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What Happens to Royalties When Creators Split Up?

Royalties and copyrights are some of the most important sources of income for many creators. This is especially true for people who built a career and a catalog and plan on retiring on those funds. That’s why these forms of intellectual property (IP) can become so contentious during and even decades after a divorce.

For instance, the divorce agreement between Sonny Bono and Cher, who were married and performed together as the duo Sonny & Cher, involved some significant royalty and copyright assets. The couple reached an agreement in 1978 on what share of the assets they would respectively receive. However, despite Sonny Bono’s passing more than two decades ago, his widow Mary Bono has recently challenged his divorce agreement with Cher.

The challenge was made public when Cher filed a claim against Mary, arguing that she owes Cher $1 million in royalties. Cher’s claim was that Mary had been withholding royalties from her based on the 50% right to royalties that Sonny granted her during their 1978 divorce. Sonny agreed to transfer this stake to Cher instead of paying spousal support.

Mary, however, disagrees with Cher. Her claim is that the 50% stake has “expired,” and that amount should go to Sonny’s heirs. According to Mary, federal copyright law should supersede the agreement Sonny and Cher came to more than 40 years ago.

While this case has yet to be resolved, it raises an important issue. Royalty and copyright income can last for decades. During creator divorces, it’s crucial to understand how royalty rights and copyright ownership work. Here’s what you need to know about these types of IP, how marriage impacts their ownership, and the most effective ways to divide them if you’re preparing for potential decades of post-divorce life.

Who Owns IP in a Marriage?

The first step to dividing IP fairly is understanding how ownership is determined. In California, all assets a couple acquires during their marriage are assumed to be marital property unless a contract states otherwise. This includes intellectual property.

For example, if a songwriter writes and releases a song on their own while married, their spouse automatically has shared ownership over that song’s copyright. This also means they have the right to 50% of the song’s royalties. This is still true if the songwriter has a contract with a producer to share ownership of those rights. If the songwriter only has partial royalty rights, they and their spouse would split that amount in half.

The only way to change this is by setting up a contract between the spouses. The couple can sign a prenuptial or postnuptial agreement to change this automatic assignment of rights and ownership. For instance, creators can ask potential spouses to sign prenups awarding the creator 100% of the rights and royalties of their works.

Postnuptial agreements can even be set up after the couple has been married and written new works. These contracts are invaluable for creatives who don’t want to lose control of the IP they’ve worked so hard to create.

Dividing Copyright Ownership in a Divorce

If a divorcing couple doesn’t have a pre-existing agreement regarding IP when they choose to split, then it will need to be divided at the moment. Dividing copyrights can be particularly tricky.

The simplest solution is to divide the creator’s rights to the copyright down the middle. However, this is often the least preferable solution. The federal Copyright Act states that when copyrights have shared ownership, one owner cannot unilaterally grant retroactive or exclusive licenses to use the IP. Your spouse could potentially block your ability to license the material you created if they get ownership.

The other option is to negotiate full retention of your copyright in exchange for other assets. For instance, you could offer items such as retirement accounts or a shared home in exchange for your copyrights. This kind of negotiation gets more complicated as it relies on both parties valuing the copyrights equally. It’s best to have an experienced divorce lawyer on your side if you’re considering going this route to help you negotiate effectively.

Dividing Royalty Rights in a Divorce

Royalty rights are different from copyright ownership. Cher doesn’t own the copyrights to the songs whose royalties Mary Bono has withheld. However, she did have the right to receive royalty funds based on those songs’ performances.

That’s because royalty rights are nothing but the right to receive money when a piece of IP generates income. Many performers, including actors and musicians, give up their copyrights in exchange for the support of production companies. An actor who performs in a film doesn’t own the copyright to the final movie, but they often receive a small percentage of the money the movie earns in the form of royalty payments.

These rights can be divided and transferred more easily than copyrights. When Sonny and Cher broke up, Sonny could cede 50% of all royalty payments with ease because it didn’t grant Cher any rights to make decisions about the IP. Sonny and his heirs retained all their rights to the IP except the right to receive half of the money the songs earned.

This flexibility makes royalty rights a potential point of contention in your divorce. If you suspect that the royalty payments will grow over time, you may fight to keep 100% of your royalties. On the other hand, if you think the payments will shrink, you can offer a share of the royalties to your spouse in exchange for other assets or arrangements you prefer. The best solution for your split depends on both the IP in question and your marriage.

Don’t Lose Control of Your Copyrights or Royalties in Your Divorce

Your copyrights and royalties are a fundamental part of your income as a creator. You can protect them by working with experienced divorce lawyers specializing in divorce for entertainers. Get in touch with the experts at Kaspar & Lugay, LLP, today to discuss your situation and learn more about your options. You don’t have to lose control over your IP just because you’re getting divorced; let out team help you learn how to protect it.