How Are Royalties Split During a Divorce?

By: Stephen J. Plog

Colorado is an equitable division state. During a divorce, the court seeks to divide marital property equitably or as fairly as possible under the given circumstances. This often begins with the court first determining value and then dividing the marital property equally. Keep in mind that “equitable” does not mean “equal” and family law judges have the discretion to deviate from and equal division.

Equitable division applies to all marital property, including royalties. Royalties are sums of money paid to a person in exchange for using their property. Royalties may apply to any of the following:

• Music;
• Art;
• Photography;
• Writing;
• Mineral rights; and
• Items with a patent or copyright.

Royalty-generating items are known as assets and generally reported as a type of business income. Any business income received by a couple during their marriage can be used to determine support matters, such as alimony or child support. That income is also considered marital income and can be used in determining the present value of a royalty.

What is Intellectual Property?

Marital assets that generate royalties often come from property that is considered intellectual property. Intellectual property division may include property that is:

• Patented;
• Trademarked;
• Copyrighted;
• A trade secret; or
• A trade dress.

Royalties from patented, trademarked, and copyrighted work may create considerable wealth. Any contractual right established during the marriage to receive royalties may be considered during marital property division.

How Can a Family Law Attorney Help Split Intellectual Property Assets?

Experienced family law attorneys can help identify whether intellectual property is separate or marital. If it is marital, a family law attorney can help find an expert to value the property and devise a way to split the asset best between the parties.

There are special considerations family law attorneys use when determining how or whether to divide royalties and potential future royalties:

• When was the intellectual property created? Before or after the wedding?;
• Was the intellectual property developed during the marriage?;
• Did the spouse contribute to the intellectual property?;
• Did the spouse help to manage the intellectual property; or
• Did the spouse help to make the development of intellectual property possible?

If intellectual property is marital, both spouses should receive a fair share of that property. When negotiating those shares, a family law attorney addresses these matters in the following ways:

• If the current and future value of the intellectual property is estimable, then each party is assigned a percentage; or
• If one party wants to keep the intellectual property royalties whole, that party exchanges an asset of the equal or approximate value for the royalty rights; or
• Split ownership of the intellectual royalty and property rights per allotted percentages until that asset depletes. Actually splitting ownership of royalties can only be done if allowed under the contract creating the royalty.

Contact Our Family Law Attorneys For Help With Intellectual Property?

Sometimes parties are unable to resolve their issues with their attorneys’ help alone and must ask the court to intervene. Negotiations do not always result in agreement. However, once the parties go to court, they lose their autonomy, and the court makes decisions on their behalf regarding the division of marital property. Not everyone is going to be happy with the judge’s decision a trial and court’s don’t always get the outcomes right. Therefore, whenever possible, it is best to resolve any issues without the court’s intervention and have some say in the outcome of your divorce case.

If a divorcing couple possesses intellectual property and is in need help identifying that property’s nature, contact Plog & Stein, P.C. We have working relationships with appraisers and experts who can assist in valuing your intellectual property or royalties. The attorneys in our firm can provide sound legal advice and answer any other unique questions you may have to ensure you fair treatment during your divorce. We are skilled at both litigation and negotiation.

Contact our law firm from anywhere in the greater Denver area today to schedule your confidential appointment.