Digital assets

01 May 2013 David Evans and Elaine Gray

Digital assets

David Evans and Elaine Gray discuss the treatment of digital assets under Guernsey's unique image rights legislation.

What are digital assets? What do they look like?

David Evans: Digital assets are any property that can be found in digital form. This can be as mundane as holiday snaps or can represent an entire business based around such assets. Clearly, as these assets are intangible they can be difficult to value, but such property is becoming increasingly relevant to both our personal and our business lives.

Elaine Gray: In years gone by, information was preserved on a range of physical materials. Now much of our information, even our heritage, exists in various digital forms, including emails, public information sites, blogs and social media applications such as Twitter and Pinterest. Digital media makes it easy to create and share content, but also offers challenges to controlling and preserving this content. Against this backdrop, it is crucial for those who own digital rights to be aware of those assets and the issues they give rise to, so those assets can be protected now and for future generations.

There is no formal agreed definition of a digital asset, but the common view is that it is text or media that is collected and stored in a digital format. There are three main categories of digital assets:

  • Textual content
  • Images
  • Multimedia

All three categories pose challenges because of the complexity and dynamic nature of the content. For example, interactive web pages such as Facebook are constantly evolving as users generate new content. Similar issues apply to online gaming environments and virtual reality.

DE: In the past ten years or so, there has been an explosion in the amount of data we all own, whether this is conscious or otherwise. This trend is clearly set to continue and little thought will have been given by most of us to what these files or bits and bytes represent or, indeed, whether they have any worth.

What are the issues now and in the future for digital assets?

DE: The first question is one of ownership. There were reports last year of the actor Bruce Willis challenging Apple over the ownership of his iTunes library of music he had acquired and wished to leave to his children. The iTunes terms and conditions (which are so long nobody actually reads them) grant a licence over the songs and at no time is there any suggestion that the downloaded songs are owned by the purchaser. The report of a case being brought by Willis is dubious, but it does raise some interesting issues.

In the past, if you bought a CD it was yours – you did not own the music on the disc, but you did have the right to pass the physical property on to another. According to Apple, this is not true of the same music in a digital form. The only workaround at the moment is to make sure someone else knows your username and password for iTunes.

EG: Without doubt, the single biggest issue facing those who own digital assets has been digital piracy, as developments in technology have made it ever easier to copy or convert digital content. Attempts have been made to grapple with the issue by both commercial and non-profit organisations, such as Google Books and the Million Book Project. The result is that digital rights management (DRM) is now a significant industry, as rights-holders attempt to control the ability to copy digital content.

For rights-owners, whether individuals, companies, trustees or others, the issues of concern therefore involve how we store, manage, control and exploit our digital assets. These issues are present today and will only become more important in the future, given the exponential growth of digital content. Depending on the nature of the digital assets and the number of such assets held, the rights-owner may wish to look at deploying DRM technologies to assist in addressing those issues.

DE: A similar problem, but with user-generated content, arose when Instagram made a change to its terms and conditions that gave it rights to license out user content without further recourse or payment to that user. It has since rethought this strategy after user complaint and defection, but again it highlights the risks in this area of either obtaining content from or uploading content to third parties.

For instance, if you are a professional photographer, all of the value in your work will now reside in data files from which you will generate images to distribute or print. These files are protected by copyright law, but care has to be taken that the storage of these assets is not in the hands of third parties who may not be so careful – especially online cloud storage providers. In addition, backup copies and insurance should be maintained for these assets in the same way as physical goods would be treated.

The fact that these same assets can generate licence fees up to 70 years after death means there should be a clear plan to deal with these assets. It must be clear that the assets form part of the creator’s estate so they can be left to the appropriate beneficiaries and actively managed and protected to generate the maximum income for future generations.

Why is it important to ensure you have a succession plan in the context of digital assets?

What happens to your content after death – for example, your Facebook and Twitter accounts? Is the content yours? Does it have a value?

