Have you ever had a lightbulb moment that got you out of a shower mid-way so that you could scribble down your brilliant idea? Ideas and inspiration are a part of the human experience, and sometimes, they can even become a part of our legacy. Intellectual property (IP) is an interesting world or laws, contracts, and agreements that protects these original ideas, creations, or inventions so that the owner can exclusively enjoy any of the benefits reaped. What gets even more interesting about IP is what happens when that owner or creator passes away. Can it be inherited? Can it be transferred or sold like any other type of property? Do you get to decide what should happen to your own invention? Keep reading to find out as Trust & Will explains what happens to intellectual property after death.
What is intellectual property?
Intellectual property (IP) refers to legal rights that are awarded to individuals and entities for their creative works. It includes intangible assets, or creations of the mind, that are a product of a person or a team of people’s creativity and innovation. IP laws exist to protect creators and owners of these assets by giving them the exclusive rights to control and reap the benefits of their creations.
5 types of intellectual property
There are several types of intellectual property, the most common of which is copyright. Below you’ll find a description of 5 types of IP along with the protections provided for each.
1. Copyright: Copyright protects original works of authorship such as literary, artistic, musical, or dramatic creations. It grants the creator exclusive rights to reproduce, distribute, display, perform, or modify their work for a certain period of time.
2. Patents: Patents protect inventions, which may be processes, machines, compositions of matter, or new and useful improvements thereof. Patents grant inventors exclusive rights to their inventions for a limited period, typically 20 years, during which they have the right to exclude others from making, using, selling, or importing the patented invention.
3. Trademarks: Trademarks are distinctive signs, symbols, logos, names, or phrases that distinguish goods or services of one business from those of others. Trademark protection enables the owner to prevent others from using similar marks in a way that may cause confusion or dilute the distinctiveness of the mark.
4. Trade secrets: Trade secrets are valuable and confidential business information that provide a competitive advantage. This can include formulas, processes, customer lists, or other proprietary information. Unlike other forms of intellectual property, trade secrets are not registered but rather protected through confidentiality agreements and security measures.
5. Industrial designs: Industrial designs protect the visual or aesthetic aspects of a product or object. They refer to the unique shape, pattern, or ornamentation applied to an article. Industrial design protection prevents unauthorized copying or imitation of the design, giving exclusivity to the owner.
What happens to intellectual property when you pass away?
Intellectual property is protected not only for its monetary value but also for its social value. These rights help provide strong incentives for innovation and creativity, as well as the investments that ensue. Creators and inventors are thus recognized and compensated for their work, helping promote economic growth, collaboration, and competition.
If you own intellectual property, then you may be wondering what happens to your IP when you pass away, and whether any of the legal protections last.
The fate of IP largely depends on any actions taken by the owner or creator before they pass away. There are some additional factors, including any applicable laws, and any existing contracts or agreements that are in place at the time of passing.
Here are some examples of possible outcomes of IP after death:
1. Transfer through inheritance: Intellectual property can be passed on to beneficiaries through a Will or the intestate succession laws if there is no Will in place. The IP rights will typically be transferred to the designated beneficiaries, who then become the new owners. They will then be able to enjoy any rewards incurred by the IP as if they were the original owner or creator, or until the exclusive protection period ends.
2. Estate planning: Prior to passing away, the IP owner can include specific provisions in their Estate Plan regarding the management, transfer, or licensing of their property. This can help ensure that their IP rights are properly handled and distributed according to their wishes. In our guide regarding copyright law, we provide an example of how Adam Yauch of the Beastie Boys included a specific provision regarding how any of his music or artistic works are prohibited from being used in advertisements following his death.
3. Assignment or sale: The creator or owner of IP may have already assigned or sold their intellectual property rights during their lifetime. In such cases, the rights would pass to the assignee or buyer as specified in the agreement or contract.
4. Continued protection: Intellectual property rights generally have a limited duration, as determined by the applicable laws. After the creator or owner's death, their copyrights, patents, or other IP rights may continue to be protected for the remaining duration of the rights. For instance, copyright laws protect creative works for up to 70 years after the creator’s date of passing.
5. Licensing or management by an estate executor or trustee: If the creator or owner appointed an executor or trustee to manage their estate, including their intellectual property, that individual or entity may handle the licensing, enforcement, or transfer of the IP rights on behalf of the estate or its beneficiaries.
Can intellectual property be inherited?
Yes, intellectual property (IP) can be inherited. The treatment of IP after an owner’s death is largely the same as any other type of property, such as the ability to sell it, trade it, or bequeath it to a loved one. Unless any legal arrangements are in place that indicate otherwise, IP will be inherited after the owner’s death.
The precise outcome of IP after its owner’s death depends on any actions taken by the owner before their passing pertaining to the IP, as well as any applicable laws and existing agreements. The next few sections provide overviews of what happens to IP after death in different scenarios.
