When Does an Idea Become an Asset and When Does an Asset Become Subject to Marital Property Division in Maryland?

Back in the 1990s, a famous politician once responded to a question under oath by noting that “it depends on what the meaning of ‘is’ is.” While that answer might be puzzling to some, the reality is that, in the law, sometimes outcomes hinge upon small phrases or even single words, and the very precise definition of those terms. The outcome of a Florida case not too long ago hinged upon what the definition of a “sale” was. Recently, here in Maryland, the outcome of one ex-wife’s case alleging her ex-husband violated the couple’s marital settlement agreement rested squarely upon two things:  whether a thing qualified as an “asset” and whether that asset had an established, non-speculative value. All of these very nuanced details had the potential to have major consequences, and they highlight why it is so important to have skilled Maryland divorce counsel on your side.Legal News Gavel

The couple, R.G. and S.G., began divorce proceedings in 2012 after 25 years of marriage. Seven months after the wife filed her divorce petition, the husband had a dream. That dream was the origin of a groundbreaking invention – a flossing toothbrush. The husband consulted one of his former patients, a businessman, about the invention, but he did not consult a patent attorney right away. Allegedly, the husband was trying to avoid leaving a “trail” that could provide the wife with an opportunity to claim the invention as a marital asset.

The couple entered into a mediated marital settlement agreement on Nov. 18, 2013. Sixteen days later, the husband contacted a patent attorney. In late January 2014, the divorce became final. A week later, the husband filed a provisional patent application for his toothbrush invention. The following November, the wife brought the husband back into court, asserting that he violated the settlement agreement when he failed to disclose the idea for the invention. Specifically, the wife alleged that the husband violated the “Disclosure” paragraph, which required that each spouse disclose all of the assets in the litigation. An improper non-disclosure, according to the agreement, meant that the injured spouse would receive 50% of the value of the undisclosed asset.

The question in this case was, what is an asset? When does a thing become an asset, and even if it was an asset, was the husband’s non-disclosure a violation of the agreement? The husband argued that the idea for the invention was not an asset and had no value as of the date that the spouses signed the settlement agreement.

The jury agreed with the wife and concluded that the “asset” was worth $2.14 million, meaning that the wife was entitled to a judgment in her favor in the amount of $1.07 million. The trial judge, however, overturned that and ruled in favor of the husband. That ruling was later upheld on appeal.

Why did the husband win and the wife take nothing from the toothbrush invention? As with many cases, it all came down to the evidence. The law says that, for a thing to be an asset, it must be “capable of being exchanged for value.” In this couple’s case, the evidence the wife presented to the court was clearly sufficient to establish that the idea that the husband had was something that could be exchanged for value on Nov. 18, 2013, the date that the settlement agreement was signed.

The problem for the wife was that this was not her only obligation in her hearing. While she had ample proof the idea was an asset, her proof did not establish what the value of the asset was as of Nov. 18, 2013.

In the absence of substantial proof on that point, there simply wasn’t enough to support a finding that she was entitled to damages. Maryland law is very clear that “damages based on speculation or conjecture are not recoverable.” Without proof of the idea’s value, any assessment of damages would be inherently speculative, so that meant that the damages were not recoverable, and the wife was entitled to receive nothing.

For skillful and knowledgeable legal representation in your family law case, contact experienced Maryland property division attorney Anthony A. Fatemi. Our office has been helping our clients work toward productive outcomes in their divorce, child custody, and visitation cases for many years. To find out how we can help you, contact us at 301-519-2801 or via our online form.

More blog posts:

But Who Gets the JPGs? Dealing with the Distribution of Digital Assets in a Maryland Divorce, Maryland Divorce Lawyer Blog, July 27, 2018

The Circumstances and Standards Under Which One Spouse Can Receive a Monetary Payment as Part of a Divorce in Maryland, Maryland Divorce Lawyer Blog, April 13, 2018

 

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