EG: In the ideal world, the creator of digital assets would create and maintain a record of their main digital assets, outlining any issues as to ownership and licensing. In that ideal world, there will also be clear succession planning that identifies how the owner wishes these assets to be managed in the future. Sadly, the real world rarely matches up to that ideal and in today’s digital world a failure to plan succession in relation to digital assets can be expensive and problematic. An obvious example of this is the dispute that is believed to exist within the family of Seve Ballesteros over his image rights.

Advisors therefore need to ensure that a proper succession plan is in place. This will involve consideration of whether or not there are digital assets and if and how these are or should be protected. In many cases the existence and ownership of digital assets will be clear. However, given the increasing use of social media, complex issues arise as to ownership and use of images uploaded to those sites. For example, do you ‘own’ the photographs you upload to Facebook or Twitter? The answer to that question is that it depends on what is meant by ‘own’. If you take a photograph, you are generally the first owner of copyright in it and are therefore able to control who copies the photograph. However, the terms and conditions of most of the major social media sites contain provisions granting the site a wide-ranging licence to use your photographs. For a well-known celebrity posting key images on these sites, this could result in a significant dilution of the value of the image.

DE: Social media accounts are not transferable but do have a value, and it is conceivable that estate owners may administer the accounts of deceased celebrities and use social media to inform followers of new products, etc. The reality of these accounts is that if you have millions of followers then they are certainly valuable assets in themselves – what has to be considered is how they are treated as part of a personality’s estate.

How does Guernsey’s image rights legislation relate to this area and how can registering image rights enhance the protection of certain digital assets?

DE: One way the new Guernsey image right can be of use is for an artist or creator to register as a personality; then the images associated with that artist can be protected as image rights. In turn, these images can be licensed and assigned in any manner. This gives the rights-holder complete flexibility in dealing with these assets. At the same time, because these rights can be maintained in perpetuity, they can provide a long-term income stream. These rights can sit within a portfolio of assets, such as copyright and trade mark rights, which can form the basis of a structured environment to manage all of these rights, including the image right and any other digital assets.

EG: The new registered image right Guernsey has created is likely to prove of great importance in the digital world. It protects images, but the definition of image encompasses all the different angles to a person’s image. It includes the obvious angles such as the personality’s photograph or likeness, but also the less obvious manifestations such as voice, name or nickname, slogans or catchphrases and avatars of the personality. All these images are likely to be evidenced or sourced in digital format. As such, the image rights legislation is of profound importance to digital assets. Where a personality registers an image, this provides a unique level of protection for the rights-owner, as it provides the rights-owner with enhanced rights to take enforcement action against infringers. At the moment, the protection available is generally limited to breach of copyright and trade mark rights, both of which are of limited value. In contrast to copyright (which lasts for a finite period), registered image rights can last indefinitely, which is of huge importance from a succession-planning perspective.

Additionally, copyright will offer limited protection against an image that is similar to an existing image, as opposed to one that is an obvious copy. As regards trade marks, these are available for protection in relation to specific goods or services and, as such, are of limited scope. For example, it is generally difficult to get protection for a celebrity’s name. In contrast, the Guernsey image right offers bespoke protection geared specifically at protecting all aspects of a personality’s image.

Why is Guernsey a good place to provide succession planning and structuring in relation to digital assets?

DE: Guernsey is ideally placed to manage digital assets for both individuals and companies. One of Guernsey’s main strengths is its ability to manage assets on behalf of others – digital rights only form another asset class, which can be dealt with and administered from the island.

EG: Guernsey is an excellent place to hold and manage digital assets because it has cutting-edge intellectual property legislation that offers maximum protection in the digital world. The well-regarded financial services industry in Guernsey offers considerable experience in dynamic and innovative wealth management, perfectly suited to the new dawn of the digital world.

Authors

David Evans and Elaine Gray

CPD Reflective Learning