Intellectual property (IP) isn’t just about being a famous artist or accomplished author. IP can also be as simple as social media content or business logos. And protecting the ownership of these types of IP, plus the profits that are derived from them, is crucial to protecting your financial well-being. Enter: the postnup. A postnup is a contract between two spouses who are already married and intend to remain married. It can outline financial obligations, including IP ownership. Let’s get into everything you need to know about protecting IP in a postnup.
What is intellectual property?
So, what is intellectual property? It is the creations of the mind, such as literary works, artistic works, designs, symbols, certain images, and more. IP encompasses several key categories: copyrights (protecting authors’ original works such as books and music), trademarks (protecting brand names and logos), patents (granting exclusive rights to inventions), trade secrets (covering confidential information like formulas, algorithms, etc.) and digital assets (which may include social media accounts and online content).
During a marriage, IP can be acquired in various ways. Think: starting a business, developing creative works like writing a novel or composing music, or even enhancing IP that was brought into the marriage, such as expanding a pre-existing business or significantly improving a patented invention.
How intellectual property is divided in a divorce without a postnup
So, how does IP get “divided up” in a divorce without a prenup or a postnup in place? Well, of course, it will first depend on your state’s laws. There may be variations from state to state on how this is done.
However, generally, IP acquired during the marriage may be subject to a division in a divorce. This may include ownership interests and future income generated from the IP. Some states say that IP acquired prior to the marriage will be kept as separate property. However, income or other profits generated by the IP during the marriage may be subject to division.
Another thing a court will do is determine the fair market value of the IP (though this is likely difficult to ascertain depending on the type of IP). For example, if one spouse developed a software program during the marriage, the court might need expert testimony to assess its potential market value, considering factors like existing sales, projected future revenue, and the overall state of the software industry.
Courts may also consider the contributions of each spouse to the creation and success of the IP, and whether the IP was substantially complete at the time of the divorce. Additionally, some jurisdictions may not allow the transfer of ownership interests in IP but may grant certain economic interests (income, royalties, profits, etc.) to the non-owning spouse.
How to use a postnup to protect IP
As you can see from the section above, without a prenup or postnup in place, you may lose out on ownership rights and/or income, royalties, or other profits from your IP. A postnup (or prenup) can help clarify ownership of current IP and any future IP that is developed. For example, let’s say you are an author who frequently writes books, you can make sure any future books you write are protected by protecting your IP.
In addition, it’s not just about the ownership of the specific trademark, copyright, or other IP. You can also ensure that any income and profits from said IP ownership are protected, such as royalties.
You can also outline whether or not spousal contributions to the IP will be considered. For example, if you are an author who frequently takes bits and pieces of your work from your spouse, this may be considered a significant contribution that entitles your spouse to ownership and/or economic interest in your IP. You can make sure in your postnup that this type of contribution does NOT count towards anything.
Here are some key clauses for IP protections in a postnup:
- Clear identification and classification of IP assets.
- Agreement on how future IP will be handled.
- Clauses regarding the valuation and division of IP.
- Confidentiality and non-disclosure agreements (protecting the privacy of any IP disputes or information).
- Clauses regarding income from IP, royalties, and licensing.
How to create a valid postnup to ensure your IP is protected
Now that you understand the benefits of utilizing a postnup to protect IP, let’s talk about creating an enforceable postnup. If you want to actually protect IP the first step is to create a contract that will hold up in court. Every state has its own laws regarding what is required of a valid agreement. Here’s what to know about postnup requirements, generally:
- In writing & signed: Postnups must be in writing and signed by both parties.
- Witnesses & notarization sometimes required: In some states, you may be required to have your postnup witnessed and notarized.
- Consideration: Some states require postnups to have specific “consideration,” which is a legal term that generally means each spouse must “get” something out of the agreement.
- Full financial disclosure: Both spouses must share the full values of all income, assets, and debt with one another. This includes the disclosure of the value of your IP, which may require an appraisal of sorts to get a fair market value of the asset.
- Each spouse has their own attorney: While not strictly required in many states, it is highly recommended to avoid any question that either party didn’t know what they were signing.
- Each spouse enters the agreement voluntarily. The postnup should not be created through coercion, duress, fraud, undue influence, or other bad faith actions.
- The agreement should be reasonable: Postnups should not be one-sided: Postnups are usually legally required to be reasonable. This doesn’t necessarily mean it needs to be 50-50, but it shouldn’t be leaving one person destitute.
Potential challenges with postnups
Postnups are a relatively newer legal concept in the United States. In a few states, they are flat-out not enforceable. In other states, they are a bit shakier and may be easier to throw out than a prenup. But in many states, postnups are very much enforceable, as long as you follow the state’s laws for validity and enforceability, such as providing financial disclosure. A way to increase your odds of enforceability is to have each spouse hire an attorney. Attorneys can help ensure the terms are enforceable and that each party knows and fully understands what they are signing.
A quick note on prenups (hint: they can also help with IP if you aren’t married yet)
A quick reminder that prenups can also protect IP. A prenup can only be signed before the couple gets married. Postnups come into play when a couple is already married and cannot get a prenup. So, if you are already married and want to protect IP, then a postnup may be the agreement for you. If you are not yet married and want to protect IP, a prenup may be the better option.
The bottom line on protecting intellectual property in postnups
As you can see, getting a valid and enforceable postnup can be a great way to protect your existing or future IP. From works of art to patents to business logos, there are so many ways IP may come into play in a marriage. And it’s not just about the ownership of the IP, it’s also about the profits that are derived from the specific IP. So make sure you outline how you want to treat IP in an agreement to ensure your wishes are met—no matter what life throws your way.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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