The use of digital platforms such as online banking, Paypal, gaming accounts, Bitcoin accounts, cloud accounts to store photographs, and social media accounts such as Facebook and Instagram continues to grow and is creating a new category of personal property – a ‘digital asset’ which is broadly defined as […]
When you purchase a book from a bookstore your rights to that particular stack of paper are pretty intuitive. It becomes your personal property, not much different from a t-shirt, a diamond ring, or anything else you might carry around. You can sell your book, lend it to a friend, or toss it in the fireplace. In short, unless you’re making a copy, you can do whatever you want without asking for permission from the book’s creator.
Those intuitions about ownership fall apart when we talk about our digital things. Some of the differences are obvious: You can’t line up your ebooks on a shelf, scribble notes in the margins, or lose them under your bed. But if you are like most consumers you are probably unaware of the more subtle ways that your digital books—and movies, games, and other media purchases—are different from physical copies. That’s because your rights to those digital things are filtered through a maze of intellectual property law and limited by the fine print that you agree to when you buy them.
To measure the gap between what consumers believe and what rights they actually get, two legal scholars, Aaron Perzanowski and Chris Jay Hoofnagle, created a fake ecommerce site called “Media Shop”. The authors studied the behavior of hundreds of online shoppers and published their findings in a paper called “What We Buy When We Buy Now”(pdf). Before I tell you what they learned, I’ll give you a chance to test your knowledge by answering similar questions to ones they posed.
Consider the following screenshot, which offers an ebook of The Martian, and then answer the questions below.
Giving up on ownership
When you purchase an ebook you must agree to the Terms of Service (TOS) that tell you what you can do with it. TOS are essentially very one-sided contracts written by the company selling the digital goods. Often they include provisions that shield the business from liability and even prevent the consumer from going to court if they feel ripped off. Typically a consumer’s only choice is to accept them as they are, or to decline to use the service entirely. An overwhelming majority of internet users agree to them without reading them. In one experiment 98% of users failed to notice a clause requiring them to give up their first-born as payment.
Using contracts to make an end-run around property law predates the web. When the first wave of digital goods—software—began to appear in the 1970’s, businesses devised standardized End-User License Agreements (EULAs) as a legal hack to prevent users from copying their products. Unlike other kinds of property, software could be copied instantly with almost no effort. Rather than wait around for courts to figure out how to protect their business model, companies stopped selling software altogether and instead began to license it. Licensing contracts provided software businesses with a tool to control what the buyer did with their software, without the overhead of negotiating terms with each customer.
In one experiment 98% of users failed to notice a clause requiring them to give up their first-born as payment.
Since then the world of digital goods has exploded. We now routinely license books, movies, music, and games in addition to software. Decades have passed since the first software licenses were stuck onto floppy disks, but the actual law remains largely the same. Licensing agreements have been supplemented by far more pervasive TOS contracts, which extend similar protections to websites and other services. Consumer protections have, if anything, gotten weaker. People who were once owners have been transformed into mere users.
At the same time, software itself has penetrated every part of our lives. It has become an essential component of many things we are used to thinking of as physical objects. As Perzanowski and co-author Jason Schultz put it in their forthcoming book, The End of Ownership, “Your car is a computer with wheels; a plane is a computer with wings; your watch, your child’s toys, even your pacemaker are all computers at their core.” You may own your car but the software required to drive it is more like a song you listen to while driving, it’s only licensed to you.
Tractors, vibrators, and other new frontiers
As the things we buy—and create—are increasingly digital, the question of what we actually own is bubbling up in unexpected places.
Owners of John Deere tractors discovered that they can’t legally fix their own equipment, because according to the company, the buyer only acquires “an implied license for the life of the vehicle to operate the vehicle.” Those terms prevent third-party mechanics from using diagnostic software to determine why the tractor is broken, effectively making it impossible to repair. As a result, no matter how capable a farmer’s local mechanic might be, he has no choice but to take his tractor to John Deere’s own, often much more expensive, certified mechanics.
