What happens to IP assets if they are not specifically identified and allocated during a divorce? Consider the recent case in which the husband owned two patents. During their 2001 divorce in California, both parties stated they had no community property. The husband subsequently assigned the patents to a third party, who sued Nextel/Sprint in federal court for infringement. Nextel claimed the plaintiff didn’t have standing to sue, however, because it failed to join the ex-wife, who—under California law—presumptively co-owned the patent.
It took nearly 10 years and several trips to state and family court and then back to federal court and an appeal, but the Federal Circuit ultimately agreed that the wife was the presumptive co-owner of the patents. However, the parties overcame that presumption in their divorce decree, effectively precluding the wife from taking any interest in the patents, then “or anytime thereafter,” the court held, in Enovsys v. Nextel Communications, Inc. (2010).
The bottom-line for IP experts and attorneys: “Whether you represent the creator of the patent or the spouse, you’d better make sure you can cover every possible variable and be prepared to educate the judge on every possible alternative use for the patent,” advised Ronald Anteau (Kolodny & Anteau), who spoke at the recent AAML/AICPA conference in Vegas.
“I’m agnostic when it comes to anything but the asset,” agreed co-presenter Neil Beaton (Alvarez & Marsal). “From a purely economic standpoint, it doesn’t matter if I represent the creator [of the IP] or the spouse. My job is to come up with a range of value that resides in the asset [and/or] the company.”
To learn more about the pitfalls of valuing IP in a divorce situation, tune in to IP in Divorce: Dividing Patents, Copyrights, and Trademarks on May 23, now featuring four experts: Beaton and Anteau as well as Drew Voth (Alvarez & Marsal) and Alexa Wolff (Kolodny & Anteau).