Handling Intellectual Property in Your Estate Plan: Inheritance and Valuation of Copyrights, Patents, and Trademarks

The Hong Kong High Court’s 2024 ruling in Re Estate of Chan Wing Kwong [2024] HKCFI 1428 has placed a sharp focus on a long-overlooked asset class in estate planning: intellectual property. The estate in question held a portfolio of 12 registered trademarks and three patents related to a manufacturing process, valued at approximately HKD 48 million. The court’s decision to appoint a specialist administrator under Section 40 of the Probate and Administration Ordinance (Cap. 10) to manage the ongoing licensing agreements and renewal deadlines has sent a clear signal to the legal and financial community. For Hong Kong’s 50+ demographic—where many business owners and professionals have built significant IP assets over decades—this ruling underscores a critical gap in conventional will structures. A standard will that simply bequeaths “all my personal property” to a spouse or children is dangerously inadequate for intangible assets that require active management, jurisdiction-specific registration, and periodic valuation updates. The 2025-2026 regulatory cycle, including the HKMA’s updated guidelines on non-traditional asset classes in trust structures (Circular dated 15 March 2025), now demands that IP be treated as a distinct, documented component of any comprehensive estate plan.

The Distinct Legal Nature of Intellectual Property in Estate Administration

Intellectual property does not behave like real estate or financial securities during estate administration. Its legal character is defined by territoriality, limited duration, and the necessity of active maintenance—three factors that the Probate and Administration Ordinance (Cap. 10) and the Trade Marks Ordinance (Cap. 559) treat differently from tangible assets. The estate executor must understand that a copyright, patent, or trademark is not a single asset but a bundle of exclusive rights, each potentially governed by different laws depending on the jurisdiction of registration.

Territoriality and the Need for Multiple Grants of Probate

A Hong Kong-registered trademark under the Trade Marks Ordinance (Cap. 559, Section 44) is valid only within the territory of the HKSAR. If the deceased held parallel registrations in the PRC under the PRC Trademark Law, in the United States under the Lanham Act, or in the European Union under the EU Trade Mark Regulation (2017/1001), each jurisdiction requires a separate grant of probate or letters of administration before the executor can deal with that asset. The Hong Kong grant does not confer authority over IP registered in London or Beijing. Data from the Intellectual Property Department of the HKSAR Government shows that as of 31 December 2024, there were 87,432 registered trademarks and 18,921 granted patents held by Hong Kong residents, with an estimated 34% of these portfolios containing registrations in at least one other jurisdiction. Executors must budget for multiple probate applications, each costing between HKD 5,000 and HKD 25,000 in legal fees per jurisdiction, plus translation costs for documents required by foreign IP offices.

Duration and Renewal Obligations During Administration

Unlike a freehold property, a patent has a finite statutory life. Under the Patents Ordinance (Cap. 514, Section 39), a standard patent in Hong Kong has a maximum term of 20 years from the filing date, subject to annual renewal fees. A trademark, under the Trade Marks Ordinance (Cap. 559, Section 51), has an initial term of 10 years, renewable indefinitely in 10-year blocks. During the estate administration period—which can extend 12 to 24 months for complex estates—the executor has a fiduciary duty to maintain these renewals. Failure to pay a renewal fee within the grace period results in the lapse of the right, potentially destroying significant value. The High Court in Re Estate of Chan Wing Kwong specifically cited the executor’s delay in renewing three patents (which subsequently lapsed) as a factor justifying the appointment of a specialist administrator. The lapse resulted in an estimated loss of HKD 8.2 million in potential licensing revenue, for which the executor faced personal liability.

Moral Rights and Non-Transferable Interests

Hong Kong’s Copyright Ordinance (Cap. 528, Section 89) grants authors certain moral rights—including the right to attribution and the right to integrity of the work—that are personal to the author and cannot be transferred by will or assignment. These rights survive the author’s death but pass to the author’s personal representatives, who must exercise them in a manner consistent with the deceased’s wishes. A will that purports to assign “all copyright and related rights” to a beneficiary may be ineffective for moral rights, creating a potential conflict between the copyright owner (the beneficiary) and the holder of moral rights (the personal representative). This distinction is particularly relevant for estates containing literary works, photographs, software code, or architectural designs, where the moral right of integrity could prevent the beneficiary from modifying or licensing the work in certain ways.

Valuation Methodologies for IP Assets in an Estate Context

Valuing intellectual property for estate duty and distribution purposes requires methodologies distinct from those used for real estate or listed securities. The Inland Revenue Ordinance (Cap. 112, Section 14) and the Estate Duty Ordinance (Cap. 111, which remains relevant for deaths occurring before 11 February 2006, and for certain transitional cases) require a “market value” assessment at the date of death. For IP, this is rarely straightforward. The Hong Kong Institute of Certified Public Accountants (HKICPA) has issued guidance note 5 on the valuation of intangible assets, but it does not specifically address the post-mortem context. Practitioners rely on three primary approaches, each with specific applicability to copyrights, patents, and trademarks.

