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The Inheritance of Intellectual Property
As a general principle, it is better to explicitly provide for one’s property in a will than to keep silent and let important, but unaccounted for, assets become part of the residue of the estate. Intellectual property rights can be tricky in this regard, since the benefits arising therefrom are often not as easily identified as those arising from real or personal property.
Still, many individuals produce, whether knowingly or not, commercially valuable intellectual property over the course of their life, especially those with an inclination for the creative or technical arts. We provide the following as a few considerations to keep in mind when deciding how to manage the inheritance of your intellectual property rights.
Maintaining a Vision
Many inventors, artists, and owners of intellectual property rights have plans for the use of those rights. These may be plans which are in the process of being implemented or plans which are to be acted upon at a later time. Particularly where your ideas are unpublished, unregistered, or unproven, the value of your ideas may not be apparent to an heir. Furthermore, without prudent record keeping and legal documentation, it may not be unequivocally clear who is the owner of specific intellectual property rights.
Intellectual property development may also be a transgenerational undertaking, where a family collectively participates in the creation and commercialization of new ideas through, for example, a family business focussed on innovative engineering or creative writing. Consequently, in planning the inheritance of one’s estate it is important to ensure that any inventive or creative works are accounted for and any intellectual property rights arising therefrom are documented in a legally enforceable manner.
If you have a vision for how you would like to see your intellectual property rights used, estate planning is often a great way to ensure that those rights will be passed on to someone who shares your vision and has the capacity to continue developing and using your intellectual property. A great deal of work goes into proving unproven ideas, and into exploiting proven ideas. Where rights are passed on to someone who has no interest in continuing a vision, the full potential of intellectual property is likely to remain unrealized. Thus, it is helpful to start planning your estate by thinking about how you would like your intellectual property to be used by an heir and by canvassing which persons are best suited or most likely to use the intellectual property in that manner.
Arranging for the passing of intellectual property rights to an interested beneficiary need not leave other beneficiaries uncared for. As any good estate planner will tell you, Canadian rules around estates planning are quite flexible and you are likely to be able to divide your assets in the way in which they will be most appreciated.
If you have an existing will but are now working on an invention or creative work or other idea, it may also be advisable to amend your will or otherwise make known your intentions in relation to the new idea.
Keeping Key Rights Together
Many books are written as part of a set of related books exploring a single creative world and many patents are obtained as part of a family of related patents covering a larger inventive scheme. Intellectual property rights can also provide different legal protections for different aspects of the same creative or inventive project. For example, a registered trademark can be associated with a product to protect the market reputation of the supplier while the product itself is protected by a patent.
If you wish to enable someone to continue your vision, they may need to have control of all related rights. Control of all related rights may be necessary to allow your heir to control how your creative and inventive works are further developed, or simply to enable your heir to have the ability to continue to develop or commercialize your works at all. Since many intellectual property rights are exclusive in nature, in the sense that they allow the owner to keep others from using the rights, related rights are often most valuable when kept together.
Leaving your heirs to sort out the ownership of key rights may result in difficult and contentious negotiations and could keep your heirs from continuing your vision. In some cases, as discussed further below, disputes may cause delays in the payment of maintenance fees or the taking of other steps, which may result in rights being lost entirely. Thus, it is better to be proactive in your management of intellectual property ownership and to consider how assigning intellectual property through a formal contract can avoid downstream problems.
Providing for Dependents
Where the value of your intellectual property is likely to comprise a large part of your estate, you may wish to obtain a formal valuation and an opinion on whether government regulations may impose limits on who you can give your rights to. If you are unsure about what may constitute commercially valuable intellectual property, you may also wish to investigate with the assistance of legal counsel whether certain creative or inventive undertakings have unknowingly generated intellectual property and how the rights arising therefrom can be divided among dependents.
Some jurisdictions have requirements regarding caring for dependents or others, often assessed as a percentage of the value of the total estate. Such obligations, if present, may limit who you are able to give your rights to or may require creative relocation of value schemes to ensure that your will is enforceable.
Providing for the Maintenance of Rights
Some intellectual property rights are contingent upon taking ongoing steps. For example, in most jurisdictions the owner of a patent must pay periodic maintenance fees to maintain their patent rights. Trademark registrations may also need to be renewed to keep the benefits derived from the registrations. Where payment or renewal deadlines are missed, rights may be temporarily or permanently lost. Thus, it is important to either select heirs that will have the capacity to maintain intellectual property rights or to separately provide an heir with the resources to pay maintenance or renewal fees.
More generally, many business agreements and arrangements involving intellectual property can be based on an understanding which may not be immediately or intuitively apparent without the assistance of legal counsel. For example, patent licenses may have been granted to settle disputes, and trademark rights may have been sought in anticipation of future growth. Providing an heir with proper documentation in this regard may go a long way in allowing an heir to realize the potential of your intellectual property rights. If you are working on something, such as an invention or creative work, it may be worthwhile to document your developmental steps and to make a note of your future plans for commercialization.
Moral Rights
While unique to creative works, the moral rights of a creator can be very important in maintaining or creating a legacy. Moral rights are separate from economic rights in Canada and exist for the length of the copyright term.
Moral rights allow an author to limit some uses of their work, even after assigning ownership of the work to someone else. Moral rights are generally directed to preserving the integrity of a work and the intent behind it and can be used to prevent others from modifying a work in a way that can prejudice the creator’s honour and reputation. Since moral rights last for the full length of the copyright term, which extends past the death of an author, the heirs of an author may enforce moral rights on behalf of a deceased author in some circumstances. Conversely, heirs of an author must be cognizant of the moral rights that subsist in a work they inherit. Thus, preparing for the protection of moral rights can be a particularly important part of estate planning.
Updating Ownership Information
Providing for the transfer of intellectual property in a will is an important first step. However, it is equally important to take the further step of updating ownership and address information with the relevant intellectual property offices after the inventor, artist, or intellectual property owner has passed. This will help to ensure that important procedural notices are received so that important deadlines, such as payment of maintenance fees and renewal fees discussed above, can be met. It is also beneficial to update ownership and address information with the relevant intellectual property offices so that the records of these offices are up to date in the event that the heir intends to further transfer ownership of the inherited intellectual property at a later date.
Conclusion
Specificity, planning, and attention to detail are key in ensuring that the transfer of your intellectual property goes as seamlessly as possible. Wills and other testamentary instruments, including transfers during your lifetime, may provide you with greater control over how your intellectual property rights are used in the years to come.
If you would like our help planning for the transfer of your intellectual property rights, contact us for a complimentary and confidential initial telephone appointment with a member of our team.
