Intellectual property does not factor in to the question of how property is divided in most Texas divorces. But when one or both spouses are involved as inventors, executives, investors, shareholders or owners in a business in which valuable interests are embodied in some type of intellectual property, the complexity of valuation and equitable division of such property in case of a divorce is elevated.
What is intellectual property?
The World Intellectual Property Organization or WIPO defines it as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.” Common kinds of intellectual property include:
- Patents protect unique inventions.
- Copyrights are interests in literary and artistic creations, including computer programs, ads, music, books and more.
- Trademarks and service marks are protected marks and signs affiliated with particular goods or services.
- Trade secrets consist of private information with economic value to the owner like a formula, production method or process and more.
- Licenses grant the right to use the intellectual property of others.
Intellectual property is a kind of intangible property, like an idea or concept that is often not something physical, but that still has financial value because of its potential to generate income. This is as opposed to tangible property like a home, diamond ring, yacht or even a bank account that is defined by a physical presence or a solidly documented existence.
Intellectual property deserves heightened attention in divorce
The problem with intangible property like intellectual property in a Texas divorce is that it could be missed in an inventory of community property to be divided between the divorcing spouses. A spouse may innocently not realize that he or she has a financial interest in an intangible asset, or because of its nature, intellectual property may be easier for a dishonest spouse to conceal or for the other spouse to even know about.
Texas is a community property state. At divorce, property is characterized either as separate, meaning owned by one spouse because it was first owned by him or her before the marriage or received as an individual inheritance or gift, or community, which is all property otherwise acquired by either or both spouses during the marriage.
Also, income generated by separate property during the marriage becomes community property.
At divorce, each spouse keeps his or her separate property and the community property is divided in a way that is “just and right,” according to Texas statute.
It is extremely important that a Texas facing a divorce in which intellectual property is potentially part of the community property to be divided seek the representation of a lawyer familiar with how to uncover, characterize and value intellectual property, whether the client has ownership interests in it or is the spouse entitled to a potential share of it. Even if the intellectual property itself is not divided, its financial value should be considered by a court (or by a couple in negotiating a marital settlement) in determining a fair division of the overall community estate.
Legal counsel will bring in experts as needed to assist in uncovering and evaluating such intangible assets.