Intellectual Property Issues in Estate Planning and Administration
| Publication year | 2017 |
| Pages | 46 |
| Citation | Vol. 46 No. 11 Pg. 46 |
TRUST AND ESTATE LAW
By LOUISA M. RITSICK.
This article describes intellectual property assets and intellectual property laws that a trust and estate attorney should consider as part of an estate plan or during estate administration.
Known for ironic parody songs like “(You Gotta’) Fight for Your Right (to Party!),”[1] Beastie Boys co-founder Adam “MCA” Yauch, who died from cancer in 2012 at age 47, fought for the right to control the future use of his musical creations after death. Yauch’s will provided, in part, that “[n]otwithstanding anything to the contrary, in no event may my image or name or any music or any artistic property created by me be used for advertising purposes.”[2] The terms of Yauch’s last will and testament, while not the dispositive factor in litigation between the Beastie Boys and the companies using Beastie Boys songs for advertising purposes after Yauch’s death,[3] are a dead-hand attempt to control the use of his intellectual property from the grave. Yauch handwrote the italicized words in the will prepared for him by his lawyers,[4] which highlights the importance of understanding the client’s legacy goals with respect to intellectual creations as well as the technical requirements for the transfer, management, and monitoring of intellectual property assets.
The term “intellectual property” (IP) refers to the ideas, inventions, technologies, processes, and musical, art, and literary works derived from the work of the mind. IP rights apply to the intellectual creation of an object as opposed to the physical object in which the intellectual creation is embodied. Copyright, trademark, patent, and other IP laws protect IP rights by assigning legal rights to produce and control the physical manifestation of the ideas of the creator[5] or other producers and providing an enforcement mechanism if the rights are infringed.
IP rights may not be "assets" in the traditional sense, but IP rights may constitute a valuable share of the client's estate for which proper planning is essential. Although Prince famously fought to protect his intellectual property during his lifetime, he died intestate, without an inventory of the music stored in his vault or a plan for its release.[6] Prince's estate has been beset with claims by purported heirs and disputes over the ownership of his intellectual property, with Universal rescinding a S31 million deal because it claimed that some of the rights purchased from the estate conflicted with rights held by Warner Bros, pursuant to a confidential 2014 transfer.[7]
What is Intellectual Property?
The World Intellectual Property Organization (WIPO)[8] divides IP into two main categories: (1) industrial property such as trademarks, patents for inventions, industrial designs, and geographical indications; and (2) copyright covering literary, artistic, and musical works, films, and architectural design as well as the rights of performing artists, producers of recordings, and broadcasters.[9] A category of intangible personal property,[10] IP has no intrinsic value when created; it is merely representative of value. IP laws offer creators an opportunity to exploit their IP in hopes of realizing a return on their investment of time and capital into the creative process. Any IP asset can be subject to both U.S. and international laws. Unless otherwise noted, this article focuses on IP rights protected by U.S. law.
Legal Protection of IP Rights
Legal protection of IP rights has a long history. As legal systems in different civilizations matured, the legal protections offered, as well as the justifications for those legal protections, evolved. In the 7th century BCE, the Greek colony of Sybaris granted chefs year-long mo-nopolies for inventing extraordinary recipes.[11] From Roman times to the Florentine republic, legal protections generally took the form of franchises and royal favors,[12] with a goal of restricting access to works already in the public domain rather than encouraging innovation. In 1421, the Republic of Florence adopted one of the first statutes instituting an incentive mechanism that is still a feature of IP laws.[13] Our current systems of copyright, patent, and trademark laws, as well as moral rights often protected under state law, are derived from the English system, such as Great Britain's Statute of Anne (1710), which is considered by many legal scholars to be the first modern copyright statute.[14]
Copyright and Related Works
Copyright protection is generally offered to "original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device."[15] The work must be original to the author and cannot be the result of copying. The owner of a copyright has the exclusive rights to:
1.reproduce the copyrighted work;
2. prepare derivative works based on the copyrighted work (e.g., sequels or merchandising);[16]
3. distribute copies of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
4. perform the copyrighted work publicly; and
5. display the copyrighted work publicly.[17]
Each of these rights may be separately retained or transferred by the copyright owner. Although copyright is automatic, vesting on creation, registration of the copyright with the U.S. Copyright Office is necessary to enforce the exclusive rights of copyright through litigation.[18] Since March 1,1989, use of the copyright symbol, ©, in the United States has been optional.[19] U.S. law required use of the © on all works first published before that date, and before 1989, failure to use the © generally resulted in a loss of U.S. copyright protection.
Under the 1976 Copyright Act (effective January 1,1978), as amended, (1976 Copyright Act) and the Sonny Bono Copyright Term Extension Act of 1998, copyrights created after 1978 are generally good for the life of the author plus 70 years.[20] For a joint work, the rights endure for a term consisting of the life of the last surviving author plus 70 years.[21] For works made for hire or works published anonymously or under a pseudonym, the copyright endures for the first to expire of a term of 95 years from the year of its first publication, or a term of 120 years from the year of creation.[22] Once the copyright protection period ends, the copyrighted materials enter the public domain.[23]
Ownership of a copyright or any of the exclusive rights afforded the holder of a copyright is distinct from ownership of any material object, FEATURE TRUST AND ESTATE LAW such as a painting or manuscript, in which the work is embodied.[24] Transfer of ownership of any material object does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.
The 1976 Copyright Act not only extended the terms during which copyright protection is available but also instituted other legal protections allowing creators or their successors to terminate a copyright transfer. The copyright owner may not have equal bargaining power or the information necessary to evaluate the value of a copyright interest when a transfer is first contemplated. For example, based on the advice of her editorial team that her book would probably only sell a few thousand copies, Harper Lee reportedly licensed some of her copyright interests to the publisher of To Kill a Mockingbirds 1960 for $2,500.[25] When Lee and her publisher originally negotiated the contract, no one, including Lee, predicted the immediate success of the novel, Lee's Pulitzer Prize, or the Oscar-winning movie with the same title released in 1962. Recognizing that the bargaining position of the creator and the value of a creator's work may be nonexistent or difficult to determine when a work is first created, Congress enacted a right of termination under the 1976 Copyright Act.[26] The "exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1,1978, otherwise than by will" is subject to an immutable right of termination.[27]The termination must occur either 35 years from the date of the transfer or, if the grant covers the right of publication, the earlier of 35 years after publication or 40 years after the execution of the transfer.[28] Notice of the exercise of the termination right must be served no earlier than 10 years before the start of the five-year termination window and not less than two years before the end of the window.[29] The right of termination will irrevocably lapse if it is not exercised within the statutory time limits. The written notice must be served on the transferee and filed with the U.S. Copyright Office along with the required fee.[30] On the termination date, the copyright reverts to the creator or to the successor to the creator's termination rights.
If the creator dies after giving the required notice but before the termination date, the copyright should revert to the creator's estate and pass by intestate succession or pursuant to the client's estate plan.[31] However, if a creator dies before the end of the termination window, the creator cannot devise his termination rights to a recipient of his choice and his heirs are forced to rely on the statutory list of who succeeds to the right of termination upon the creator's death.[32] Because the termination right is immutable, it cannot be altered by the creator or the creator's statutory heirs. The statutory heirs are the creator's surviving...
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