Intellectual property (IP) includes patents, trademarks, copyrights, and creative works like books, music, or software. IP can increase in value over time, making it harder to split fairly during divorce. New Jersey residents need to understand how a court may value and divide IP during a divorce.
Understanding intellectual property in divorce
New Jersey follows the principle of equitable distribution, which means the court divides property fairly but not necessarily equally. If one spouse created an IP asset during the marriage, it usually becomes marital property, so the court assesses and divides it like any other financial asset.
Some types of IP generate ongoing income, such as book royalties or patent licensing fees. The court considers the potential value of this future income in its decision.
If a spouse created an IP asset before the marriage but it increased in value during the marriage, the court may view only the increased value as marital property. Courts also look at factors such as when the creators developed the IP, how they funded its development, and whether the other spouse contributed to its success.
Valuing and dividing intellectual property
Valuing IP can be difficult because it is not a physical object with a set price. Experts often assess the potential earnings of IP by looking at past income and market trends. In some cases, one spouse may buy out the other’s share of the IP. This allows the creator to keep full ownership while compensating the other spouse for their share.
If both spouses contributed to an IP asset, they may agree to share future earnings. For example, if one spouse wrote a book and the other helped with editing or marketing, they may split royalties. Some couples choose to sell the IP and divide the profits, but this is less common. Each option depends on the type of IP and how much income it generates.
New Jersey courts aim for a fair outcome based on the unique details of each case. Since IP can continue to grow in value, it is important to consider future earnings when dividing these assets. Good planning can help both spouses move forward with a fair settlement.