[WSBAPT] Postmortem Handling of a Copyright?

[Eric Nelsen]

Undigested chunk of the WSBA Community Property Deskbook (4th ed. 2014) re intellectual property is pasted below.

Re valuation, I would look at history of royalty or other payments received. Typically a publication has diminishing returns over time, so I would aim for calculating a diminishing income stream, reduced to present value.

Re transfer, I would do an "assignment of copyright" for the PR to sign. Attached is a form that I found in our forms file, from 2012; I have no idea where it came from or whether we have ever used it before, but at least it's something to look at.


(11)   Intellectual property

Intellectual property" refers to the collection of legal rights that have grown up to protect the products of the human mind. It is a form of intangible personal property that includes patents, copyright, trade secrets, trademarks, the law of misappropriation, and rights to publicity. Donald S. Chisum, understanding Intellectual property Law 2-3 (2d ed. 2011). In recent years, a growing body of case law has recognized that intellectual property must be taken into account in adjudicating marital property rights. 2 Brett R. Turner, equitable division of property §§6.76-6.81 (3d ed. 2005); Brett R. Turner, Division of Intellectual Property Interests Upon Divorce, 12 DIVORCE LITIG. 17 (2000). Although there are few Washington cases on this subject, the conclusions reached in other jurisdictions shed light on how intellectual property rights are likely to be treated under Washington community property law, and so we include a brief discussion of those cases in §3.2(11)(a), below. In §3.2(11)(b), we address issues pertaining to federal preemption of state laws related to the classification of intellectual property as community property.

(a)   In general

There can be little doubt that intellectual property acquired during marriage, as the result of marital labor, should be considered community property as a matter of state law. Rodrigue v. Rodrigue, 218 F.3d 432<http://links.casemakerlegal.com/federal/US/books/Circuit_Opinions/results?ci=14&search%5bCite%5d=218+F.3d+432&fn=Washington%20Community%20Property%20Deskbook> (5th Cir. 2000), cert. denied, 532 U.S. 905<http://links.casemakerlegal.com/federal/US/books/Supreme_Court_Opinions/results?ci=14&search%5bCite%5d=532+U.S.+905&fn=Washington%20Community%20Property%20Deskbook> (2001) (treating copyright as community property under Louisiana law does not violate Copyright Act); In re Marriage of Worth, 195 Cal. App. 3d 768<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Deskbook>, 241 Cal. Rptr. 135<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=241+Cal.Rptr.+135&fn=Washington%20Community%20Property%20Deskbook> (1987) (copyright is community property available for division at divorce); Lorraine v. Lorraine, 8 Cal. App. 2d 687<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=8+Cal.+App.+2d+687&fn=Washington%20Community%20Property%20Deskbook>, 48 P.2d 48 (1935) (characterizing patents acquired during marriage as community property); Howes v. Howes, 436 So.2d 689<http://links.casemakerlegal.com/states/LA/books/Case_Law/results?ci=14&search%5bCite%5d=436+So.2d+689&fn=Washington%20Community%20Property%20Deskbook> (La. App. 1983) (dividing patent as community property); see also Teller v. Teller, 99 Haw. 101, to be divided at divorce if they are marital property; trade secrets were premarital separate property, but patents were marital property); In re Marriage of Monslow, 259 Kan. 412<http://links.casemakerlegal.com/states/KS/books/Case_Law/results?ci=14&search%5bCite%5d=259+Kan.+412&fn=Washington%20Community%20Property%20Deskbook>, 912 P.2d 735<http://links.casemakerlegal.com/states/KS/books/Case_Law/results?ci=14&search%5bCite%5d=912+P.2d+735&fn=Washington%20Community%20Property%20Deskbook> (1996) (patents are marital property that was properly divided by the divorce court).

There appear to be no published decisions in Washington on this issue, but unpublished opinions have treated patents as community property at dissolution. In re Marriage of Crivello, 103 Wn.App. 1019, No. 43707-1-I, 2000 WL 1668014, 2000 Wash. App. LEXIS 2148 (Nov. 6, 2000) (trial court "properly characterized the patent as community property," even though idea for invention was developed before marriage); Shultz v. Shultz, 91 Wn.App. 1072, No. 40306-1-I, 1998 WL 463480, 1998 Wash. App. LEXIS 1176 (Aug. 10, 1998) (a right to patent licensing fees and royalties acquired during marriage is community property even if royalties are paid after marriage). This seems generally to be understood by parties to marital dissolutions, as well. In In re Marriage of Knight, 75 Wn.App. 721<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&search%5bCite%5d=75+Wn.App.+721&fn=Washington%20Community%20Property%20Deskbook>, 880 P.2d 71<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&search%5bCite%5d=880+P.2d+71&fn=Washington%20Community%20Property%20Deskbook> (1994), review denied, 126 Wn.2d 1011<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&search%5bCite%5d=126+Wn.2d+1011&fn=Washington%20Community%20Property%20Deskbook> (1995), the court had before it a property agreement entered into by the couple. There was no characterization issue before the court; however, the agreement listed as community property something called the "Ramtha Dialogues, including all copyrights, royalties, trademarks, patents or license agreements which may exist."

