When planning your trust, you should plan for the security and the distribution of your physical estate to your named beneficiaries. However, something that is often overlooked by first-time estate planners is the security and distribution of your non-physical property. Book copyrights, business logos, and any patents you might hold all count as part of your overall estate.
When creating an estate plan in Virginia, you should consider protecting the assets that you can’t see just as vigilantly as your physical estate. In this article, we’ll cover several different ways to protect your intellectual property in your estate plan.
What is “Intellectual Property?”
By definition, intellectual property is “any product of the human intellect that the law protects from unauthorized use by others.” The three areas of intellectual property that are usually covered by the law are:
Each area covers a different form of intellectual property, and the registration processes and protections can vary widely depending on which type you pick. We’ll outline the basics of each type of intellectual property below.
A patent is the legal ownership of an invention, issued by the United States Patent & Trademark Office (USPTO).
There are three general patent categories:
- Utility patents
- Design patents
- Plant patents
A utility patent is granted when someone establishes a new and original process, machine, method of manufacturing, or discovers a composition of matter. This can include the improvement of established patents and processes.
A design patent is granted when someone establishes a new and original print, pattern, or design method for manufacturing.
A plant patent is granted when someone establishes a new and original species of plant that is distinct from the existing record of plant species.
Generally, a patent is granted when there is a new, original, and distinct invention of some sort that is or can be useful to society. A patent will last roughly 20 years from the date of acceptance.
A patent will protect your invention from being made, used, sold, or imported into the United States by other parties. However, a patent does not grant you the right to make, use, sell, or import the invention into the United States. The patent is merely a protection of your intellectual property (or in this case, your conceptualized invention).
The USPTO is not responsible for enforcing a patent’s restriction on use by outside parties. It is the responsibility of the “patentee” to enforce the patent.
A “trademark” or “mark” is used in the trade and representation of goods and services. Common marks include:
A trademark issued by the USPTO protects against the replication or similar use of a mark in the trading of goods. It does not protect against others providing the same goods and services.
The mark is the intellectual property. The sources of goods and services represented by the mark are not intellectual property that can be protected by a trademark.
A copyright is an “original work of authorship.” Art, drama, intellectual work, literature, photographs, and music – published and unpublished – are covered by copyright.
The copyright protects your form expression, not the subject matter of your work. A similar subject matter can be replicated in another form of expression, free of conflict with your copyright.
(Note: Copyrights are issued by the Copyright Office of the Library of Congress.)
Intellectual Property in Virginia Estate Planning
Intellectual property is a topic that is difficult to address from a legal standpoint. While it’s a bit easier to protect the physical assets of your estate, there are certainly methods of securing your intellectual property too.
Transferring Intellectual Property in Virginia
One method of preserving your intellectual property is by transferring it to a responsible, trustworthy party.
Methods of transfer can include:
- Death intestate (transferred via succession laws to your parents, spouse, children, grandchildren, etc.)
- A Virginia will or a trust
- An otherwise written, legal document that details the desired transfer of intellectual property after death; although an option, it is much more desirable to establish a will with named beneficiaries, trustees, and/or executors to manage your physical and intellectual property.
While dying intestate won’t eliminate the intellectual property from your estate, it can cause issues with inheritance. Although succession laws would deem the intellectual property as the surviving spouse’s estate, it can be distributed to the parents or the children of the deceased spouse.
A method of ensuring your intellectual property is being transferred to the party of your choice is through carefully crafting the bequest language of your Virginia will. Traditionally, the language of a bequest will only cover “tangible personal property,” or the physical estate.
Without explicitly addressing your intellectual property in your Virginia will, there is a chance that it could be filed into your residuary estate and distributed elsewhere.
Transferring Intellectual Property in Life
If you make the decision to transfer your rights in your intellectual property before you die, there are a few things to consider.
If you transfer your patent, trademark, or copyright during your lifetime, you may be subject to paying a gift tax. However, the value of the gift would still be subject to exceeding the gift tax threshold of exemption.
Virginia does not enforce an estate or gift tax. However, the federal enforcement remains at a $14,000 threshold in gifts per year. Anything less is exempt from the federal gift tax.
There is a financial motivation to transfer intellectual property in life. Gifted intellectual property that appreciates, or becomes more valuable over time, will be exempt from the estate’s taxable inventory.
Transferring Intellectual Property in Death
As stated, it is possible to transfer intellectual property through inheritance by a will or a trust.
The benefit of transferring property through your will or trust is your ability to retain the intellectual property until death. If you gift the intellectual property during your life, you forfeit all rights to that intellectual property.
Another benefit to including intellectual property in your estate plan is your avoidance of the federal gift tax, should your gift exceed the value threshold of $14,000.
The use of “unified credit,” or spousal inheritance of intellectual property will exempt your intellectual property from taxation.
Differences in Patent, Trademark, and Copyright Inheritances
As stated, the patent is the protection of your invention – not your idea or concept. While the invention doesn’t need to be physically constructed, it cannot be an unfinished thought. It must be applicable in theory.
When filing your patent with the USPTO, you must include who owns the patent, who holds the licensing rights, and who will be making the maintenance payments.
When the patent is inherited, the beneficiary becomes the new owner, who will re-assign the responsibilities of licensing and maintenance funding.
A patent must be renewed each time it expires in order to protect intellectual property from fraudulent ownership and manufacturing.
As with patents, the trademark protects your unique mark – not your goods or services. Other businesses may promote the same or similar goods and services, but they cannot market them using marks or designs that replicate your trademark.
In death, the trustee or executor of your estate must file with the state or federal trademark agency that officially licensed your trademark. The agency must record the transfer of the trademark to the new owner for registration purposes.
The new owner will do well to remain active in promoting your mark, while ensuring that there are no conflicts with other businesses and registered marks in your trade.
Again, a copyright protects your method of expression – not the subject of the work.
It is important to note that copyrights left in a will are not subject to family contest, while copyrights left in other estate documents can be contested.
A copyright is also inclusive of the intellectual property of your work, not the physical work itself. While you are able to pass along the painting, literature, or music that is copyright protected, you are not bequeathing the legal copyright unless explicitly stated in your will or trust documents.
Your executor is responsible for protecting your copyright. Registering your death and lifetime ownership of the copyright with the Copyright Office in Washington, D.C. will ensure your work isn’t lost to “public domain” categorization.
Intellectual property and estate planning are tricky to navigate, and are made more confusing when they are intertwined. However, if you individually hold a patent, trademark, or copyright, you should consider how you’ll be protecting your intellectual property.