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 2024and 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.
— Michael G. von Keitz