Contracts designed to protect software often also grant the company the right to do things that seem to invite abuse. For example, in 2009 Amazon remotely deleted copies of George Orwell’s 1984 from customers’ Kindle readers. If doing this had required them to physically enter each customer’s house, it would have clearly been a crime, but under the Kindle Store terms of service their action was entirely legal. In similar fashion, video game companies have knowingly broken certain games.
Contracts govern an ever larger slice of our lives—from how we read to how much privacy we get when we’re having sex.
For a more provocative example, consider the case of WeVibe, the vibrator made for long-distance couples and meant to be triggered remotely. Earlier this year, at the Def Con hacker conference, presenters demonstrated that the device was streaming data about its usage back to the manufacturer. The TOS for the device make this data collection legal, but it’s unlikely any of its users would approve of the company spying on their intimate moments. If buyers of the device owned the software, they could perhaps modify it to prevent this tracking, but, of course, they didn’t and the contract forbids tampering with it. (The company’s suggestion was to put the device in airplane mode—hardly a satisfying fix for a device that’s entire purpose is to be controlled remotely.)
These new contracts govern an ever larger slice of our lives—from how we read to how much privacy we get when we’re having sex. By proxy, the companies creating these products are deciding what we are and are not allowed to do. Nancy Kim, a law professor at California Western, refers to internet giants such as Google and Facebook as “quasi-governmental actors” for their ability to regulate every aspect of our lives, up to and including our freedom to speak. (Facebook is, after all, not a public space.) She describes terms of service contracts as a form of “private legislation,” which “reorder or delete rights otherwise available to consumers.”
Does anyone really care?
Despite tremendous erosion of property rights, most consumers transitioning to digital media have so far avoided the pain of losing anything they really cared about. Few have had a favorite ebook deleted or been embroiled in a legal argument over their digital inheritance.
The attitudes of young adults make ownership seem positively passé. Rates of homeownership are down, the “sharing economy” is up, and everything that can be streamed will be streamed. Perzanowski, an admitted pessimist, believes it is “…a real possibility that we are in the midst of a much deeper cultural shift away from ownership.”
However, it may also be that most people simply haven’t yet realized that they’ve given anything up. Such confusion is at least in part explainable by businesses continued use of words that imply ownership, such as “buy.” When Perzanowski and Hoofnagle’s tested a version of the Media Shop that replaced the “Buy now” button with a “License now” button study participants more accurately understood their rights. Additionally, about half of all shoppers were willing to pay more to acquire a digital copy that explicitly came with traditional ownership rights, such as the right to resell.
“It is a real possibility that we are in the midst of a much deeper cultural shift away from ownership.” — Aaron Perzanowski
Scholars such as Perzanowski argue that the ideal solution is a restoration of property rights for digital goods. However, any legal fix would present significant technical, economic, and political challenges. A huge part of the global economy is now based on licensing intangible things. Unwinding that could take decades. The lobbying efforts against it would undoubtedly be overwhelming.
Courts could make a more immediate impact by simply refusing to enforce the worst parts of these contracts. The legal “doctrine of unconscionability” allows judges to throw out parts of a contract that are entirely one-sided. Unfortunately, courts have so far chosen to treat terms of service agreements the same way they treat traditional, negotiated contracts. Under that rubric, the bar to find something “unconscionable” is incredibly high, especially in cases where no money changed hands.
If consumers could be motivated to care, then the most plausible mechanism for reform may be a sort of 21st century consumer rights movement. In the last century public outcry led to regulatory reforms providing greater protection from manipulative financial terms, unsafe manufacturing processes, and other abuses. A modern equivalent could watchdog the worst abuses of software contracts and work to restore important legal protections, such as the right to modify the software in our devices so they can be repaired or repurposed.
Before anything like that can happen millions of users will have to, at a bare minimum, acknowledge that huge swaths of their lives are legally controlled by contracts they have never even read.
