A recent decision from the Court of Appeal has clarified the law on how copyright will be treated in the context of relationships that come to an end. 

The Court of Appeal has addressed a question many artists have been deeply concerned about, namely whether copyright in artwork is relationship property and if so, how it should be treated vis a vis the other partner in the relationship. Notably, the Court of Appeal has confirmed that copyright created during a relationship is relationship property and therefore subject to the rules of division prescribed under the Property (Relationships) Act 1976 (which require, as a general rule, an equal division of relationship property between the parties to a relationship). 

What is copyright? 

For those unfamiliar with copyright, it's an intellectual property right that grants owners the exclusive right to control the copying and distribution of original works. Such works can encompass a wide range of creative expressions, including art, music, literature and film. Other works can also qualify for copyright, such as engineering drawings, architectural plans and source code. Copyright is an intangible asset that is separate from the work itself.

Copyright protection applies as soon as a work is created and fixed in a tangible form, such as written on paper or saved in a digital file. There is no method of registering copyright in New Zealand. Protection is automatically granted and in New Zealand copyright lasts for the creator’s lifetime, plus an additional 50 years after their death. During this time, copyright owners have the exclusive right to control how works are copied and distributed, which can include granting licenses to others.

For many creators, their copyright works represent a significant investment of time, skill and effort. These works may also serve as a crucial source of income. Many artists will have strong emotional attachments to their works, making the ability to maintain control over their creations deeply personal.

What should you do if you wish to protect your copyright in the context of a relationship breakdown?

This Court of Appeal decision is an important reminder to artists, writers and other creators that if they consider their copyright (and the income that they derive from it) to be their separate property (and not relationship property) then they need to enter into a contracting out agreement with their partner to record this.

A contracting out agreement is an agreement under which parties to a relationship make their own rules about the ownership of their property (including copyright) and how it is to be divided if their relationship ends either as a result of separation or death. In this context, a contracting out agreement can provide that an individual’s copyright is their own separate property and theirs to retain in the event of separation or the death of either of them.

In this specific case, the Court of Appeal recognised the deeply personal nature of artworks, and decided the artist could keep her copyright, but must pay her former spouse a compensatory adjustment from other shared assets to ensure an equal division. Presumably, there were adequate other relationship property assets (in addition to the copyright) to fund this compensatory adjustment. This may not always be the case, especially if the value of the copyright is significant.

What about other intellectual property rights?

The Court of Appeal noted there is nothing under the Property (Relationships) Act to suggest Parliament intended to remove intellectual property assets from the reach of this law. This decision (and the practical implications of it) could therefore be read as extending to all forms of intellectual property, and not just copyright. Other types of intellectual property include patents, trade marks, designs and confidential information (like inventions and trade secrets).Complex issues could arise in cases where intellectual property is co-owned with other parties outside the relationship, and/or where it is licensed to others to exploit.

Are there any other important considerations?

One thing that was not addressed by the Court of Appeal (and which has instead been remitted to the Family Court) is the quantum of the compensatory adjustment to be paid to the artist’s ex-husband. The quantum as decided by the Family Court, and the calculation method used to determine it, will be important to note for advisers who are preparing contracting out agreements for their creator clients.. This is because when preparing contracting out agreements, it is important that parties to a relationship make full disclosure of their assets and the value of those assets. Unlike some assets (such as real estate) which can be valued relatively easily, valuing intellectual property and other intangible assets may prove more difficult.

Another important consideration when preparing a contracting out agreement is how often, or what events, would trigger a review of the agreement. A contracting out agreement can be set aside on the basis it is unfair and results in serious injustice. Because the value of intellectual property rights can increase (in some cases significantly) over a period of time, and new rights may be created, it is important that a balance is struck to ensure the agreement remains fair and reflective of the parties’ current circumstances whilst also not requiring the parties to undertake constant reviews or make numerous amendments to their current agreement.

Takeaways

If you are an artist, writer, filmmaker, musician or inventor then this decision will be particularly relevant to you. In some cases a creator may wish to share her or his intellectual property with a partner in the event of separation (or it may be fair to do so as a result of the particular circumstances of the relationship). However, in some cases sharing of rights will not be the intention. In such a case, a contracting out agreement will be needed. We have experts in both intellectual property and relationship property laws at Dentons. If you would like to discuss this further please reach out to us.