When considering your estate plan, one important area often overlooked or misunderstood is
intellectual property (IP). You might wonder if this applies to you, so let's break it down.
Intellectual property is a fancy term for the rights you own to things you've created or invented.
IP covers four main categories: patents, trademarks, copyrights, and trade secrets. Let's take a
quick look at what each one is:
Patents are property rights the U.S. Patent and Trademark Office grants for original inventions,
like a new process, machine, or even a new type of plant. Once the office determines that an
invention is eligible, the inventor is given a patent, which helps protect their investment and
prevent others from copying it. Think of the shape of a cool sports car or a brand-new app –
patents often protect these. Patents can help keep your invention safe from being copied for a
set period.
Trademarks are all about branding. They cover names, logos, and symbols that help people
identify a product or service. Have you ever seen McDonald's Golden Arches or heard a jingle
that reminded you of a company? That's trademark territory. You can even pass on trademarks
to your heirs so they can keep benefiting from them.
Copyrights protect creative works like books, music, artwork, and podcasts. You automatically
own the copyright if you write a book or compose a song. You can register it with the U.S.
Copyright Office, which isn't mandatory but can provide more robust legal protection.
Copyrights can be passed on as part of an estate plan. However, the protection is not
permanent; it's valuable during its lifetime and can be part of your estate.
Trade secrets are the confidential, valuable bits of information that give a business an edge, like
a secret recipe or formula. As long as a trade secret stays secret, it's protected and can be a
significant asset when considering your estate. This nonpublic knowledge has monetary value
and provides information. A company that owns a trade secret must take active steps to keep it
confidential, as it loses protection once it becomes public. Unlike copyrights, trade secrets can
be either tangible or intangible. For example, a significant trade secret in the tech world might
be Google's search algorithm. If you own a business, including trade secrets in your estate plan
is essential. You can require your beneficiaries to sign confidentiality agreements and set up
measures to ensure the continued protection of these secrets.
Why does this matter? Intellectual property can be one of the most valuable things you own,
whether it's tied to a business or something you created. That's why it's important to include it
in your estate plan to ensure it continues to provide value and is managed in a way that fits
your wishes.
Here's what you need to think about when adding IP to your estate strategy:
Ownership – Make sure you actually own the rights to the intellectual property. Sometimes,
ownership can be shared or passed on to others, so you must check any agreements or
contracts.
Value – IP can be tricky to value, especially since it might depend on its future earning
potential. Some assets, like patents, only last for a limited time, while trademarks and trade
secrets can last indefinitely. Patents are granted for a set period—20 years for utility patents
and 14 to 15 years for design patents. Copyright protection lasts for the creator's lifetime plus
70 years, although older copyrights may have different rules. For instance, in 2024, all works
from 1928 or earlier entered the public domain. On the other hand, trademarks and trade
secrets can last indefinitely as long as they remain in use or retain commercial value.
Remember that intellectual property laws are constantly evolving, so these rules may change
over time.
Legacy—You might not want your creations used in ways you disapprove of (like your song
being used in a commercial you don't like). By planning carefully, you can ensure that your IP is
handled in a way that respects your personal wishes.
The value of intellectual property (IP) can fluctuate, but key factors must be considered.
Previous licensing agreements can offer clues about an IP's worth and whether the rights
granted were exclusive or non-exclusive. Non-exclusive rights may provide opportunities for
further licensing, while exclusive rights come with a set value and time limit. It's also important
to evaluate IP assets for sales, taxes, or business transactions. Not doing so can lower their
overall value.
Some types of IP, like copyrights, are valued based on potential future earnings. Consulting a
professional appraiser with expertise in the specific IP type can help determine its current and
future value. In some cases, descendants of copyright holders can reclaim rights to increase
negotiating power for creative works. However, legal rulings can sometimes invalidate patents,
making them worthless. That's why estate professionals must work with IP experts to assess
any risk of invalidation for patent assets.
Incorporating intellectual property into your estate plan requires a little extra effort, but it's
worth it. By working with your financial team and IP professionals, you can ensure your
creations and inventions are protected and continue to benefit your heirs. If you have any
questions, feel free to contact The Bridgeway Group.