A royalty is a sum of money paid to another person in exchange for using their property. Royalties may be paid to use a person’s music, art, photography, writing, or patented and copyrighted items. Any item that generates royalties is an asset, as is the income generated.

Although the property that produces royalties is intellectual property, royalties are one of many types of assets subject to division in a California divorce.

California is a Community Property State

California is a community property state. This means that all property and debts obtained during a marriage are presumed to be owned equally between the spouses. While some assets are easily divided, royalties can be challenging.

When is Intellectual Property Community Property?

When determining whether to and how to split royalties, ownership of the intellectual property must be determined. Intellectual property may be separate property, community property, or commingled property.

While separate property belongs to the creator of the intellectual property alone, community and commingled property must be divided. How royalties are split depends on when the intellectual property was created, patented, and developed.

  • If the intellectual property was created and patented before the marriage, it is likely separate property
  • If the intellectual property was created and patented after the marriage, it is likely community property
  • If the intellectual property was created before marriage but increased in value over the course of the marriage with the help of a spouse, it is likely commingled or mixed property
  • If the intellectual property was created before marriage but patented after the marriage, it is likely commingled or mixed property

Spouses may reach their own agreement on the division of royalties or take the matter before the court.

Negotiating a Royalty Settlement

When possible, spouses may choose to settle their royalty division outside of court. When choosing this option, an expert is typically brought in to assign a current and future value to any intellectual property. Each spouse is then allotted a percentage.

The spouses may keep or trade their percentage for other community property. A spouse may be provided with a buyout option at a future date or even phased out gradually as an owner. How the spouses negotiate their settlement depends on ownership percentages and their circumstances.

Protecting Ownership of Intellectual Property and Royalties

The best way to protect the ownership of intellectual property and any resulting royalties is through a prenuptial or postnuptial agreement. Either of these marital agreements allows a spouse to create, claim, and retain their idea as theirs alone, along with any revenue that idea may generate.

Contact an Experienced California Attorney Today

For more information on how a California divorce affects intellectual property and royalties, contact the knowledgeable attorneys at Fernandez & Karney. We will meet with you confidentially to answer your questions and discuss options for protecting your assets.

Fernandez & Karney can help with your other divorce issues, including child custody and visitation, child support, and alimony. Speak with an experienced Los Angeles divorce attorney today.