In today's digital age, our lives are increasingly intertwined with assets called “intellectual property” (IP). IP refers to creations of the mind and includes literary, artistic, dramatic or musical works, inventions, logos and other creations that have legal protection as an intangible asset. IP comes with legal rights known as IP rights. Three of the main types of IP rights in Canada are copyrights, patents and trademarks. When it comes to estate planning, it is crucial to consider how your IP will be handled after your death. This article will discuss three of the main types of IP rights in Canada and explore why having a will is essential for dealing with IP after death and for safeguarding IP assets for future generations.
Why should you have a will?
Everyone should have a will regardless of whether they have IP. A will is a legal document that provides instructions as to how you want your assets and belongings to be distributed after your death. It ensures your final wishes are carried out by those administering your estate. You should seek an estate planning professional's advice when drafting a will, as a clear and legally valid will can help prevent disputes among loved ones over the distribution of your assets, ensure that your assets are passed on to your beneficiaries in the most tax-efficient manner, and provide peace of mind to you as the person making the will by confirming that your final wishes are known and will be honoured after your death. A will also prevents delays in settling your estate and reduces the amount of paperwork for your loved ones at a difficult time. If you have IP, a will is critical in providing direction regarding the inheritance of your IP and can ensure the legacy of your IP is not exploited after your death.
1. Copyright
Copyright provides for the exclusive legal right to produce, reproduce, publish or perform an original literary, artistic, dramatic or musical work. These works include paintings, novels, poems, software source code, designs, photographs, TV shows and symbols, names and images used in commerce, to name a few. In Canada, a work is protected by copyright law as soon as it is created and fixed in a material form, so registering a work with the Canadian Intellectual Property Office (CIPO) is voluntary. However, registration can be beneficial, as a certificate of registration is evidence that the work is protected by copyright and that the person in possession of the certificate is the registered owner.
What happens when the person who owns the copyright dies? In Canada, copyright generally lasts for the life of the author, plus 70 years after the end of the year of the author's death. Accordingly, for about 70 years following death, beneficiaries of the copyright control the use of the copyrighted works and benefit from publishing or licensing agreements related to the copyrighted works. When drafting your will, it is best practice to ensure the same individual is the beneficiary of the IP asset, such as a painting, and the IP right, such as the publishing and licensing rights. Though this is not required, it prevents disputes over the use and licensing of the IP.
Further, copyright assignments do not extend more than 25 years after your death, at which time the copyright returns to your estate. If you want an assignment made during your lifetime to extend beyond the 25 years after your death, you must include this in your will.
2. Patents
Patents apply to inventions, such as devices, products, methods and processes. An invention is not automatically protected by law, but inventions that meet the criteria for patentability can be protected through patents. A patent will be granted for inventions that are new, inventive and useful, and can also be granted for improvements to existing patented inventions.
What happens when the person who owns the patent dies? In Canada, patents protect the exclusive rights to make, use and sell inventions for 20 years from the date of the application. Accordingly, for up to 20 years following death, beneficiaries of the patent control the right to make, use and sell the invention in Canada. Further, the right to submit an application for an invention does not expire, assuming the invention is still patent-eligible. When drafting your will, you should consider whether the patent is tied to a business and if it is, your will should address whether the patent will stay with the business, be sold or ultimately be transferred to a beneficiary. If you have an invention but not a patent, you should consider assigning the right to apply for a patent (assuming the invention is patent-eligible) to a beneficiary in your will.
3. Trademarks
Trademarks are a sign or combination of signs used by a person to distinguish their goods or services from those of others, such as words, designs, tastes, textures, moving images, mode of packaging, holograms, sounds, scents, three-dimensional shapes and/or colours. If a trademark is registered at CIPO, its rights are enforceable across Canada. An unregistered trademark may only be enforceable when the owner proves the geographic area in which it has gained “goodwill” or a reputation (for example, across Alberta only).
What happens when the person who owns the trademark dies? In Canada, registrations of trademarks are valid for a period of 10 years and are renewable indefinitely upon payment of the applicable administrative fees within the required timeframe. Accordingly, beneficiaries of a trademark can retain and renew (as the case may be) their rights to the trademark indefinitely (subject to potential issues like expungement for non-use). When drafting your will, in order to avoid an unintended partial assignment of a trademark, you should leave the trademark (in respect of all of the goods or services in association with which it has been used) and any goodwill of the business to which it is attached, to the same beneficiary.
