An inventor invests money and time in developing an invention. The inventor invests in commercializing the invention, leveraging patents and non-disclosure agreements to protect the invention and control a market. In a divorce proceeding, to the inventor’s disappointment, the inventor’s spouse may get some of the royalties from the inventor’s efforts and the invention may be considered marital property, which gets divided between the parties. In this interview with Ferrier Stillman, Partner at Tydings in Baltimore and Towson, we learn how a premarital agreement helps direct the royalties, the value of the invention, and other commercial benefits to the inventor.
Ferrier begins with a discussion of divorce, marital and non marital property, child support, and alimony. Maryland law requires that “marital property gets equitably divided between the parties.” At some point in a divorce proceeding, a court may calculate child support and/or alimony. Ferrier points out that “without a premarital agreement, the income stream from the invention would typically be considered income to the person with the patent even if the patent was acquired before the marriage”. The inventor may want to exclude the income stream for alimony purposes and keep the patented invention that is producing the income. Ferrier suggests a premarital agreement because “the best way to do that is to have a premarital agreement that waives the other spouse’s rights to the product as an asset and/or any royalties from it.” However, even with a premarital agreement, that income will be counted for child support purposes.
Under Maryland law, there is an equitable distribution of marital property only. Marital property includes assets each spouse acquired during marriage, not assets that they had prior to the marriage or directly traceable to pre-marital property. For saved or reinvested patent royalties, the patented invention itself may be non-marital property; however, financial benefits of the patented invention may be marital property. “If you sell the product that was invented after marriage, there could be an argument either way – most likely, partly marital, partly premarital. And, if the invention increases in value during the marriage not just through normal appreciation, but rather through work of the inventor, the invention may be partly marital and partly non marital.”
Courts strive for a fair and equitable division of property, including intellectual property. A premarital agreement allows fiancés to define the division of property. A premarital agreement is “a contract between two people who are going to get married that allows them to give each other legal rights and responsibilities that they wouldn’t necessarily have under current law or lessen those legal rights and responsibilities ” That is, “the prenup should control what happens. But if there is no prenup, and they can’t settle, then the court will decide if the invention is a martial asset or a non-martial asset.”
Ferrier provides a scenario. Imagine the above inventor filed a patent application before marriage and commercialized the invention after marriage. The non-inventor fiancé could say, “Yes, you got this patent before we got married. But, you are going to continue to earn money from it, or it’s going to increase in value, after the marriage, and so it should not be completely excluded from marital assets.” With a premarital agreement, the fiancés control division of invention-based assets and income.
Patents and non-disclosure agreements provide an inventor with peace of mind. Ferrier offers premarital agreements as providing a similar function, peace of mind in divorce situations. “Sometimes people who are planning to marry, don’t think of IP as something that could be subject to some type of division in a divorce case, or even as part of an estate.” A court is limited in what it can do, but the fiancés can agree to any way to handle division of property in a premarital agreement.
I want to thank Ferrier Stillman for sharing her expertise on intellectual property and premarital agreements. To learn more about Ms. Stillman’s Family Law practice, please visit Tydings & Rosenberg LLP.
Hutchison Law, LLC has experience protecting intellectual property rights, such as patent rights. To learn more about our intellectual property practice, please contact us at 410-978-7287 or firstname.lastname@example.org.
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