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The inheritance of IP rights

29 February 2024

The inheritance of IP rights

Inheritance of IP rights is inherently complex and varies from country to country. In some countries, it even varies from person to person based on religion. Espie Angelica A. de Leon discusses the various legal frameworks, including the challenges and the necessary planning.

Can intellectual property rights be inherited? Yes, they can.

“Copyrights are categorized into moral rights and economic rights. The economic right of copyright is inheritable, but the moral right belongs exclusively to the author and cannot be inherited according to Article 21 of the Taiwan Copyright Act,” said Crystal Chen, a partner at Tsai, Lee & Chen in Taipei.

“For copyrights, only economic rights and the right to publish the works can be inherited. Inheritance of copyright is not only regulated for works created by one person but also applies to works created by co-authors,” added Chi Lan Dang, an associate at Tilleke & Gibbins in Hanoi. According to her, organizations can also inherit IP rights in Vietnam, as long as the will specifies it. Moreover, inheritance extends to the right to register or file applications for IP protection. In Vietnam and Taiwan, heirs can inherit these rights if they meet the respective registration conditions.

“The inheritor shall have no locus standi against any third party unless the patent application has been filed in the name of the inheritor at the time of filing, or a request of recordal of changing the applicant has been filed with the Taiwan Intellectual Property Office (TIPO),” Chen explained. “If the details of inheritance are not provided in the patent, trademark or copyright acts, one should refer to the provisions of the civil code for the relevant rights or obligations,” she added.

In India, patents, trademarks, copyrights and trade secrets are considered to be movable properties, and the rules of law applicable to the ownership and devolution of movable property apply to IPs, said Pravin Anand, managing partner at Anand & Anand in Noida. “The inheritance laws will only come into play when the IP right in question is a personal property. Courts in India have ruled that IP disputes amongst family members ought to be treated as a property dispute and all legal heirs to have equal rights to use the IP.”

Inheritance rights in India are governed by two sets of laws: the Indian Succession Act and the personal laws based on the religion of the person. Application of these laws will depend upon whether the IP right holder died with a will, in which case there will be a testamentary succession of IP, or without a will, in which succession of IP will be intestate.

IP in estate planning, last wills and trusts

To allow inheritance, the IP right owner should execute a last will as part of succession planning. Careful successional planning includes establishing trusts and estate planning strategies for the IP assets involved in succession, among others. Mary Wendy Duran, a senior partner at Duran & Duran-Schulze Law in Manila, emphasizes that these assets can hold significant value and income potential. Without a clear plan, they might be distributed according to default rules, potentially against the owner’s wishes.

“For example, a patent may be the subject of extant licensing arrangements that produce consistent revenue streams, and copyrights along with trademarks possess the potential to continue to yield economic returns well beyond the life of the IP owner,” she said. “Absent a comprehensive estate plan, these IP assets may become subject to default rules of intestate succession, potentially contravening the decedent’s distributive preferences and could lead to suboptimal administration of the IP assets.”

During successional planning, the IP owner should be proactively involved in identifying and documenting all his IP assets. He should also specify how they should be handled, whether through trusts or other means. If he decides to establish a trust, he should provide instructions for the administration of these assets. These instructions must cover licensing, selling or otherwise managing the IP assets, among others.

 “Likewise, it is imperative that the IP owner engages in a discourse with the intended beneficiary or beneficiaries of his IP assets, ensuring they are informed and assent to their prospective administration and management thereof,” said Duran. “Such dialogue will equip them for the responsibility of safeguarding the IP owner’s creations posthumously.”

In India, where the Indian Succession Act governs testamentary succession, making a will is also strongly advised for IP owners. However, this law does not apply to Muslims. Family settlement agreements are also common practice to clarify the distribution and management of IP assets among heirs, explained Anand.

