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All Digital Assets Are Not Legally Equal

By Jonathan Bick
November 02, 2017

The Internet has generated a new set of assets known as “digital assets.” Broadly defined, a digital asset is an electronic record in which an individual has a right or interest. This definition erroneously implies that digital assets should be treated as a legally equivalent set of assets when, in fact, failure to differentiate digital assets into one of three distinct classes will result in legal difficulties.

  1. Class One. The first class of digital assets is contained on a device that is in the owner's control. Usually, this device is a computer or storage device. Class-one digital assets include emails, software, and content and data stored in tangible property, typically a decedent's home computer.
  2. Class Two. A second class of digital assets are access rights and use rights to Internet assets located in a computer or other storage device owned by a person other than the digital asset owner. Class-two digital assets are emails, software, content and data stored in tangible property on a third-party's computer or other tangible property.
  3. Class Three. Class-three digital assets are access and use rights related to Internet assets, but unlike class-two digital assets, class-three digital assets do not have any physical point of presences (i.e., their existence is not dependent upon storage), hence they need not be stored anywhere. A domain name is an example of a class-three digital asset.

These three classifications are based on the location, if any, of the digital asset. Unlike traditional assets, which normally reside in one physical location and under the control of the owner (documents in a home or a bank safety-deposit box), digital assets, such as emails, may reside in multiple physical locations and under the control of more than one party.

Failing to treat digital assets located in the owner's possession (such as the owner's personal computer) differently from digital assets located in the possession of a third party (such as on a Google server) may result in contract breach, copyright infringement and privacy violations, to name a few legal complications.

Similarly, digital assets that have no location, such as a domain name, must be treated differently from digital assets that have a physical location (such as on a local personal computer or a third party's server). Otherwise, legal issues such as jurisdiction, venue and governing law legal matters may arise.

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