A Working Definition of Digital Assets.

By John Romano on September 1, 2011 in Legal

The phrase “digital asset” is being used, but we have yet to come to a legally-accepted definition. A simple definition is that a digital asset is content owned by an individual that is stored in digital form. But this may not be broad enough to encompass all the digital elements of an estate that have value. An expanded definition includes online accounts.

So a more inclusive definition is that a digital asset is digitally stored content or an online account owned by an individual.

Digital content includes individual files such as images, photos, videos, and text files. It also includes other digital content (perhaps as data in a database). These assets are stored either on a device owned by an individual (“locally”), or on devices accessed via the Internet (“in the cloud”), often as part of a service offered by a third party and governed by a contact with the individual.

Some online accounts can be considered assets in and of themselves and have value to an estate. There are email accounts, social media profiles (such as YouTube or Flickr), social networking profiles (such as Facebook), and many others. These are also governed by a contact between the service provider and the individual.

What type of property is a digital asset?

The digital files themselves seem to be most easily classified as intangible, personal property, as long as they stay digital. They quickly become tangible personal property if they are printed or transformed into physical media (such as a printed photo).

Depending upon the law in your jurisdiction, this distinction between tangible and intangible assets may have significant implications on how clients grant executors access to these assets, what control the executor has over these assets, and over the probate process itself.

Problems with this definition.

While this might sound fairly straightforward, there are some problems with this definition.

Account or content?

We are suggesting that online accounts should be considered digital assets. But this begs the question, does an individual own the account or just the content stored and accessed using that account?

One might argue that the actual account at an Internet service (such as a Facebook account) can not be considered an asset and that only the content stored in that account (and accessed by means of that account) are the digital assets.

For example, there is the case of John Ellsworth. Mr. Ellsworth is the father and executor of deceased Marine, Justin Ellsworth. Yahoo denied Mr. Ellsworth’s request for access as an executor to his son’s Yahoo email account. The Probate Court of Oakland County, Michigan later ordered Yahoo to give over the contents of Justin’s email account to Mr. Ellsworth, but not access to the account. Yahoo argued that providing access to Mr. Ellsworth would violate the terms of service, as it states that the account is non-transferable.

While ownership of the content and not the account might make sense, online profiles often represent much more than a collection of content. Sometimes the account itself has monetary value. Sometimes the value is in the connections to other online accounts or the money making potential of an account. For this reason, we need to consider the account a digital asset and an asset of an estate.

Terms of service

A terms of service contract almost always exists between individuals and online account providers. It governs the account and nearly always defines a choice of law. The terms often specify who can access the account, transferability and sometimes what should happen after a individual’s death. Sometimes they define a period of inactivity beyond which the account is deactivated or deleted.

The problem is that these terms sometimes block the executor of an estate from accessing an account (as in the Ellsworth case) and therefore block access to the property of the deceased.

This issue of access to online accounts can be a significant problem for executors. In most cases, the content of an account clearly belongs to the deceased. But the executor will be unable to carry out the provisions of the will if they are denied access to the assets by the service provider.

Choice of law

Several states, such as Connecticut, Rhode Island, Idaho and Oklahoma have passed laws to grant the executor the right to access and control these accounts. But these laws may be in conflict with the terms of service and with the state defined in the choice of law. Many services define Santa Clara County, California as the place where disputes will be resolved. This creates a conflict that is yet to be resolved since California does not have any laws in place to explicitly grant executors access to a decedent’s account.

Things change fast

Our definition above is most inclusive of the range of valuable digital assets we have today. But we should remember that the technology changes fast and Internet enabled services are developing at an extremely fast pace. Right now we are seeing a huge movement to could-based services that will continue to challenge and stretch our definition of digital assets and there will be new challenges after that. This reminds us that our definitions should not be too limited. The laws of Connecticut and Rhode Island are already out of date due to their restrictive and overly specific wording.