Transferring IP during your lifetime
The transfer of intellectual property ownership can be done while the creator or owner is still alive. This option typically makes the most sense for businesses and entities since they don’t “die” in the common sense. (Bankruptcy, mergers, buyouts, or dissolution may be equivalent scenarios.)
To secure IP rights, companies often incorporate clauses in employment contracts that ensure that any inventions made by an employee while they are employed remain company property. They will also have employees sign non-disclosure agreements (NDAs) to ensure that inventions, formulations, and other trade secrets aren’t leaked to competitors.
Individuals may use Estate Planning tools such as a Living Trust or Charitable Trust to proactively protect their IP. They transfer IP into a Trust during their lifetime, allowing them to specify who can access and benefit from it both during their lifetime and after they pass away.
When transferring ownership of IP rights, it is crucial to inform the relevant government body (such as the USPTO or USCO) to avoid future complications. Mere assignment or transfer of IP rights without prior arrangements may not be considered valid under patent and copyright regulations. By default, the creator of an invention is its owner unless specified otherwise.
Dying without a Will (intestacy)
Without any prior action taken by an IP owner, their rights transfer by default to their legal heirs when they pass away. This means that the ownership and control of IP (copyrights, patents, trademarket, trade secrets, etc.) pass to an heir or heirs according to intestate succession laws in their state. While succession laws vary from state to state, the order of heirs begins with the surviving spouse, then children, followed by other close relatives.
This order of succession and determination of the heir of IP takes place in a process called probate. After the IP owner passes away, their estate assets and property are probated by the court system to identify heirs and distribute assets.
Once an heir inherits intellectual property, they will be the rightful owner for all intents and purposes, meaning that they will continue to earn any residual profits and retain exclusive rights provided by the property for as long as it is protected by law.
While this may be a good outcome, this court process does not provide the IP owner with much control over what happens to their property when they pass away. The outcome is determined by succession laws rather than their personal wishes. Instead, it is recommended that the owner takes action during their lifetime by putting an Estate Plan into place.
Dying with an estate plan
Instead of allowing the probate court and intestacy laws to dictate what should happen to your IP after you pass away, it’s always a better idea to take ownership over your legacy through an Estate Plan. Your Estate Plan often begins with a Will as its foundational legal tool, which allows your last wishes to be known. Here, you can use your Will to bequeath your IP to a specific person or entity of your choice. For instance, intestate succession may transfer your IP to your surviving spouse if you don’t have your Estate Plan in place. However, perhaps you want your IP to go to a charitable organization instead. You can arrange for this to happen by making this wish known in your Will. Further, you can make other wishes regarding your IP known. For instance, you can leave provisions regarding how you would like your work to be used or prohibit its use in certain scenarios.
You can further elevate your Estate Plan and provide additional protections by transferring your IP into a Trust. Introduced earlier, this is a tool that allows you to transfer your property during your lifetime and specify who can access, control, or benefit from your IP before and after your death. If you want to add a number of stipulations to your property, such as how your IP should be managed, or conditions that must be met in order for your beneficiary to benefit from it, then a Trust is the stronger option.
Take control over your IP outcomes
As a creator, your intellectual property is likely a large part of your identity. If you’ve made a career out of your passion, then you may even have a large quantity of IP on your hands. This legacy of yours holds intrinsic value, not just monetary value, that deserves to be handed down from generation to generation with care.
After you pass away, your IP will indeed transfer to your heir or heirs. This transfer is dictated by your state’s succession laws. While this may be a good enough outcome, it certainly doesn’t allow you to make a decision regarding your legacy.
Instead, you have an opportunity to take control and decide exactly what should happen to your intellectual property. Like any other type of property, you can designate your IP to a beneficiary of your choice through your Will. This is especially important if your beneficiary is not your primary heir by law.
For even better protection, it’s strongly recommended to transfer your IP to a Trust during your lifetime. A Trust is an estate planning tool that allows you to remove property from your estate entirely while still allowing you to maintain control and access to the property during your lifetime. By doing so, your property will not have to pass through the probate process that can be costly and time-consuming. Similar to a Will, you can still designate a beneficiary for your IP through your Trust. Further, a Trust allows you to include specific provisions or conditions that must be met. If you have particular instructions regarding the use and access of your IP then a Trust is likely the better option.
If you would like more support in deciding what type of Estate Plan is best for you and your intellectual property, look no further! Trust & Will can help you get started, after which you can use our streamlined platform to set up your Estate Plan with ease and convenience. Further, we offer a service that will help you and your loved ones navigate the Probate process with confidence! Be sure to take that extra step to protect your IP, and thus your legacy, for your loved ones today.
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Trust & Will is an online service providing legal forms and information. We are not a law firm and we do not provide legal advice.
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