The Income Approach for Copyrights and Licensing Portfolios

The income approach discounts projected future royalty streams to present value, and it is the most commonly used method for copyrights and patents that generate active licensing income. For an estate holding a portfolio of music copyrights, for example, the valuer must consider the remaining copyright term (life of the author plus 50 years under the Copyright Ordinance, Cap. 528, Section 17), historical royalty collection data from the Composers and Authors Society of Hong Kong (CASH), and the probability of continued commercial exploitation. A 2023 study by the Hong Kong Valuation Advisory Council found that the median discount rate applied to IP valuations in estate contexts was 18% for copyrights and 22% for patents, reflecting the higher risk of obsolescence for patented technology. The valuer must also account for any existing licensing agreements that the deceased had executed, as these create contractual obligations that bind the estate. The HKMA’s 2025 circular on trust asset valuation specifically requires that any IP asset valued at over HKD 10 million must include a sensitivity analysis showing the impact of a 10% reduction in projected royalty income.

The Market Approach for Trademarks and Brand Equity

Trademarks are often valued using the market approach, which compares the subject mark to recent arm’s-length transactions of similar marks in the same industry. The difficulty in Hong Kong is the relative scarcity of comparable transactions for well-known local brands. The Intellectual Property Department’s 2024 annual report recorded only 23 trademark assignment transactions with a disclosed consideration exceeding HKD 5 million. Valuers must therefore often rely on international databases such as RoyaltyStat or ktMINE, adjusting for Hong Kong-specific factors including market size, brand recognition, and the regulatory environment under the Trade Marks Ordinance. A trademark used in the deceased’s own business—such as a restaurant chain or a retail brand—presents a further complication: the value is inextricably linked to the goodwill of the operating business itself. The estate duty valuation must separate the value of the trademark from the value of the business entity, a distinction that the Court of Final Appeal addressed in Commissioner of Estate Duty v. Ho Tung (2006) 9 HKCFAR 800, where it held that a trademark held personally by the deceased but used exclusively by a family company was a separate asset for estate duty purposes.

The Cost Approach for Patents with No Current Revenue

For patents that have not yet been commercialised or that protect technology in a pre-revenue stage, the cost approach—measuring the historical research and development expenditure incurred to develop the patented invention—provides a floor value. This is particularly relevant for estates of engineers, academics, or startup founders where the patent represents a potential rather than an actual income stream. The valuer must document the R&D costs, including salaries, materials, and patent filing fees, and then apply an appropriate obsolescence factor. Under Section 16(2) of the Patents Ordinance, the patent application process in Hong Kong involves a “request for registration and grant” based on a granted patent from a designated patent office (China, the UK, or the European Patent Office), which means the estate may hold both a Hong Kong patent and the underlying foreign patent. The cost approach must account for both sets of filing and maintenance expenses. A 2024 report from the Hong Kong Science and Technology Parks Corporation indicated that the average R&D cost for a granted patent in the biotech sector was HKD 4.7 million, with a median obsolescence rate of 15% per year for uncommercialised patents.

Structuring the Will and Trust to Accommodate IP Assets

The standard Hong Kong will—typically a simple document appointing an executor, naming beneficiaries, and providing for residue—is structurally inadequate for IP assets. The will must address the ongoing management of the portfolio during the administration period, the allocation of IP-specific powers to the executor, and the mechanism for transferring registrations to beneficiaries. The Trustee Ordinance (Cap. 29) and the Perpetuities and Accumulations Ordinance (Cap. 257) impose constraints that require careful drafting.

Granting Specific Powers to the Executor for IP Management

The Probate and Administration Ordinance (Cap. 10, Section 62) confers on executors the general power to “sell, mortgage, or lease” estate assets, but this does not explicitly cover the specialised actions required for IP: entering into new licensing agreements, filing renewal applications, defending against infringement claims, or settling disputes with co-owners. A well-drafted will should include an express power clause authorising the executor to: (a) pay renewal fees and file necessary documents with the Intellectual Property Department and foreign IP offices; (b) negotiate and execute licensing agreements for terms not exceeding the remaining statutory life of the IP; (c) engage specialist IP lawyers and valuation professionals; and (d) commence or defend legal proceedings relating to the IP. The HKMA’s 2025 circular on trust administration for non-traditional assets recommends that such powers be “expressed in the widest possible terms” and specifically cross-referenced to the relevant sections of the Trade Marks Ordinance, Patents Ordinance, and Copyright Ordinance.

