Clarence Darrow once said: “Someday I hope to write a book where the royalties will pay for the copies I give away.”
Royalties are payments made to the owner of an asset for the
right to use that asset, typically being a percentage of the income
derived from such use. Royalties can relate not only to the use of
intellectual property, such as patents, trademarks, and copyrights,
but also to land use and mineral rights, oftentimes governed by a
formal contract between the licensor and licensee.
For individuals benefitting from the payment of royalties, it is
not uncommon for those payments to continue after death, which
gives rise to considerations in the estate planning and estate
administration contexts. The most prominent example in recent years
may be that of Michael Jackson, recognized by Forbes as the highest-paid dead celebrity in 2024 and
in several years prior – royalties earned from MJ: The Musical alone certainly bolstered
the bottom line.
Unlike his contemporary, Prince, Michael Jackson considered his estate
plan during his lifetime and left a last will and testament. This is perhaps the
most critical component of Michael's posthumous financial
success. He planned well.
Expiration of Rights
When discussing royalties, it is important to identify when the
underlying property rights, and therefore the right to royalty
payments, may cease.
For example, patents filed in Canada on or after
October 1, 1989, generally last for a maximum of 20 years from the
filing date of the patent application, subject to, among other
matters, the payment of annual maintenance fees, considerations
arising pursuant to the new patent term adjustment system which came
into effect on January 1st of this year, and
special considerations relating to pharmaceutical patents.
Meanwhile, copyright in Canada generally protects
original literary, musical, dramatic and artistic works from
reproduction, adaptation and distribution for a period terminating
at the end of the 70th year after the
author's death.
Though it can be helpful to register the work with the Canadian
Intellectual Property Office as evidence of copyright, it is the
act of creation and not the act of registration that gives rise to
copyright, subject to otherwise adhering to the provisions of
the Copyright Act. Of note, the moral rights of the
author, including the right of anonymity, the right of integrity,
and the right of association, can be waived but are otherwise
inalienable.
Much like a copyright, a trademark in Canada need not be
registered. Common law rights to a trademark arise on established
use of a word, phrase, symbol, design, or some combination of these
elements, which is used to distinguish the goods or services of one
party from those of others.
However, registered trademarks afford secure, enforceable and
exclusive use of such marks across Canada for periods of 10 years
at a time which periods are renewable indefinitely. So,
while Tender Wings of Desire may eventually
enter into the public domain, much to the regret of all,
distinctive KFC registered trademarks could
conceivably be renewed in perpetuity.
As for royalties deriving from land use and mineral rights, the
precise wording of the governing agreement is critical. If the
agreement explicitly states the royalty constitutes an
“interest in land”, the royalty will be found to run
with the land. Otherwise, the agreement is contractual in nature
and will only be enforceable as against the grantor of the royalty
and not subsequent purchasers of the land.
In other words, the royalty will either be perpetual or
extinguishable in nature, but is not subject at law to a fixed
period of validity, renewable or otherwise, other than what may be
provided for within the terms of the underlying agreement.
Enforcement of Rights
Where the property rights underlying particular royalty payments
are unexpired, and there is a breach of those rights, remedies
exist at common law and in the legislation for enforcement of such
rights. Each of the Patent Act, the Copyright Act, and the Trademark Act provide for, among other
matters, prospective civil and criminal liability, inclusive of
fines and terms of imprisonment. Infringement of intellectual
property rights, therefore, should not be taken lightly.
Judicial consideration of patent infringement in an estate context
was undertaken in Kun Shoulder Rest Inc. v Joseph Kun Violin and
Bow Maker Inc., 1998 CanLII 8639 (FC), while copyright
infringement was likewise considered by the Federal Court
in Winkler v Hendley, 2021 FC 498
(CanLII).
Meanwhile, allegations of trademark and trade name infringement in
an estate context were considered by the Ontario Superior Court of
Justice in Reliable Life Insurance Company v Ingle,
2012 ONSC 3519 (CanLII).
For further consideration of land and mineral rights, generally, I
would encourage a review of Third Eye Capital Corporation v Ressources
Dianor Inc., 2018 ONCA 253 (CanLII). In the instant case,
a group of mining claims were held to be subject to a “gross
overriding royalty” which constituted an interest in land.
This can be extended analogously to an estate context.
Key Takeway
As one can see, royalties are not a simple subject. This blog post merely serves as an overview of the topic. Those with royalties to consider as part of their estate plan or an existing estate administration should engage the services of a skilled estate lawyer and, with any luck, they too might enjoy posthumous financial success in the vein of Michael Jackson.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
