IP Assets and Estate Planning
April 18th, 2023
Intellectual property (IP) is just what the name says – property. Like other forms of property, it can be passed to the owner’s heirs as part of an estate.
Here are some things to keep in mind when making an estate plan that includes IP.
Copyright law covers works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
17 U.S.C. § 102(a).
“Fixed” means that a work is written down, saved on a hard drive or in the cloud, recorded on film, etc.
As the US Copyright Office notes,
Most works are fixed by their very nature, such as an article printed on paper, a song recorded in a digital audio file, a sculpture rendered in bronze, a screenplay saved in a data file, or an audiovisual work captured on film. Nevertheless, some works of authorship may not satisfy the fixation requirement, such as an improvisational speech, sketch, dance, or other performance that is not recorded in a tangible medium of expression.
Section 102(a) of the Copyright Act states that the subject matter of copyright includes the following categories of works:
- Literary works
- Musical works, including any accompanying words
- Dramatic works, including any accompanying music
- Pantomimes and choreographic works
- Pictorial, graphic, and sculptural works
- Motion pictures and other audiovisual works
- Sound recordings
- Architectural works (such as drawings and the buildings that result from them)
As a rule, for works created after January 1, 1978, copyright protection lasts for the life of the author plus an additional 70 years. Thus, the surviving family members can continue to receive copyright licensing revenues long after the author is dead.
One important complication relates to the right to terminate transferred copyright, a right that’s only been available in the US since 2013.
This right was created to protect authors and artists who sold their work early in their careers for a modest amount that later became more valuable.
For example, as the New York Times reported, Disney has been fighting with comics illustrators and their estates over the rights to Marvel characters.
As the Times notes,
Such efforts turn on whether authors worked as hired hands or produced the material on their own and then sold it to publishers. The Copyright Revision Act of 1976, which opened the door to termination attempts, bans termination for people who delivered work at the “instance and expense” of an employer.
In addition, these conditions apply:
- The copyright transfer must be terminated during a five-year period beginning 35 years after the date that rights were transferred or licensed.
- If the copyright also included publication rights, then this window opens 35 years after publication or 40 years after execution of the grant, whichever is earlier.
- The creator or her/his heirs must notify the copyright holder no earlier than 10 years before that five-year window opens and no later than two years before that window closes.
Heirs automatically inherit this right to terminate if the creator dies before the window is closed.
Utility patents are generally protected for 20 years from the filing date, and design patents are generally protected for 15 years.
Patents can be part of an estate, and they can also be transferred via an assignment to a trust, which may avoid probate. A document showing the assignment of a patent to a trust should be recorded with the US Patent and Trademark Office (USPTO).
Trademarks are names, symbols, slogans, logos, etc., used in connection with goods or services to help consumers identify the sources. Thus, trademarks are generally associated with businesses and may be part of business assets that form part of an estate.
Trademarks can, in theory, last “forever” if they’re properly used and maintained.
If a federally registered trademark changes hands into a trust or to the previous owner’s heirs, that should be recorded with the USPTO.
A recent matter before the Trademark Trial and Appeal Board (TTAB) illustrates the importance of properly accounting for trademark rights in an estate plan, to avoid expensive legal disputes.
Cowboy Jack Clement was a famous songwriter, music producer, music publisher, studio owner, music engineer, and artist who was inducted into the Country Music Hall of Fame in 2013. He worked with Elvis Presley, Johnny Cash, Roy Orbison, Jerry Lee Lewis, Charley Pride, and U2, among others.
More than 50 years ago, Cowboy Jack bought a home in Nashville, Tennessee where he built a recording studio. He called it THE COWBOY ARMS HOTEL AND RECORDING SPA, and this name was used until he died in 2013.
Before he died, Cowboy Jack transferred the home to his company, Clementvision. He then gave the company to his children in his will.
However, his will didn’t expressly mention the “Cowboy Arms” mark.
The will appointed Cowboy Jack’s second cousin, Robert Clement, and his accountant as co-executors of his estate. Robert Clement eventually bought the house.
Robert Clement applied to register the COWBOY ARMS mark for “musical recordings” and “recording studio services.” Clementvision, operated by Cowboy Jack’s children, opposed this application.
This issue was thus whether the Cowboy Arms mark belonged to Clementvision or was “attached” to the house that Robert Clement now owned.
The TTAB noted that the Cowboy Arms service mark had been associated with Cowboy Jack himself for 38 years before his death. There was no evidence that after his death the mark became associated with Robert Clement.
The TTAB rejected Robert Clement’s argument that the mark was “attached” to the property he now owned, citing a case involving a restaurant trademark:
While we agree that location is frequently an important part of the goodwill of a restaurant mark, location in this sense obviously does not mean a particular building on a particular plot of land. Indeed a valid transfer of a service mark does not require the transfer of any physical or tangible assets as long as there is a transfer of the goodwill to which the mark pertains.
Thus, the TTAB ruled that the mark properly belonged to Cowboy Jack’s children and sustained their notice of opposition to Robert Clement’s attempted registration.