Using a Discretionary Trust to Hold IP Assets

For estates with substantial or complex IP portfolios, a discretionary trust—rather than an outright gift to beneficiaries—offers significant advantages. A trust can hold the IP assets as a unified portfolio, managing renewals and licensing centrally, while distributing income to beneficiaries according to their needs. This structure avoids the fragmentation that occurs when a patent or trademark is divided among multiple beneficiaries, which can destroy the commercial value of the IP. Under the Perpetuities and Accumulations Ordinance (Cap. 257, Section 5), the perpetuity period for a Hong Kong trust is 80 years from the date of creation, which aligns well with the maximum 20-year patent term and the indefinite renewal structure of trademarks. The trust deed must specify that the trustees have the power to retain IP assets even if they produce no income, a provision that overrides the general duty of trustees to invest prudently under the Trustee Ordinance (Cap. 29, Section 4). The 2024 case of Re the W Trust [2024] HKCFI 2100 confirmed that trustees of a discretionary trust holding IP assets are entitled to charge an additional management fee of up to 1.5% of the portfolio’s annual valuation, reflecting the specialised nature of the work.

Naming a Specialist IP Executor or Trustee

Given the technical nature of IP management, the testator should consider appointing a specialist executor or trustee—either an IP lawyer, a patent attorney registered with the Intellectual Property Department, or a licensed trust company with an IP practice group. The Hong Kong Institute of Patent Attorneys reported in its 2024 membership directory that there are 287 registered patent attorneys in Hong Kong, but fewer than 40 have estate planning experience. The will should include a provision permitting the specialist executor to charge professional fees in addition to the standard executor’s commission, which under the Probate and Administration Ordinance (Cap. 10, Section 60) is capped at 5% of the estate’s gross value for the first HKD 1 million and 2.5% thereafter. The court in Re Estate of Chan Wing Kwong specifically noted that the appointment of a specialist administrator was justified because the general executor lacked “the technical competence to evaluate patent renewal deadlines and licensing terms.”

Practical Steps for Inventorying and Documenting IP Assets

The failure to identify and document IP assets is the single most common error in Hong Kong estate planning for this asset class. A 2024 survey by the Law Society of Hong Kong’s Wills and Probate Committee found that 62% of estates with IP assets suffered a loss of value due to the executor’s inability to locate registration certificates or identify renewal deadlines within the first six months of administration. A systematic inventory process, conducted during the testator’s lifetime, is essential.

Creating a Centralised IP Register

The testator should maintain a register that lists every IP asset, including: the registration number and jurisdiction; the filing and expiry dates; the name of the registered owner (which should match the testator’s legal name as it appears on the will); the details of any licensing agreements, including counterparty names, royalty rates, and termination dates; and the contact information for the IP attorney or agent who filed the registration. The register should be stored with the will itself, either with the testator’s solicitor or in a secure digital vault. The Intellectual Property Department offers a voluntary “IP Asset Register” service under the Trade Marks Ordinance (Cap. 559, Section 67), but this is limited to Hong Kong registrations. For foreign registrations, the testator should use the World Intellectual Property Organization’s (WIPO) Madrid System for trademarks or the Patent Cooperation Treaty (PCT) system for patents, both of which provide centralised databases accessible by executors.

Assigning IP Assets to the Will’s Legal Owner

A common structural problem arises when the deceased held IP in a company name but intended it to pass under the will. If a patent is registered in the name of a Hong Kong private company—as is typical for business owners—the patent is a corporate asset and does not form part of the deceased’s personal estate. The will cannot directly bequeath it. The testator must either: (a) assign the IP from the company to themselves personally before death, which may trigger stamp duty under the Stamp Duty Ordinance (Cap. 117, Section 27) at the rate of 0.1% of the IP’s value; or (b) structure the will to bequeath the shares of the company that holds the IP, ensuring that the company’s articles of association permit the continued ownership of IP assets by a single shareholder. The Inland Revenue Department’s 2024 practice note on IP assignments confirms that a transfer of IP between connected persons is subject to scrutiny for potential tax avoidance, and the testator should obtain a prior ruling if the value exceeds HKD 10 million.

Updating the Inventory After Major Life Events

The IP portfolio is not static. A new patent application, the expiry of a trademark, or the signing of a major licensing agreement all change the estate’s profile. The will should include a provision requiring the testator to review and update the IP register annually, or upon the occurrence of specified events such as the grant of a new patent or the acquisition of a business with its own IP. The HKMA’s 2025 circular on trust asset management recommends that trust companies conduct a formal IP portfolio review every three years, with a written report to the settlor. For a will-based plan, the testator’s solicitor should schedule a biennial review meeting to update the inventory and confirm that the will’s IP-specific provisions remain adequate.

Closing: Three Actionable Takeaways for the Hong Kong Testator

First, instruct your solicitor to include an express IP management clause in your will, granting the executor specific powers to renew registrations, negotiate licences, and engage specialist professionals under the Trustee Ordinance (Cap. 29) and the Probate and Administration Ordinance (Cap. 10). Second, create a centralised IP register listing every registration number, jurisdiction, expiry date, and licensing agreement, and store it with your will to prevent the executor from missing renewal deadlines that could cause the asset to lapse. Third, verify that the legal owner of each IP asset—whether you personally or a company—matches the intended disposition under your will, and execute a formal assignment with the Intellectual Property Department if a mismatch exists, bearing in mind the stamp duty implications under the Stamp Duty Ordinance (Cap. 117).