Estate Planning Considerations for Intellectual Property

September 15, 2021

A comprehensive estate plan transfers assets from one owner to chosen beneficiaries while also minimizing administration expenses and tax liabilities. A category of assets that can be included in an estate plan is intellectual property interests. Many business owners, artists, musicians and authors know they hold substantial commercial value in their intellectual property and understand that it can be complex to protect the value during a transfer of ownership. In addition to the intellectual property itself, there may also be royalties, related agreements and licenses that need to be properly considered in the planning process.

Let’s look at the 4 main types of intellectual property:

Copyrights:Original works of authorship may be protected as a legal copyright. This may include books, movie scripts, songs, photos and even software or certain applications (“apps”). A copyright symbol should be used to notify the general public that the work is under copyright protection. It can also be registered with the US Copyright Office. The copyright protection will last for 70 years following the creator’s death.

Patents:Any new and useful process, machine, manufacture or composition of matter may be protected by filing for a patent with the US Patent and Trademark Office. There are three main types of patents – utility patents, design patents and plant patents. Obtaining a patent is a very complicated process and will only be issued if the invention has not ever been publicly disclosed. This requires a very comprehensive search of the patent database. Once granted the patent will last from fourteen to twenty years.

Trademarks:Brand names and logos that are used to identify goods and services in the commercial marketplace are also protected as trademarks. A comprehensive trademark search must be conducted, and then the trademark should be filed with the US Patent and Trademark Office if the owner is seeking nationwide protection. The federal registration only lasts 10 years, but for a fee, the owner can continue to renew the trademark for an indefinite period of time.

Trade Secrets:A trade secret is information that is (1) not generally known outside of the owner’s organization, (2) has independent economic value and (3) is subject to reasonable measures to maintain its secrecy. Examples of trade secrets include recipes, formulas, patterns, or processes. The value of the trade secret lies in its confidentiality. Competitors cannot make exact copies therefore; the item is rare based on its unique composition.

Transferring intellectual property assets to new owners requires careful planning. The new owners need to have sufficient funds to maintain and continue to protect the assets as well as an understanding of ongoing use or filing requirements.

For patents, trademarks and trade secrets, it is often best to consider the use of a trust because it can minimize expenses and provide a level of privacy. These assets do not contain termination rights like copyrights. For this reason, it is often not advised to transfer copyrights via trusts. Copyrights can transfer through an owner’s will. A will is advised for copyright transfers because it avoids a possible termination of the transfer by the statutory heirs. Termination rights, pass to a copyright owner’s spouse and children when the owner dies but cannot be waived or transferred during the owner’s life. If the owner transferred the copyright to a trust, the statutory heirs could undo the owner’s intent.

All intellectual property assets should be clearly defined in all estate planning documents. Clearly defined means at a minimum, the owner of the intellectual property, any numbers designated by the USPTO, names of any persons with the right to license, and all parties responsible for maintaining up-to-date filings and paying required fees.

Once the transfer of the asset occurs, whether by will, trust or lifetime gift, the new owner should be recorded with the USPTO. It may also be best to name an executor or trustee with experience managing intellectual property and the income generated from those assets to ensure a smooth transition.

If you or your business owns any type of intellectual property, contact the experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area for a consultation on comprehensive estate planning that includes intellectual property rights and assets. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:

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