IP Valuation Due Diligence Step One: Who Owns It?

This was the subject of a recent article in Lexology by Stanley Gibson, Esq., of Jeffer, Mangels, Butler & Mitchell, LLP. According to Gibson, often overlooked is the impact of community property laws, and he cites Enovsys LLC v. Nextel Communications, Inc., et al., 614 F.3d 1333 (Fed. Cir. 2010) as an example.

California law provides that each spouse is entitled to an equal share of community property, property that the spouses acquire during their marriage. Key point:  This also applies to intellectual property that is created during a marriage.

In Envosys, an inventor filed two patent applications while married and in California. At the time of the divorce filings, one of the patents had been granted.  The other patent issued after the divorce was final.  It was then that the inventor (with a co-inventor) created Envosys, which took over the patents and sued Sprint for infringement.

Particular to this case, because the wife failed to list the patents in the summary dissolution form, it was deemed she had no ownership in them.  More instructive to valuation analysts, however, is the implication that a converse fact pattern (if the wife DID list the IP assets in the summary dissolution form) would have resulted in a finding that the patent ownership was indeed split.  Part of due diligence must be to research dates, marital status, and relevant state community property laws, even if the IP valuation apparently has nothing to do with a divorce.