Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II)

December 16, 2010
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Image by The Planet via Flickr

Today, we’ll continue our discussion on digital assets (see part I here) by reviewing the current state of the law, including the enforceability of the “Terms of Service” we all click on before opening an online account.

Categories of Property

First, let’s discuss the broad ways that the law defines different kinds of property before we discuss where digital assets might fit in.

For hundreds of years, property has generally been viewed in two major categories – real property and personal property.  Real property amounts to land, as well as the buildings or anything else attached to it.  Personal property is property that you own personally.

There have mainly been two kinds of personal property.  Tangible property is physical items that you can see or hold, such as a car, furniture, or jewelry.  Intangible property lacks physicality and is more conceptual, such as stocks, copyrights and trademarks.  Intellectual property is a type of intangible property that involves creations of the mind, including copyrights, trademarks and patents.

The rules of digital assets may be closely tied to copyright law.  According to the U.S. Copyright Office, “[y]our work is under copyright protection the moment it is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device.”  So congratulations, your creations already have some copyright protection, perhaps without you even knowing it.

What Kind of Property is a Digital Asset?

At this point, there is no real consensus about what kind of property digital assets are.  According to Wisconsin lawyers Nathan J. Dosch & Joseph W. Boucher, digital assets are probably most closely identified with intangible property.  Others might further designate digital assets as a form of intellectual property.

However, these definitions are not perfect.  For example, Dosch and Boucher (as well as the U.S. Copyright Office definition) raise the issue that an intangible digital photo online can easily become tangible when it is printed.  So would the photo be tangible or intangible?

Without knowing just what kind of property digital assets are or what rights attach to them, the law of contracts, property and probate law cannot adequately deal with how to handle digital assets after a person’s death.

States are now beginning attempts to clarify the issue.  Just last month, Oklahoma became the first state to pass a digital estate law that attempts to create rights in the executor to access or shut down the decedent’s online accounts.   However, some believe that the law will ultimately be ineffective based on the argument that the law cannot create property rights in an account in which none were granted in the first place.

Contracts of Adhesion?

On the other hand, can it not be argued that websites claiming ownership of accounts and their content are freely taking the intellectual property rights of its account holders?

Most social networking firms require account holders to first approve of the Terms of Service before granting accounts.  Most click through the Terms of Service without reading them.  In most states, a “contract of adhesion” is one offered by an organization on a standard form that is presented on a take-it-or-leave-it basis, where the party signing has unequal bargaining power to negotiate otherwise.  Such contracts are generally held to be unenforceable.

It could be argued that the Terms of Service are contracts of adhesion.  Are the providers taking advantage of the fact that most will just want to quickly sign on to be able to network with family and friends?  Do people signing up know that they may be negotiating away the exclusivity to the fruits of their work without any compensation?  Should the firms be penalized if most people don’t read the Terms of Service, even when they clicked that they did?

Next Post in Series:  What Steps to Take

All of these matters will undoubtedly take several years to work through.

In the meantime, in a later post, we will conclude this series by discussing the steps you can take now to help yourself and your family work through these issues more easily, if not perfectly.

 Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II)
 Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II)

Scott

Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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5 Responses to Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II)

  1. December 20, 2010 at 12:33 pm

    Hi Scott,

    I love that you are talking about digital assets and how to protect them. This is precisely what our company does and awareness has really been the biggest issue. If you haven’t yet, feel free to check out our version of a solution to this issue at http://www.entrustet.com. You can also call me at 920-540-6208.

    Thanks,
    Eugene Yang
    JD/MBA
    Director of Digital Estate Planning

    • Scott
      December 21, 2010 at 10:53 am

      Thank you Mr. Yang! You all are doing some fine work over there.

      Scott

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