Additional estate planning considerations
A clear and legally valid will is key to ensuring your IP is inherited by your intended beneficiaries on your death, which provides your beneficiaries the right to use and benefit from the IP as they see fit for as long as it is valid. However, if your will does not leave your IP to a specific beneficiary, the IP will form part of the residue of your estate, which can result in several beneficiaries controlling the use of and benefiting from the IP. Dying without a will, or dying “intestate,” can similarly result in a large number of beneficiaries controlling the use of and benefiting from the IP. Both of these situations result in unintended beneficiaries inheriting your IP, which can create disgruntled beneficiaries, delays in estate administration, and lengthy litigation. When drafting your will, it is best practice is to ensure that your intended beneficiaries are clearly stated in a separate clause so as to avoid confusion and prevent IP from forming part of the residue.
Jimi Hendrix, one of the most famous musicians of all time, died tragically in 1970 at the age of 27 and Hendrix's estate emphasizes the issues that arise when an individual with IP dies intestate and unintended beneficiaries inherit IP. Hendrix was close to his brother, Leon Hendrix and may have intended for his estate to go to his brother upon his death. However, because Hendrix died without a will, intestacy rules applied. As a result, Hendrix's entire estate went to his estranged father. When Hendrix's father died many years later, his will excluded Leon Hendrix, thereby ensuring Leon Hendrix did not inherit any of the estate. As a result of dying intestate, Hendrix's final wishes may not have been honoured, his estate has been embroiled in litigation for decades, and his estate has further been accused of undermining and exploiting Hendrix's artistic legacy through the exercise of IP rights, which some individuals have claimed Hendrix would never have approved. Since he died without a will, Hendrix lost control over the legacy of his IP after his death.
As a final note, upon death, certain IP may be considered capital property, which comes with additional tax obligations related to capital gains. When drafting a will, you should keep tax consequences in mind and should seek the advice of an estate planning professional to set up your estate as tax-efficiently as possible.
Why you should consult with an expert in IP and estate law:
We recommend that you speak to an IP professional about your IP and how you can best protect that IP (even beyond the context of your will), so that you can understand and maximize your IP rights. Additionally, speaking to an estate planning professional about including IP clauses in a will is crucial because of Canada's unique legal landscape regarding estate and IP laws. Here's why consulting with an expert is important:
1. Navigating IP and estate law
Canada's legal framework for IP is governed by federal law, while wills and estates fall under provincial and territorial jurisdiction.
A professional can ensure your will aligns with the specific laws applicable in your province or territory while addressing federal IP regulations.
2. Preserving IP rights
Beyond your will, a professional can help ensure that you protect your IP while you're still alive.
Then, properly transferring these rights in your will ensures that your heirs can benefit from royalties or licensing for many years to come (depending on the IP and subject to other potential issues like non-use of a trademark).
A professional can help you structure clauses to manage this timeline effectively.
3. Clarity on ownership and transfer
IP ownership can be complex, especially for creators who collaborated with others or whose rights are tied to employment contracts.
An expert can clarify ownership and draft precise clauses to transfer your IP rights without ambiguity.
4. Avoiding probate complications
In Canada, wills often go through probate, where assets are validated and distributed. Poorly drafted IP clauses can lead to disputes, delays or additional costs.
A professional ensures that your IP clauses are clear and legally enforceable, streamlining the probate process.
5. Protecting revenue streams for heirs
IP can generate ongoing revenue, such as royalties or licensing fees. Proper planning ensures that these income streams are protected and managed effectively for your beneficiaries.
A professional can advise on strategies like setting up a trust to handle income distribution and taxes.
6. Minimizing tax implications
Canadian estate law involves taxes on income generated by the estate and potential capital gains taxes on asset transfers, including IP.
An expert can help mitigate tax liabilities through estate planning tools like trusts, charitable donations or strategic bequests.
7. Avoiding family disputes
IP assets can be a source of contention among heirs, especially if their value or ownership isn't clearly outlined in the will.
A professional can ensure clear, equitable distribution of your IP, reducing the risk of disputes.
8. Adapting to legal nuances
Canada's IP laws, such as those governing moral rights for an author of a work, may require specific provisions in your will. For example, moral rights under Canadian copyright law cannot be transferred but can be waived.
A professional understands these nuances and ensures they are addressed appropriately.
9. Planning for complex scenarios
If your IP is tied to a business, co-owned or registered internationally, its transfer may involve additional considerations.
A professional can navigate these complexities and create a plan that accounts for all potential scenarios.
10. Ensuring peace of mind
By consulting a professional, you can be confident that your IP assets will be protected, managed and distributed according to your wishes, providing for your heirs and preserving your legacy.
About Dentons
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.
