
A prenuptial outlines which property will be considered marital, including intellectual property, and how that property will be treated in a separation or divorce.
The following are some critical issues that can be addressed with a good prenup:
- Ownership of Existing IP A prenup can say that intellectual property developed before the marriage is separate property. For example, an author may own the copyright to their novels, or a designer may own the trademarks relating to their name.
- Addressing Future IP It can specify ownership of any intellectual property produced during the marriage. Jessica B. McKenzie, a Seattle divorce mediator and author of “From Rivals to Partners: How to Make Your Divorce a Win-Win Situation,” said other provisions can detail ownership of intellectual property developed during the marriage. For instance, if one party develops new patents or copyrights, the agreement might say that the new patents or copyrights are still owned by that party alone.
- Licensing and Revenue Rights Prenups can specify what happens to income or royalties from IP assets. This is especially significant in case of high-value asset, like royalties associated with music, film copyrights, or patented inventions.
- Managing Business Interests For entrepreneurs, control of an IP relevant to their businesses is critical. A prenup can also include a clause that permits each spouse to retain trademarks, trade secrets, or other business-critical IP to avoid disruptions if the relationship ends in a dispute.
- Addressing Future Disputes A prenup can provide for independent, outside, valuation of IP assets in the case of a divorce, so that both parties clearly understand who owns what and how it will be treated financially.
Legal Issues Related to Creating an IP-Based Prenup
Prenups provide essential protection, but it needs to meet certain legal requirements for it to be enforceable in UK law.
Key factors include:
- Full Financial Disclosure There should be full and frank disclosure of both parties’ financial circumstances, including all intellectual property currently held. Transparency helps maintain fairness and minimises future disputes.
- Independent Legal Advice Each party needs to get separate legal advice to print having understood the terms and having entered into the agreement voluntarily. This also avoids claims of duress or imbalance.
- Fairness and Equity For such a deal, it has to be fair to both parties. Prenups will be shopped with a keen eye; courts will ensure that no side is unduly favoured. Well-defined provisions for IP (supports the perception of fairness here).
- Regular Updates For creators and entrepreneurs for whom IP develops over time, prenups should be reviewed and amended as needed. You may, for example, need to update the agreement due to new inventions or licensing deals.
- Compliance with UK Law Although prenups are not automatically binding in the UK, the courts are now every more likely to uphold contracts which are fair, transparent, and freely entered into by both parties.
How to Protect Your IP in a Prenup
If you are a creator or entrepreneur, use these steps to protect your IP in marriage:
- Identify Your IP Assets Not simply what innovation you utilize yourself, however what innovation you have actually developed on not only your IP (IPs), trademark, patent, copyright, and trade secret. Make sure you account for assets-in-development or those owned through business entities.
- Assess the Value of Your IP The fact is, that value is set by market forces, and services like IP valuation experts can give you an estimate of the current and future residual value of your intellectual property. This will provide the basis for fair terms in the prenup.
- Get Independent, Professional Legal and Financial Advice Ensure your agreement takes into account all relevant factors — including possible tax implications or future income from any IP — by involving family law solicitors and financial advisors in the process.
- Collaborate with Your Partner The main role of the prenup is to protect your IP, but make sure it is fair and reasonable in entirety for both parties. Being open about the nuts and bolts of finances and legal matters can improve your relationship.
- Prepare for Court Scrutiny Work with your solicitor to create an agreement that complies with the law and can survive a challenge in court. Include all of the documentation, disclosures and provisions.
How Freeman Harris Can Assist You
Freeman Harris understands that intellectual property is not just an asset for your business, it is a staple of your innovative ideas, creativity, and hard work.
It is important to preserve the value of these assets and a prenuptial agreement is vital to do that and run your business/career.
Our specialist solicitors will advise you on well-drafted pre-nuptial agreements to safeguard intellectual property.
When working with both financial and IP specialists, we provide you with comprehensive guidance to protect your future, ensuring your agreement is enforceable.
If a prenup is something you’re considering or are in need of protecting your intellectual property, contact Freeman Harris today. Together, we’re laying down a rock solid foundation for your future success.