With rapid advancements in technology there is the increased likelihood that you have created a digital presence and online identity. As time goes by many of our ‘possessions’ are becoming digitised, creating a new category of personal property that being the ‘digital asset’.
What is a digital asset?
A digital asset is anything you may own, or have rights to, that exist either online or on hard storage devices. Some examples of your online assets include email, social networking, iTunes, cloud storage and financial accounts. Hard storage devices include assets such as computers, laptops, USB, smart phones and any other external storage drives which are locked by way of encryption.
Why is important to consider our digital assets in estate planning?
Whilst we are creating personal digital assets at an unprecedented rate, the laws governing them have not developed simultaneously. It remains unclear where the notion of digital assets fits among other traditional concepts of property. Therefore in order to protect these assets, it is important to make separate provision for dealing with them in your estate plan.
It is important to deal with these assets for various reasons. This includes the prevention of identity theft, to have your history and memories recorded and your wishes expressed, to continue the management of any online business, to assist your executors in the estate administration process and also for preventing any litigation which may be required in being able to gain access to such assets.
Furthermore, whilst the value of a digital asset may vary, the particular type of value of the asset may be significant for a loved one or beneficiary. For example, the asset may have sentimental value such as digital photos, or it may have significant monetary value such as a professional blog or writing.
How do I include digital assets in my Estate Plan?
The first step is to create a digital inventory of all your assets. This inventory will need to include the names of all your assets and where they are stored, as well as all the usernames, passwords and secret questions which will allow a nominated person to be able easily access them upon your incapacitation or death.
It is then important to think about what you’d like to happen to these assets upon your incapacitation or death. For example, would you like to have your Facebook account closed down or memorialised? Is there someone in particular you would like to have access to your iTunes account?
Once you have made the inventory and considered what you would like done with your assets, it is then important to make your wishes legally binding by formalising them in a Will and Enduring Power of Attorney.
The most important part of planning for incapacity is to execute an Enduring Power of Attorney. This document will allow you to appoint someone that you trust to deal with your digital assets effectively and properly in the event you are incapacitated and can no longer control the accounts yourself.
Your Will is the document which addresses how your assets will be dealt with upon your death. Therefore it is important that your Will make provision for and include a clause that will give power to your executor to handle and manage your digital assets in accordance with your wishes and the terms of your Will.
Your executor, being the person you have nominated to administer your estate, should also have access to your inventory of your digital assets. This allows them to know what assets exist and where to locate them. The inventory should remain separate from the Will and should be updated as required.
The concept of ‘digital assets’ is no longer an idea of the future but rather it is very real and present right here and now. Therefore, it is prudent to seek advice from a solicitor in relation to your digital assets and your estate planning needs. A solicitor is best equipped to provide you with appropriate advice on how to best to structure your affairs in order to ensure your digital assets are dealt with effectively in your estate plan. For advice on Wills and Estate matters contact Jason Coluccio or the team at Welden & Coluccio Lawyers.
“I leave my MP3 collection, Apps library, e-books and Facebook content to…”
When we think about our assets, we usually think about our bank accounts, reals property, retirement accounts, and personal property and so on. But in this age of digital information, most people have sizable portfolio of digital assets. These can include our MP3 collections, iTunes and Apps libraries, e-books, photos as well as and other digital media. It may also include things like our Facebook, Twitter, and Instagram posts and online blogs. What happens to these things after we die? Who gets to access our emails and Twitter accounts? Can we leave our e-book and app collections to our family member or friend? These are not issues that we can really look to history and precedence for guidance. The idea of digital assets did not even exist until the last few years!
Most states and the federal government are still struggling with this issue. In July of this year, the Uniform Law Commission approved the draft of the Uniform Fiduciary Access to Digital Assets Act. The Uniform Act is not a law, and it is up to states to decide if they wish to adopt the Uniform Act or their own version of it. The Uniform Act greatly increases access to a deceased person’s digital assets, including emails, unless there are contrary instructions in the deceased person’s will. Moreover the Uniform law supersedes any provisions contained the terms of service or other end-user agreement.