Because intellectual property acquired during marriage may be community property, it is necessary to determine when it has been acquired. As explored earlier, courts must choose between an "inception of title" or "time apportionment" approach. See §3.1(11), above. In only one decision does a court seem to have explored this issue in any detail, and it is a decision from a non-community property state. In Teller v. Teller, 99 Haw. 101, the court concluded that determining whether intellectual property is marital property depends on when the property right "vests." It held that property in trade secrets vests "when the information has either actual or potential economic value." Id. at 110. As for patents, the court noted that under federal law, a right to a patent accrues when a patent is issued, suggesting that "the intellectual property for which a patent is issued is not protected unless and until the patent issues." Id. at 111. The court's discussion suggests that it was following an inception of title approach to such assets. At the same time, however, the court recognized that the value in a patent is not all created at the time the patent issues: "In a situation such as the case at hand, the invention was completed prior to marriage and the patent was issued after marriage. Generally, it will be incumbent upon the family court's discretion to determine whether there was value in the pre-patent intangible intellectual property and the patent itself." Id. Similarly, in an unpublished decision in Texas, the court applied the inception of title approach-the general rule in Texas-and recognized that identifying the inception of title can be challenging:

No Texas case has addressed when inception of title to patent rights occurs. Arguably, inception may occur at any of three times: (1) when the concept is sufficiently developed to generate a plan to build the invention; (2) when the invention is actually built; or (3) on the effective date of the patent. 2 VALUATION & DISTRIBUTION OF MARITAL PROPERTY §23.07[2] (Matthew Bender & Co. ed. 1997).

Alsenz v. Alsenz, 101 S.W.3d 648<http://links.casemakerlegal.com/states/TX/books/Case_Law/results?ci=14&search%5bCite%5d=101+S.W.3d+648&fn=Washington%20Community%20Property%20Deskbook> (Tex. Ct. App. 2003).

None of these courts has explicitly adopted or even considered the alternative: a time apportionment approach. But application of the apportionment theory seems to have been presupposed in Washington and in other community property states. See Crivello, 103 Wn.App. 1019, No. 43707-1-I, 2000 Wash. App. LEXIS 2448 (Nov. 6, 2000) (affirming a trial determination that a patent was community property; although the idea was developed before marriage, the patent was awarded and most of the work that went into its development occurred during marriage); Ozolnieks-Burnell v. Burnell, No. 43931-6-I, 2000 WL 339887, at *1, 2000 Wash. App. LEXIS 493 (Mar. 27, 2000) ("To prevail, [wife] had to prove that [husband]'s development work on the [invention] was a community asset of some value at the time of dissolution."); see also In re Marriage of Worth, 195 Cal. App. 3d 768<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Deskbook>, 773, 241 Cal. Rptr. 135<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=241+Cal.Rptr.+135&fn=Washington%20Community%20Property%20Deskbook> (1987) ("[A]ny artistic work created during the marriage constitutes community property."); Michel v. Michel, 484 So.2d 829<http://links.casemakerlegal.com/states/LA/books/Case_Law/results?ci=14&search%5bCite%5d=484+So.2d+829&fn=Washington%20Community%20Property%20Deskbook>, 834 (La. App. 1986) (when novels were published after marriage but "some of her work and effort which served as a foundation for the completed works took place during the community," it was appropriate to award 50 percent of future book revenues to the community). This seems to us the better way to handle the problems inherent in the development of intellectual property, which necessarily takes time and sometimes capital. It is also consistent with Professor Cross's suggestion that apportionment should be used when the steps in the acquisition of the property right in question are voluntary rather than obligatory. Cross, The Community Property Law in Washington (Revised 1985), 61 WASH. L. REV. at 46. Another leading commentator agrees:

The cases hold uniformly that intellectual property rights are acquired gradually, as the owner performs the work necessary to separate property, even if the formal document creating the right was received during the marriage. Likewise, a right obtained through marital effort is marital property, even if the formal documentation was not delivered until after the date of classification. Many intellectual property rights are created over a period of months or years, and when only part of this period occurred during the marriage, there will be a partial marital interest in the resulting right.

