Are Your Digital Assets Secure?

Date: February 17, 2015

Digital assets require special consideration during business succession and estate planning. Here’s how to protect them.

What Are Digital Assets?

Digital assets include intangible assets and intellectual property owned by your business. The most common are websites, domain names, logos and email accounts. Digital assets can also include branding, copyrighted or trademarked ideas and patents.

Nasir Pasha, a business-law attorney who practices in California, New York and Texas with his firm Pasha Law, says identifying these assets can be challenging. “The difference in how the law treats them is very slight. The difficult part with intangible assets is identifying them and dealing with these unique issues,” Pasha says.

What Do You Need to Know?

For digital assets like domain names, websites and email accounts, anything purchased or owned by the business entity will transfer like any other asset in the event of a business succession. If the digital asset is purchased or created by the business owner or an employee and registered under your limited liability company (LLC) or business entity, there’s likely nothing more you need to do.

However, it’s common for small business owners to allow Web development contractors or marketing agencies to register domain names and build websites for them. It’s worthwhile to check that these assets are properly under the umbrella of your business. “If it was purchased by an independent contractor before the business was formed or under another name, that should raise a red flag to check with an attorney on whether this asset is actually with the company,” Pasha says.

Intellectual property created as part of a work-for-hire contract is trickier due to complicated copyright laws. “The law of ownership over [intellectual property] is not as intuitive as a tangible asset,” Pasha says.

When you hire a designer, photographer, writer or other creative professional to complete work for your business, don’t assume that the completed work automatically legally belongs to your business.

“If you hire a company to develop a brand for you, the obvious thought of most companies is that you own the brand. ‘I’m hiring you, so what you develop is mine.’ When it comes to copyright law, it’s the complete opposite. If it’s an independent contractor, it belongs to them.”

How Can You Protect Yourself?

Special language is required within the work-for-hire contract to ensure that these assets fully transfer to your business when the work is completed and the fee is paid in full. “The actual language is pretty simple. You need to add that the company that’s developing this work agrees to do everything and anything they can to make sure this work is properly transferred,” Pasha says.

According to Pasha, this language is becoming increasingly standard in work-for-hire contracts dealing with intellectual property. “If these development companies went around and held their content hostage, they wouldn’t do much business,” he says.

However, it’s important to ensure that you fully own any digital assets that are valuable for your company to avoid future problems with succession. “If you have an asset you value, and you’re dealing with an outside contractor, then you want to make sure it’s reviewed by an attorney to make sure it’s done properly,” Pasha says.

 

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