[WSBAPT] Postmortem Handling of a Copyright?

[John J. Sullivan, Esq.]

Thank you Eric!

 

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>
On Behalf Of Eric Nelsen
Sent: Friday, March 27, 2020 11:09 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Postmortem Handling of a Copyright?

 

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?c
i=14&search%5bCite%5d=218+F.3d+432&fn=Washington%20Community%20Property%20De
skbook>  (5th Cir. 2000), cert. denied, 532 U.S. 905
<http://links.casemakerlegal.com/federal/US/books/Supreme_Court_Opinions/res
ults?ci=14&search%5bCite%5d=532+U.S.+905&fn=Washington%20Community%20Propert
y%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&sear
ch%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Des
kbook> , 241 Cal. Rptr. 135
<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=241+Cal.Rptr.+135&fn=Washington%20Community%20Property%20Deskbo
ok>  (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&sear
ch%5bCite%5d=8+Cal.+App.+2d+687&fn=Washington%20Community%20Property%20Deskb
ook> , 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&sear
ch%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&sear
ch%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&sear
ch%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&sear
ch%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&sear
ch%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&sear
ch%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&sear
ch%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&sear
ch%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Des
kbook> , 773, 241 Cal. Rptr. 135
<http://links.casemakerlegal.com/states/CA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=241+Cal.Rptr.+135&fn=Washington%20Community%20Property%20Deskbo
ok>  (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&sear
ch%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&sear
ch%5bCite%5d=195+Cal.+App.+3d+768&fn=Washington%20Community%20Property%20Des
kbook> , and Rodrigue v. Rodrigue, 218 F.3d 432
<http://links.casemakerlegal.com/federal/US/books/Circuit_Opinions/results?c
i=14&search%5bCite%5d=218+F.3d+432&fn=Washington%20Community%20Property%20De
skbook> . 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&sear
ch%5bCite%5d=257+Ill.+App.+3d+782&fn=Washington%20Community%20Property%20Des
kbook> , 197 Ill. Dec. 506
<http://links.casemakerlegal.com/states/IL/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=197+Ill.+Dec.+506&fn=Washington%20Community%20Property%20Deskbo
ok> , 631 N.E.2d 728
<http://links.casemakerlegal.com/states/IL/books/Case_Law/results?ci=14&sear
ch%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&c
odesec=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&c
odesec=25.05.205&title=25&fn=Washington%20Community%20Property%20Deskbook>
-.210
<http://links.casemakerlegal.com/states/WA/books/Revised_Code/browse?ci=14&c
odesec=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
<mailto:wsbapt-bounces at lists.wsbarppt.com>
<wsbapt-bounces at lists.wsbarppt.com
<mailto: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
<mailto: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, 

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

Attorney

 

Lyons | Sullivan

10655 NE 4th Street, Suite 704

Bellevue, WA  98004

425·451·2400 tel 425-451-7385 fax

 <http://www.dljslaw.com/> www.dljslaw.com

 

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