Estate Planning DigIssues:
 
Issues Relating to the Transfer of Digital Assets
 
Written by Brian R. Tunis
As published in the Califf & Harper, P.C. May 2013 Newsletter
 
 
 
 
We now live in a digital age when nearly everyone owns or uses some type of digital asset. Digital assets include digitally stored content or media and online service accounts. Examples of digital assets include, but are not limited to, emails, accounts on social networking sites such as Facebook and Twitter, and pictures, videos, music, and books stored in a digital form on sites and services such as iTunes, Amazon, Facebook, YouTube, Shutterfly, Photobucket, and Flickr. Things that were once exclusively held in tangible form such as pictures on film, movies on VHS tapes and DVDs, music on cassette tapes and CDs, and hardcopy books are now becoming increasingly digital through digital recording equipment and online sales and storage services.  

The expansive use of digital assets is evident by looking at the usage statistics of just a few of the largest services. For example, the media megastore iTunes reported in February 2013, that more than 25 billion songs had been purchased and downloaded from the iTunes Store, averaging downloads of over 15,000 songs per minute by iTunes users. Further impressive, the social media giant Facebook reported that, at the end of 2012, it had 1.06 billion active monthly users, 618 million active daily users, its users had logged 1.13 trillion "likes," and its users had uploaded 219 billion photos.  

What then happens to these 25 billion songs or 1.06 billion accounts when their owners die? 

The answer to this question comes in two parts:  

1) What happens to the accounts themselves (such as iTunes accounts, Facebook accounts, email accounts, Amazon Kindle accounts, etc.); and 

2) What happens to the contents of the accounts (the downloaded songs, movies, books, etc.)? 

Accounts 

The terms of service for each account service will establish how the accounts themselves can be transferred upon the account owner's death. Most terms of service are restrictive in that they do not allow the account to be transferred to anybody else. Further, many such account services terminate upon the death of the account owner, essentially locking the individual's beneficiaries out of his or her accounts. After the death of the account owner, the accounts and the contents of those accounts are lost forever. Therefore, it is important to check the terms of service of all account services you use to determine if your accounts can be transferred to your beneficiaries upon your death. If the accounts cannot be transferred, then you will want to make sure you have another method to distribute the contents of the accounts to your beneficiaries rather than merely attempting to transfer the account to your beneficiaries. 

Contents 

Pursuant to longstanding law, the owner of hardcopies of books, records, tapes, CDs, DVDs, etc., is allowed to sell, gift, or devise the original lawfully made book, record, tape, CD, DVD, etc.  Comparatively, copyright issues may present themselves regarding distribution of the account contents to your beneficiaries. Similar to your hardcopy books, tapes, CDs, DVDs, etc., you are unable to unlawfully reproduce and/or unlawfully distribute your digital assets. A reproduction occurs when a copyrighted work is "fixed" in a new material object, such as a CD, DVD, or hard drive. Therefore, for example, you cannot copy your iTunes library (or any part of it) to a relative's computer as that would be an unauthorized reproduction.  

In April, the United States Court for the Southern District of New York decided Capital Records LLC v. Redigi, wherein the Court stated digital music recordings are not subject to the "first sale doctrine,” i.e., digital music, unlike hard copy records, tapes, or CDs, cannot be sold or transferred without running into copyright issues. Essentially, the Capital Records LLC decision created a rule that owners of digital assets are prohibited from transferring their digitally-held songs, videos, pictures, books, and other assets to others by sale, gift, or devise upon their death. Accordingly , it appears for the time being that legally transferring digital assets is at a standstill until there is a definitive legislative "fix” to this issue.

For more information on this topic please contact Califf & Harper, P.C. by calling 309-764-8300 or 1-888-764-4999. This article is intended to provide general information regarding the topic discussed herein but is not intended to constitute individual legal advice.