Recently, Delaware became the first state to pass legislation related to how digital assets are dealt with after a person’s death. The Delaware Fiduciary Access to Digital Assets and Digital Accounts Act is modeled after the Uniform Act. It allows personal representatives of the estate of a deceased person the same access to the accounts and digital assets of the deceased account holder as the account holder had him/herself. While this statute may raise many privacy concerns, it does greatly increase access to the digital assets of a deceased person and increases ease of estate administration.
In Pennsylvania, a bill was introduced in 2012 that would allow the personal representative of an estate the power to “take control of, conduct, continue or terminate” a deceased person’s social media account. This act was never passed and currently there is no guidance in the Pennsylvania legislature on how a person’s digital assets can be effectively disposed of after their death.
In the absence of legislative guidance, user agreements will determine who may access to digital assets after the death of an account holder. This may prevent the family members and loved ones from being able to access valuable information held by the deceased. Moreover, there may also be confusion if a person will or other testamentary document leaves instructions that are contrary or in conflict with the end-user agreement with the service provider. This, in the absence of further guidance is received from lawmakers, it is very important to have estate plans that allow the personal representative of the estate to have fullest flexibility to communicate with the service providers and have access to your digital assets in the event of death or incapacity.
On Monday, the family of Robin Williams gathers in a San Francisco courtroom in a quarrel over how to divide personal property such as jewelry and memorabilia. Unfortunately, the dispute overshadows one of the more innovative aspects of Robin Williams’ estate planning, which just might become a model for other celebrities preparing for their demise. After all, one thing his wife Susan and children Zachary,Zelda and Cody won’t be discussing in court is intangible property like the late actor’s right of publicity.
According to a review of the Robin Williams Trust — filed as an exhibit last Wednesday — Williams bequeathed rights to his name, signature, photograph and likeness to the Windfall Foundation, a charitable organization set up by Williams’ legal reps at the law firm of Manatt, Phelps.
There are two important facets of this provision.
First, the Trust restricts exploitation of Robin Williams’ right of publicity for 25 years after his death. That means, there won’t be any authorized advertisements featuring Williams until at least August 11, 2039. The provision also interferes with someone immediately doing, say, a hologram of a Robin Williams standup routine or digitally inserting him into a new film.
“It’s interesting that Williams restricted use for 25 years,” says Laura Zwicker, an attorney at Greenberg Glusker who counsels high net worth individuals on estate and tax planning. “I haven’t seen that before. I’ve seen restrictions on the types of uses — no Coke commercials for example — but not like this. It could be a privacy issue.”
Or maybe, Williams’ reps were aware of novel technologies that have the power of essentially resurrecting dead celebrities — and hoped to avoid anything that could tarnish his legacy.
The Trust’s publicity rights provision is cutting edge in another way.
If the Windfall Foundation is deemed ineligible for a charitable deduction by the Internal Revenue Code, the Trust mandates that Robin Williams’ publicity rights be distributed to one or more charitable organizations with a similar purpose (Doctors Without Borders, AIDS, Make-a-Wish, etc.) which qualify for such charitable deductions.
According to insiders, this appears to be a direct reaction to a dispute happening at the moment between the estate of Michael Jackson and the IRS over how to value the late singer’s publicity rights for estate tax purposes. The federal government claims the King of Pop’s estate owes more than $500 million in taxes from his publicity rights and must also pay almost $200 million more in penalties. The dispute is currently being adjudicated in U.S. Tax Court.
Assigning publicity rights to a tax-advantaged charitable organization could limit his family’s tax liability. By doing what he did, Williams not only asserted a measure of control over posthumous exploitation, but he recognized that the value of a celebrity’s afterlife has gone up in recent years and made a step to mitigate the IRS’ interest in this.