Estate Planning: What About the Intellectual Property?
June 13, 2017
Despite good intentions, many people do not get serious about completing their estate planning and estate documents until late in life. Even when they do, they focus on which individuals will inherit the tangible assets – such as houses, land, money, jewelry, stock and other investments. However, less attention is placed on the intangible assets – such as works of authorship, inventions, brands and trade secrets. Many people may believe that they do not have intangible assets, however, in today’s world, most people regularly use social media and internet tools – allowing them to write and comment via various platforms daily. As a part of the estate planning process, one must identify their intellectual property.
Intangible assets result from the creative power of the human mind. Works of authorship, inventions, brands, and trade secrets are all created using our intelligence and creativity. While not everyone can be a famous author, singer, musician or inventor, one may still own some intellectual property rights.
As an example, copyright law provides protection for works of authorship. Some people are authors of articles, books, sheet music, and website content. Others are creators of software code for various products, while others create paintings, drawings, photographs, videos and sound recordings. For an individual author, these copyrights last for the life of the author plus seventy years. Clearly, the next generation will have rights that could be valuable if handled appropriately.
Several years ago, my clients who have written many books entered into a long term license agreement for use of these copyrights in exchange for certain royalty payments. The licensee was also licensed to make derivative works – meaning works that are based upon these pre-existing books. This license agreement may continue after the life of the authors – providing an annual royalty revenue stream to the heirs.
Many people use social media tools every day. Decisions should be made about what happens to all of that content upon one’s death. To understand the applicable rights, one has to review the terms of service for the applicable social media platform. Whether the content that one has written has value or not, one should decide if the social media account should stay open or be closed following death. As an example, Facebook® allows for either the closing of the account or the conversion of the account into one for memorialization following death.
It is important to distinguish in one’s will between tangible personal property and intellectual property, and specifically designate to whom one wishes to leave the latter. Intellectual property rights have unique requirements for maintaining such rights, and they pose unique business issues to commercially exploit these rights. As an example, under certain situations, copyright law allows for one to terminate a copyright transfer that was made 35 years prior. It sometimes makes sense to appoint a specialized executor for these assets and rights.
One should consider transfers at death that are made via living trusts, which avoid probate. They also allow for management of intangible assets if and when one may be incapacitated. In addition, one can transfer ownership of their intellectual property to legal entities such as corporations and limited liability companies, for ease and continuity of management and to facilitate the transfer.
Looking at another form of intellectual property, trade secrets provide protection for information that one keeps secret. Trade secrets include the formula for Coca-Cola® and the recipe for KFC® chicken. There is no doubt that this formula and recipe are quite valuable. However, even an owner of a local neighborhood restaurant may have a trade secret in the form of a recipe for unique barbeque sauce or special pizza sauce, or a recipe for a European dessert. Trade secrets last forever so long as they are kept secret.
Patent law provides protection for inventions. The next generation could inherit the exclusive rights to exclude others from making and selling products and services under the invention. Patent rights last for twenty years for the utility and plant patent. Maintenance fees are due periodically so that the patent rights are not cancelled and lost. If one’s heirs will not directly use the patented rights, then a patent license to third parties in exchange for a royalty may be appropriate.
In conclusion, as part of the estate planning process, a list of all intangible assets and intellectual property rights should be developed. One must decide how to transfer those assets and rights upon death, and whether to transfer such assets into a legal entity well before death. The next generation must understand one’s wishes and be well informed about how to maintain and commercially exploit these assets. The services of an intellectual property attorney should be retained to assist in the efforts of the estate planning attorney and the financial advisor.
1 Vasilios Peros is founder and principal of Law Office of Vasilios Peros, P.C. His practice is focused primarily on business, technology and intellectual property law. He has been recognized as one of Greater Baltimore’s top attorneys, including SmartCEO’s 2016 Centers of Influence, 2015 CPA + ESQs, 2014 Power Players, and Legal Elite in 2011, 2010 and 2009. He can be reached at (410) 274-2053 and VPeros@PerosLaw.com.
2 This article is provided for informational purposes only and should not be construed as a legal opinion or legal advice. The reader should not rely on this article in making business, legal or other decisions on any matter without first consulting an attorney regarding any such decision or undertaking.