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Kim and Kanye and Valuing Intellectual Property

In recent celebrity news, Kim Kardashian and Kanye West have decided to get divorced. Undoubtedly, the couple signed a prenuptial agreement that handles much of the property division claims. But one aspect that is interesting about their eventual property settlement, is the issue of royalties. It is likely that the couple have a provision about their royalties and other intellectual property (IP) in their prenuptial agreement, but let us consider how it would play out in North Carolina if they did not.

Kanye West is a musician-turned-fashion designer-slash-reality-TV-co-star. He has been actively making millions on his talent and stardom since the late 90s and early 2000s, making music, clothes, and other media content. In that time, he has probably acquired extensive deals regarding his music, including royalties. Kim Kardashian is also a major reality TV star and owns interest in fashion and cosmetics companies. She very likely has many deals for royalties for her IP as well.

So first, what are royalties? Generally, they are contract provisions that provide payments for the use of your property. There are many different ways to set royalties. A simplified example would be Kanye allowing Spotify to use his music to promote the platform in exchange for a royalties provision wherein Spotify pays him per play for the next five years. In that context, his royalties are ongoing until the five years are up.

Now in the divorce context, how should those royalties be considered in equitable distribution? First, the IP must be classified as either marital or separate property. Generally, if the IP was acquired during the term of marriage, then it is marital property. Next, the Court needs to assign a value. The valuation of IP is sometimes difficult to arrive at. But in the case of royalties, the direct income can be used as a starting point. The market value price-per-play of a song might be a starting point when determining the worth of the song. The Court could presumably also treat the royalties as a wholly separate line item and just divide the proceeds of the royalties projected for any time remaining on the contract.

The division of intellectual property is complex. Pre-nuptial or property settlement agreements are probably the best way to handle it. Kim and Kanye likely had provisions in a prenuptial that outlined that each of their IP would remain separate, and new IP acquired during the marriage would be separate, or something along similar lines. But it would be quite interesting to see how a Court would decide on the value of songs, image rights, and trademarks.