Category: Intellectual Property

  • Dividing Intellectual Property & Software in NY Divorces

    Dividing “Ideas” in Divorce: The Ruling in D.P. v S.P.

    How New York courts value and split complex intellectual property, patents, and software code.

    Valuing a bank account in a divorce is easy. Valuing an invention, a patent, or a line of code is much harder. In the recent decision of D.P. v S.P. (2026 NY Slip Op 50129(U)), the New York courts provided a critical roadmap for how complex Intellectual Property (IP) is treated during the “Equitable Distribution” phase of a marriage.

    Infographic: Visual sketchnote of the D.P. vs S.P. case. Shows icons for computer code, valuation methods, and a 70/30 split pie chart.
    Figure 1: Visual Digest of D.P. v S.P. – From Valuation to Distribution
    View Text Description of Case Summary

    The Asset: Software that helped in the hiring process. Ruled as Marital Property because it was developed during the marriage using marital funds.

    Valuation Method: The court used a “Double-Pillared” approach:
    1. Income Approach: Projected royalties over 10 years.
    2. Market Approach: Sales prices of similar forensic technology startups.
    Note: A discount was applied for future taxes (Embedded Capital Gains).

    The Split (70/30): The court awarded 70% to the Husband (creator) and 30% to the Wife. Why? The IP is an “Active Asset” requiring the husband’s continued labor to maintain value.

    The Resolution: A “Distributive Award.” The Husband pays the Wife a cash lump sum for her share, rather than making them co-owners of the patent.

    1. The Asset: What was the Intellectual Property?

    The core of the dispute involved proprietary software and related patents developed by the husband (the titled spouse) during the marriage. Specifically, this IP consisted of software that helped in the hiring process (the SCAnDi Connection).

    The Classification: The Court ruled the IP was Marital Property. Even though the husband was the listed “inventor” and wrote the code, the work was performed during the marriage, and marital income was used to fund the initial patent filings.

    2. Valuation: How to Price an “Idea”

    Valuing IP is notoriously difficult because its value often lies in future potential rather than current cash. The court utilized a “Double-Pillared” approach:

    • The Income Approach: A neutral forensic accountant projected the potential royalty streams and licensing fees the software would generate over the next 10 years.
    • The Market Approach: The court looked at what similar forensic technology startups had been sold for recently.
    Tax Impact: The court applied a discount for “Embedded Capital Gains,” acknowledging that whoever keeps the asset will eventually have to pay taxes on that value.

    3. The Split: Equitable, Not Equal

    New York is an Equitable Distribution state, which means “fair,” but not necessarily “equal” (50/50). In this case, the court did not split the IP down the middle.

    The Result: The court awarded 70% to the Husband (the creator) and 30% to the Wife.

    The Reasoning: The court categorized the IP as an “Active Asset.” Unlike a passive stock portfolio that grows on its own, this software’s continued value depended heavily on the husband’s unique expertise, ongoing labor, and future “manual” refinements. Since he had to keep working to make it valuable, he was entitled to a greater share.

    4. Why the Non-Titled Spouse Got 30%

    The court identified four main factors to justify the 30% award to the Wife, highlighting that contributions to a marriage are not just financial:

    1. Direct Contributions: She assisted in the early days by proofreading patent applications and managing the business’s initial bookkeeping.
    2. Indirect Contributions: By handling the primary care of the couple’s three children and managing the household, she provided the Husband with the “time and freedom” necessary to innovate.
    3. Sacrifice of Career: She put her own professional advancement on hold to support the “family venture” of developing this technology.
    4. The “Active” Nature of IP: As noted above, the necessity of the creator’s future work prevented a higher (50%) award.

    5. The “Final Gavel” (The Holding)

    To avoid forcing divorced spouses to remain business partners, the Court ordered a “Distributive Award.” Instead of making the couple co-owners of the patents (which would lead to endless future conflict), the Husband was ordered to pay the Wife a lump sum representing her 30% share of the appraised value. This allowed him to retain full ownership and control of the technology while she received her fair equity in cash.

  • Understanding Intellectual Property: Protecting Your Ideas

    Understanding Intellectual Property: Protecting Your Ideas

    A guide to Trademarks, Copyrights, Patents, and Trade Secrets for business owners.

    For many entrepreneurs, the most valuable assets they own are not physical equipment or real estate, but intangible ideas. Understanding Intellectual Property (IP) is critical to safeguarding the unique identity and creative output of your business.

    Infographic: The Four Types of Intellectual Property - Copyright, Trademark, Patent, and Trade Secret.
    Figure 1: Distinguishing Between Different Forms of IP Protection
    View Text Summary of Graphic

    Copyright: Protects original works of authorship (books, music, software). Protection is automatic upon creation, but registration adds legal benefits.

    Trademark: Protects brand identifiers (logos, names, slogans) that distinguish goods or services in the marketplace.

    Patent: Protects inventions and discoveries. It provides a limited-time monopoly in exchange for public disclosure.

    Trade Secret: Protects confidential business information (recipes, client lists) that provides a competitive edge.

    1. The Core Concept: The Right to Exclude

    A common misconception is that owning Intellectual Property gives you the “right to use” your creation. In reality, IP rights are negative rights: they give you the right to exclude others from using your protected work without your permission. Securing these rights is what allows you to build a moat around your business and prevent competitors from profiting off your hard work.

    2. Trademarks: Your Brand’s Shield

    Trademarks are the most essential form of protection for building a brand identity. A trademark protects words, phrases, symbols, or designs that identify the source of your goods or services. Think of the Nike “Swoosh” or the Apple logo.

    Registering a federal trademark with the USPTO provides powerful benefits:

    • Nationwide Protection: It puts the entire country on notice that you own the mark.
    • Legal Leverage: It gives you the ability to sue for infringement in federal court.
    • Asset Value: A registered trademark is an asset that can be licensed, franchised, or sold.

    Before launching a brand, it is crucial to conduct a comprehensive search to ensure you aren’t infringing on an existing mark.

    3. Copyrights: Protecting Creative Output

    Copyright protects “original works of authorship” fixed in a tangible medium. This includes everything from the code that runs your app to the text on your website, your marketing videos, and your training manuals.

    While you technically own the copyright the moment you create the work, registration is key. You generally cannot file a lawsuit to stop someone from stealing your content unless you have registered that work with the U.S. Copyright Office. Registration is an accessible and cost-effective way to secure your creative assets.

    4. Patents and Trade Secrets

    Patents are for inventions—new machines, processes, or compositions of matter. One can get a Design or a Utility Patent. They are powerful but can be expensive and time-consuming to obtain. They grant a limited monopoly (usually 20 years for a utility patent and 15 years for a design patent) to exclude others from making or selling your invention.

    Trade Secrets cover confidential information that gives you a competitive advantage, such as the Coca-Cola formula or Google’s search algorithm. Unlike patents, you don’t register them; you protect them through strict internal contracts (NDAs) and security measures.