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Intellectual property and divorce

When it comes to dividing property in a divorce, it may be a headache getting through all the possessions in a marriage. From deciding what to do with the house to figuring out who gets the couch, there is a lot to divide in a divorce.

But how do divorcing spouses split an idea? Evaluating a house is one thing, the valuation of intellectual property is another.

Tangible vs intangible assets

Houses and couches are physical objects that count as tangible assets. Intellectual property is an intangible asset since it creates value but has no physical representation.

As the World Trade Organization defines, intellectual property rights involve the rights given to persons over the creations of their minds. These include literary and artistic works from musical compositions to computer programs. And they all might count as community property if one spouse thought them up and worked on them over the marriage.

But not all ideas have equal value. Dividing IP requires evaluating it.

Valuing intellectual property

The inherent value of IP, as detailed by the World Intellectual Property Organization, comes from the right for the owner to exclude competitors from using it. Evaluators look at said asset from a few positions.

  • The income method, based on expected income generation over time.
  • The market method, based on the transfer price paid for a similar IP
  • The cost method, based on establishing value based on a similar IP

Once evaluators determine the approximate value of an IP, it is up to spouses to determine how best to split that. That might mean dividing ownership or, as when one spouse takes the house, dividing an equivalent amount of assets to the other spouse.

Intellectual property, developed over a marriage, may make the divorce process more complex. For those couples with IP among their assets, they still must divide it somehow all the same.