“It is imperative that wills and the manner of use, territory of use, scope of use of IP is carefully elaborated upon prior to the death of the individual since too much division of IP between multiple stakeholders may also negatively impact the valuation of the IP. Every decision, including on protection, scope of protection, enforcement, etc., has a significant effect on the value of the IP,” said Anand.

However, in Taiwan, IP rights owners are not required to act before death. “An inheritor, however, should be aware that, for patent and trademark, the inheritance shall have no locus standi against any third party unless it is recorded by the TIPO. On the other hand, the economic right of copyright will be automatically inherited, so the copyright inheritor does not need to take any action,” Chen said.

In the absence of a last will and testament

In the event that an IP owner dies without a will, the fate of these rights varies depending on the legal system of the country in question.

In Vietnam, IP rights are subject to division according to the law. If there is no heir or if the heir refuses to receive the inheritance or is ineligible to do so, the rights automatically transfer to the state. On the other hand, Taiwan’s Civil Code dictates the order of inheritance. Spouses, lineal descendants by blood, siblings and grandparents are entitled to inherit, and if no eligible heirs exist, the IP rights are extinguished upon the right holder’s death. Similarly, the Philippine Civil Code also prioritizes compulsory heirs and the same transfer of rights if no lawful heirs exist.

Meanwhile, in India, the rules vary depending on the family’s religion. Generally, the spouse is the first to inherit, followed by the children and then close relatives. For Buddhists, Jains, Sikhs and Hindus, succession follows the Hindu Succession Act, while for Christians, succession follows the Indian Succession Act. Muslims in India have their own laws on succession based on tenets of Islamic law. 

Anand added that the Indian Succession Act prohibits the bequeathment of property in perpetuity, ensuring it passes to further legal heirs per the inheritance laws. He also emphasized that while personal laws differ based on religion, they generally operate similarly, ensuring that property is passed down to legal heirs according to inheritance laws.

The challenges of inheriting IP rights

  • No mention of IP rights in the last will or agreement. This will lead to confusion and difficulty in enforcing the rights. In the document, IP matters should be mentioned, defined separately and in detail.
  • Family members may challenge the will on different grounds. “In India, inheritance issues are very complex, and wills are subjected to challenge by family members,” said Anand. “The will may be challenged on the grounds that it was improperly executed, or on the genuineness of signatures of the executor and/or witnesses.”
  • Depositions or the exercise of the IP right held in common are prone to dispute. Chen said: “According to the civil code, when the IP right owner dies and more than one person are entitled to inherit, the IP right is owned in common by all inheritors before its partition. Any deposition or the exercise of the right held in common shall be made with the consent of all the inheritors, which is prone to disputes.”

In India, the court may refer to the family settlement agreement or may follow the laws of inheritance. “Thus, in family disputes, where the IP is devolved upon more than one heir, specific covenants should be drafted to divide the IP, the nature of business and its operational jurisdiction, thus, clarifying the scope of the rights,” explained Anand. 

  • Heirs may not have the knowledge or skill to manage or enforce them. The result: Underutilization or misuse of the IP assets which may diminish their value.
  • Inaccurate identification and documentation of IP assets. Certain rights tend to be overlooked or inadequately recorded. This may lead to disputes or mismanagement of the IP assets.
  • IP valuation comes with challenges. The process is inherently complex due to its unique characteristics and the fluctuating nature of market conditions. “In contrast to tangible assets, the valuation of IP assets can be highly speculative and is often contingent on prospective profits, market possibilities and the remaining term of the IP right,” said Duran. 

Moreover, multiple stakeholders may negatively impact the valuation of IP, added Anand. Differing strategies among owners for brand management, promotion and positioning can weaken the brand’s overall strength, impacting its valuation. Additionally, controversial practices or negative publicity involving one owner can lead to negative associations, further diminishing the brand’s value.

Further, extending the brand across too many products or services that deviate from the company’s original mission or values can increase the risk of brand dilution.

