IP’s place in relationship property in spotlight

Sally Peart. PHOTO: ODT FILES
Sally Peart. PHOTO: ODT FILES
Have you thought about what would happen to your intellectual property (IP) rights if your marriage or relationship ends?

When couples separate, resolving relationship property usually revolves around the tangible items of property such as buildings, vehicles and personal effects, together with money in bank accounts, investments and business interests.

Couples rarely direct their minds to intangible assets such as copyright, trademarks and rights to trade secrets unless they are part of a wider business operation which is carried on by one or both partners in the relationship.

One of the possible reasons for this being overlooked is that people may not immediately realise that IP rights are also property which may be relationship property for the purposes of the Property Relationships Act 1976 (PRA).

The PRA creates rules for how the property of couples (the relationship property) is to be divided up when the couple separates and there is a presumption of equal sharing.

This is usually achieved by the couple entering into an agreement (commonly called a separation agreement) and each must be independently advised by a lawyer.

Where business assets and interests are owned by one or both partners, these agreements can be complex and may involve lawyers with a background in business law to assist one or both family lawyers advising the couple.

Where agreement cannot be reached without the involvement of the court, things can get complicated. Relationship property matters are initially dealt with by the Family Court, and it would be unusual for Family Court lawyers and judges to have an in-depth knowledge of IP matters.

The recent High Court case of Palmer v Alalaakkola has demonstrated the confusion that can arise when differing principles of law collide in an unintended way.

Ms Alalaakkola is a painter. During her 20-year marriage to Mr Palmer she created a number of original paintings or works. Now that they are separated, one of the issues the parties have been unable to resolve is the status of copyright in the paintings as relationship property.

The paintings themselves are straightforward: they are tangible assets capable of being bought and sold and having a value attributed to them. As Ms Alalaakkola created them in the course of her relationship with Mr Palmer, they are relationship property.

However, there are other rights associated with the paintings. As the creator of them, Ms Alalaakkola has moral rights in the paintings, which include the right to be attributed as the creator of the work, and the right not to have them used in a derogatory manner. These moral rights can never be taken away from her.

The Copyright Act also grants owners of original works the exclusive right (copyright) to do certain things in relation to these works. As the creator of the work, under the Copyright Act Ms Alalaakkola is also the owner of the copyright, unless certain exceptions apply (for example, where she is creating them in the course of her employment by another). These rights include the right to make and sell copies, to make adaptations of the work and to license others to do the same. Unlike the moral rights, these rights are able to be sold or given to others, often while still being retained by the copyright owner. For example, Ms Alalaakkola could license a dealer to distribute prints of her paintings in Europe while she retains the rights to do the same in Australasia. It is these rights which Mr Palmer claims are relationship property.

The dispute started in the Family Court, which decided that the copyright in the paintings was Ms Alalaakkola’s separate property and was not relationship property.

One of the reasons for the judge’s finding was the concern that if both Ms Alalaakkola and Mr Palmer had the right to make and sell copies of the works in future, they would be in competition with each other which was contrary to the clean break provisions of the PRA. Mr Palmer appealed to the High Court, which found that the copyright in the paintings was created during the relationship and was relationship property. He could not see the distinction between the skill of the artist and other skills that parties bring to a relationship. The outcome was that the paintings and the copyright in them is relationship property and should be subject to the equal sharing provisions of the PRA.

Ms Alalaakkola did not participate in the High Court proceedings but has now been granted leave to appeal the decision to the Court of Appeal. The outcome will be interesting as this case is the first to directly address the issue of copyright in the context of a relationship property claim.

The approach of the High Court seems logical and consistent with the general approach of the courts to relationship property and the presumption of equal sharing. The outcome in this case has caused considerable comment in the media, and particularly from the arts community, some of whom see it as an infringement of their rights to ownership of the product of their creativity.

In my view, this approach undermines the inherent value in creative works by suggesting they should be treated differently to, for example, rights in something more prosaic such as an industrial design which is also capable of deriving revenue from reproductions.

And what if the artist had been supported in their efforts by a spouse who had sacrificed their own career to raise children? Would it be fair for the artist to retain all rights to commercialise their copyright as their separate property?

The case does demonstrate the importance of couples addressing issues of relationship property in an appropriate agreement at the commencement of their relationship. This is important where they may have good reason not to want equal sharing of relationship property, or to want to agree in advance what is each of their separate property. This could be because the parties have children from other relationships, or have unresolved property issues from a prior relationship.

Whatever the outcome of this appeal, no doubt lawyers will be asking more questions now about IP rights generally when advising clients on relationship property matters.

  • Sally Peart is a partner in Marks & Worth Lawyers and specialises in intellectual property. She regularly advises on complex issues involving the intersection of estate law, relationship property and commercial/IP interests.

 

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