2 Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY §6.80, at 422-23 (3d ed. 2005) (footnotes and citations omitted).

(b)   Federal preemption

One potential obstacle to classifying some types of intellectual property created during marriage as community property is the effect of federal law. The copyright and patent systems are largely creatures of federal law. Questions arise, therefore, as to whether characterization of either copyright or patent as marital property, and the resultant division at the end of the marriage, would violate federal law.

Copyright

The only two cases in which courts have considered in depth the preemptive effect of federal copyright law are In re Marriage of Worth, 195 Cal. App. 3d 768<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&search%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Deskbook>, and Rodrigue v. Rodrigue, 218 F.3d 432<http://links.casemakerlegal.com/federal/US/books/Circuit_Opinions/results?ci=14&search%5bCite%5d=218+F.3d+432&fn=Washington%20Community%20Property%20Deskbook>. In Worth, the court took the position that California community property law works an automatic transfer of the copyright:

[T]he [Copyright] Act expressly provides for the transfer of a copyright by contract, will "or by operation of law." ([17 U.S.C.] §201(d)(1).) Consequently, notwithstanding that the copyright "vests initially" in the authoring spouse (§201(a) ... ), the copyright is automatically transferred to both spouses by operation of the California law of community property.

195 Cal. App. 3d at 774; cf. In re Marriage of Heinze, 257 Ill. App. 3d 782<http://links.casemakerlegal.com/states/IL/books/Case_Law/results?ci=14&search%5bCite%5d=257+Ill.+App.+3d+782&fn=Washington%20Community%20Property%20Deskbook>, 197 Ill. Dec. 506<http://links.casemakerlegal.com/states/IL/books/Case_Law/results?ci=14&search%5bCite%5d=197+Ill.+Dec.+506&fn=Washington%20Community%20Property%20Deskbook>, 631 N.E.2d 728<http://links.casemakerlegal.com/states/IL/books/Case_Law/results?ci=14&search%5bCite%5d=631+N.E.2d+728&fn=Washington%20Community%20Property%20Deskbook> (1994) (common-law state that used community property principles at divorce awarded share of copyright royalties to nonauthor spouse). In Rodrigue, although not rejecting the approach taken in Worth, the court adopted an "analytically distinct" rationale. It held that under Louisiana law, the Copyright Act could coexist with Louisiana community property law if the right to manage and transfer the copyright (the "usus" and "abusus" rights) were reserved to the author spouse, but the "usufruct" right to enjoy the income produced by the copyright was awarded to the community. Rodrigue, 218 F.3d at 437-38 & n.26. In this way, the court concluded that preemption could be avoided. Id. at 439-42. It found support for this analysis in Louisiana law because that law allowed community property items "registered" or "issued" in the name of only one spouse, such as checks, cars, and partnership interests, to be exclusively managed by that spouse, notwithstanding the community's economic half interest in the item. Id. at 438. See generally 1 Melville B. Nimmer & David Nimmer, NIMMER ON COPYRIGHT Ch. 6A (2012) [hereinafter NIMMER]. See also Dane S. Ciolino, How Copyrights Became Community Property (Sort Of) Through the Rodrigue v. Rodrigue Looking Glass, 47 Loy. L. rev. 631 (2001) (arguing that the Fifth Circuit's analysis in Rodrigue failed); J. Wesley Cochran, It Takes Two to Tango!: Problems with Community Property Ownership of Copyrights and Patents in Texas, 58 BAYLOR L. REV. 407, 443 (2006) (arguing that the Rodrigue court effectively held that the copyright was owned by the creating spouse as separate property even though the "fructus" or income produced by that property was community property).