  • Tax implications. There are substantial tax considerations. These involve appraisal of the estate for tax purposes upon the decedent’s or IP right owner’s demise and income tax implications relative to revenues generated by the IP assets. Strategic planning and expert advice are needed to handle these tax obligations.
  • Navigating IP transfer and registration processes in multiple jurisdictions has its own difficulties.Duran explained: “The conveyance of proprietorship of IP rights requires navigating an array of registration systems, each possessing jurisdiction-specific peculiarities. Each type of IP – be it patents, copyrights, trademarks, or trade secrets – is governed by their respective procedural protocols for transfer and recordation, which mandate scrupulous adherence to.”
  • International considerations. Different countries may have different statutory provisions on the inheritance of IP rights. The process can thus be intensive. Worse, it can be financially draining as well.
  • Conflicting regulations on the validity of the IP subject to inheritance. In Vietnam, according to Article 95 of the IP law, a protection title is terminated when the owner no longer exists. However, under the law on notarization and authentication, heirs must prove the continued existence and legality of the inheritance left by the deceased during the inheritance declaration process. This verification challenge can hinder the declaration and division of the inheritance, explained Dang.

She related a case their firm handled involving the trademark rights of a famous French designer who had passed away. “We have faced difficulties in renewing the validity of his trademarks, which were due to expire when the lawful legatee had not yet been decided by the court. Theoretically, his IP rights have been terminated since his death. However, there is a time gap between such date and the time the IP rights are transferred to the heirs, in which the status of the IP titles are uncertain, causing problems to some procedures and actions such as renewal, license, etc.,” said Dang.

  • Continuing legal disputes or claims in relation to the IP assets. This will force successors-in-interest to engage in intricate legal contests which can be both financially and psychologically taxing.

According to Duran, the handling of Elvis Presley’s estate after his death exemplifies the inherent value and complexities involving post-mortem management of IP assets. Presley’s portfolio of IP assets included his image, name and likeness, in addition to music royalties. 

Upon his demise on August 16, 1977, Presley’s estate was hounded with enormous financial problems, but thanks to the strategic handling of his executors, particularly his former wife Priscilla Presley, critical decisions were made and solutions were brought to the table.

Among the most notable of these solutions is the popular tourist destination that is Graceland, Presley’s Memphis, Tennessee, home. Converted into a museum, Graceland has become a lucrative source of revenue generated from the throngs of tourists who visit the property, eager to see the legendary singer’s abode, cars, gold records, dazzling costumes and other memorabilia. 

Furthermore, establishing Elvis Presley Enterprises (EPE) was pivotal in managing his IP assets. “The continued expansion in the commercial utilization of Elvis’s image and proprietary marks, by venturing into new markets and modern media platforms, further escalated the estate’s value and ensured that his legacy continued to provide financial benefits accruing to his heirs,” explained Duran.

In 1993, Presley’s sole heir, Lisa Marie Presley, established the Elvis Presley Trust, of which she was owner and board chair until 2005. Her mother Priscilla and the National Bank of Commerce were named co-trustees. The living trust was created to manage Graceland, EPE and the rest of Presley’s estate, further boosting its continued success and prosperity.

“Lisa Marie Presley played a pivotal role in the consummation of the sale of a predominant stake in EPE, encompassing the stewardship of Elvis’s name, likeness and image, musical royalties, collection of photographs and other investments,” said Duran. “This strategic divestiture reflected an ingenious appreciation for the intrinsic attributes of IP assets, adeptly leveraging their economic potential while maintaining substantial influence and perpetuating the homage to her father’s illustrious legacy.” 

Many people aren’t aware that inheritance of IP rights is possible and that it comes with complications. Many more are probably clueless about IP to begin with. But the fact remains: Yes, you may pass on your IP rights to someone or an organization as a legacy. 

The key is getting the right information about IP and the laws in your jurisdiction, having the right preparation to see to it that such inheritance is achieved and the heir(s) having adequate knowledge, and skills to be able to manage the IP assets and make these work for their financial benefit.

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