Teller v. Teller

Supreme Court of Hawai'i · Family Law

Family LawProperty DivisionIntellectual Propertyequitable distributionintellectual propertytrade secretspatentsfair market value

Facts

Howard invented and promoted electronic products before and during his marriage to Mei Li, including a weather radio and weather-alert technology. Before marriage, he had developed trade-secret information relating to those inventions; after marriage, he obtained the Circuit Patent and the Tuner Patent. He later sold his companies and related rights under the Zinta Agreement, and also arranged for payments through Paignton tied to the Circuit Patent. On remand, the family court rejected Howard's expert's cost-approach valuation, found part of the intellectual-property-related sale value to be premarital and part marital, treated Paignton payments as marital assets, and declined to calculate depreciation.

Issue

Whether intellectual property, including trade secrets and patents, may be equitably distributed in a divorce under HRS § 580-47, and whether the family court erred in valuing, classifying, and dividing Howard's intellectual property and related payments. The court also considered whether it should review Howard's prejudgment-interest argument despite briefing defects.

Rule

Intellectual property is property capable of equitable distribution under HRS § 580-47. Trade secrets are intangible property subject to division when the right has vested, which occurs when the information has actual or potential economic value; patent rights vest when the patent is issued. In valuing intellectual property for divorce purposes, fair market value is an appropriate method when sufficient information exists, and a family court does not abuse its discretion by rejecting a cost approach where market value is available. Trade secrets and patents are not depreciated absent evidence establishing depreciation, and appellate courts may decline to review inadequately briefed points under HRAP Rule 28.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Nina Velez developed a confidential recipe-processing algorithm for her small food-tech company during her marriage to Omar Velez. In the divorce, Nina argues the algorithm cannot be divided because it is intangible and exists only as confidential know-how rather than land, equipment, or cash.

How should the court rule on Nina's argument?

Explanation. The majority held that intellectual property is capable of equitable distribution under the divorce statute. That includes intangible rights, not just physical assets. Trade secrets and patents may be distributed because they are recognized forms of property with value and transferability; patent issuance is not required before any intellectual property can qualify.