Even assuming that the Fifth Circuit's analysis worked under Louisiana law, it does not follow that it comports with Washington law. Louisiana, like Texas, recognizes the propriety of "exclusive management" of some kinds of community property, so treatment of copyrights as such "exclusive management" property did not pose a serious conflict under state law. Indeed, the Fifth Circuit noted that if Louisiana's usual "equal management" rule "were to be applied across the board to copyrights created by one spouse in community, ... an irreconcilable conflict with the author-spouse's five exclusive §106 rights of reproduction, adaptation, publication, performance, and display would result." Rodrigue, 218 F.3d at 438. Unfortunately, there is generally no similar "exclusive management" rule available under Washington law, and so characterization of copyrights as community property could run afoul of federal law. The only portion of Washington's management regime that might offer some support for an exclusive management approach is RCW 26.16.030<http://links.casemakerlegal.com/states/WA/books/Revised_Code/browse?ci=14&codesec=26.16.030&title=26&fn=Washington%20Community%20Property%20Deskbook>(6), which reserves to a spouse who is the sole manager of a community property business to make management decisions "in the ordinary course of such business." See Chapter 4, §4.6. A court might be persuaded to apply this section of the RCW, by analogy, to copyrights. But this strategy would still need to confront the "ordinary course of business" qualifier. Sale or assignment of a copyright might not qualify as being in the "ordinary course" of the "business" of managing the copyright unless the copyright were, itself, held as an asset of a community business.

There are three possible ways to avoid this result. First, Washington courts could adopt the reasoning of In re Marriage of Worth and hold that Washington community property law works an automatic "transfer" of copyright to the community as "joint authors" by operation of law. As pointed out by Nimmer, however, when considered in the context of other provisions of the Copyright Act, the "imputed transfer" doctrine of Worth may also require a finding that an author spouse constructively consents (upon marriage) to a protan to transfer to the non author spouse of his or her rights under copyright law. See 1 NIMMER §§6A.03[C][2][b], 6A.04. Washington courts may have the authority to so interpret Washington law of marriage and community property, but they have clearly not done so yet.

This brings us to the second solution: Washington law could be amended to confer on an author spouse the exclusive right to exercise those managerial rights that the federal Copyright Act confers upon authors, while reserving to the community the economic values derived from such exclusive management. The Rodrigue case, arising under Louisiana law, depended upon such an exclusive management right in Louisiana. Such a right does not yet exist in Washington, but could be created legislatively. Perhaps it could also be recognized judicially, as an interpretation of Washington's management statute, to avoid rendering state community law unconstitutional as to copyright. Nimmer suggests that such a result might be reached by a suitable judicially crafted presumption about the consent that accompanies marriage: "[T]he courts could presume that the author-spouse's consent to sharing author status is contingent on the non author-spouse's consent to ceding full authority over disposition of the copyright to the author- spouse." 1 NIMMER §6A.04, at 6A-26. Some additional support for such a result under Washington law might be found in the management restrictions on partnership interests that are community property because non partner spouses have no rights to transfer and/or manage the partnership share. RCW 25.05.205<http://links.casemakerlegal.com/states/WA/books/Revised_Code/browse?ci=14&codesec=25.05.205&title=25&fn=Washington%20Community%20Property%20Deskbook>-.210<http://links.casemakerlegal.com/states/WA/books/Revised_Code/browse?ci=14&codesec=25.05.210&title=25&fn=Washington%20Community%20Property%20Deskbook>. See also §3.1(7), above.

Finally, Congress could amend the Copyright Act to recognize, expressly, marital property rights.

Until one of these solutions is accomplished, there will continue to be uncertainty in Washington as to the characterization (and divisibility) of copyrights. Cf. Westmorland v. Westmorland, NO. C07-1435MJP, 2007 WL 4358309 (W.D. Wash. Dec. 10, 2007) (district court dismisses for lack of federal jurisdiction a copyright holder's attempt to enjoin his wife from seeking and/or obtaining a share of his premarital copyrights during dissolution proceedings).


Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of John J. Sullivan, Esq.
Sent: Friday, March 27, 2020 10:50 AM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Postmortem Handling of a Copyright?


Listmates:

I have a client who died. He had written a book, still in publication, late in his life. The copyright is in his name alone.

His estate plan was based upon a revocable trust and pour-over will here in WA.

The last ten years or so he remarried (after his Co-Grantor of the RLT died) and split his time between WA and NV (both CP states).

My initial questions are basic:


  1.  Does spouse during the writing of the book have a CP interest in the copyright?
  2.  How is the copyright handled? Pass to the trust under the pour-over will/Small Estate Affidavit?
  3.  Any experience valuing one?

Thanks for any experience, insight or referral to learned writings.

Best regards,
John J. Sullivan<mailto:dlyons at lyonslawoffices.com>,
Attorney

Lyons | Sullivan
10655 NE 4th Street, Suite 704
Bellevue, WA  98004
425·451·2400 tel 425-451-7385 fax
www.dljslaw.com<http://www.dljslaw.com/>

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