We live in a digital age, which dictates the way we interact with each other, how we exchange information and what assets we use in our daily activities.
We communicate electronically, read e-books, use advanced technologies, Web applications and software and store data in Cloud, and use many assets which have an electronic (or ‘digital’) form.
However, unlike physical assets, which are relatively easy to protect from misappropriation or theft, protection of digital assets is not that simple. Due to their electronic form, it is easy to copy them (or their part) but difficult to get them back.
This article reviews digital assets and possible measures to secure their protection from both commercial and legal standpoints.
What are Digital Assets?
Unlike other assets, which normally have physical presence and which you can touch or feel, digital assets are ‘virtual’. They only exist in electronic form only and may consist of a source code, media content, graphics, deployed services or data.
Due to constant advancement of technology, it is not possible to indicate the exhausting list of digital assets, which your business can own.
Some examples of digital assets include:
- Software and applications developed or used in your business activity;
- Domain names registered in the name of your business entity;
- Websites, online platforms and online stores;
- Various online subscriptions and online accounts;
- Trademarks, logos and patents, which may exist both in electronic and physical form;
- Copyrighted material, including graphics, electronic or audio books; and
- Digital currencies like Bitcoin.
Protection of Digital Assets from Commercial Standpoint
Considering ‘virtual’ character of digital assets, they are susceptive to a risk of being misappropriated as a result of a cyber-attack or harmed or destroyed by viruses, worms and similar malicious programs.
In addition to that, often companies store their data or digital assets with third-party providers or contractors. Any malfunction of their electronic systems may affect your digital assets as well, which you may have little control over.
Since any of those risks may result in substantial financial loss for your business, it is essential that you have effective mechanisms to mitigate those risks and to enable restoration of the digital assets in the worst-case scenario.
Possible avenues of protection of your digital assets from commercial standpoint may include:
- ensuring that information related to a particular digital asset (e.g., source code, data, passwords, etc.) is not locked on one individual and can be accessed by other employees or managers of your company. If that is not done, death of an individual may result in losing your digital asset as well;
- setting hack-proof security systems and policies within your company;
- ensuring that application programming interface (API) is thoroughly documented by responsible individuals and allows restoration of an asset, if required;
- storing your digital assets in Cloud;
- setting up effective backup and data redundancy plan. Some companies adopt multiple backup systems to make sure that their digital assets may be restored in the event of a cyber attack, systems outage or malfunction. Data redundancy most often involves storing your data at an off-site facility, where it can be easily retrieved in a force majeure event.
Protection of Digital Assets from Legal Standpoint
Since digital assets are stored and transmitted electronically, in addition to the risks disclosed above, your business may face a risk of their illegal copying, misappropriation or illegal use. Therefore, securing legal protection of your rights to your digital assets is essential to prevent or minimise your possible financial loss.
Considering that various digital assets are unique, there is no one-for all approach to their legal protection.
You therefore need to consider each digital asset individually and adopt an effective method of protection.
What Type of Asset do You Want to Protect?
As an initial step towards protection of your rights to a digital asset you should ask yourself: what is it that I want to protect and is it valuable in my business activity?
For example, you may need to secure your rights to a source code to a software which has been developed and used by your company to ensure that it is not copied by your rivals to your disadvantage.
As another example, you may need to secure your proprietary rights to some visual or audio elements of digitalized books, reproduced by you from public domain for the purpose of their distribution through online stores similar to Amazon or Booktopia.
What Rights do You have to the Defined Asset?
As a next step, you need to ascertain the scope of your legal rights to the asset which you want to protect and the scope of any possible legal protection.
Although it may seem straightforward, it may become difficult to determine whether you actually own a particular digital asset or whether you merely have a licence to use that asset.
As an example, you may believe that you own a code to a software developed by your contractor. However, you may be surprised that it is the contractor who owns the code unless and until the code is properly assigned to you.
The situation may be even more complicated if you deal with cross-border transactions and a digital asset was developed by a contractor located overseas. The law of a foreign country may specify that proprietary rights to a digital asset developed by a contractor belong to its creator, unless the contract provides otherwise.
Possible Legal Measures
Depending on your assessment above, protection of your ownership from the legal standpoint may involve:
- registration of your ownership to the digital asset, if relevant and possible. Please note that it may not be possible to register your ownership to a particular digital asset either in Australia or overseas;
- securing your rights by relevant agreements (for example, agreements with your contractors and employees);
- executing effective agreements with those parties, who can potentially misappropriate your digital assets or underlying elements. Those parties include: your contractors, employees or clients;
- setting up effective licence agreements with respect to your digital assets, which articulate the ownership to your digital assets and conditions of their use by other parties. Most often, licences are contained in Terms of Use, which are displayed on a Website of the digital assets’ owner. The Terms of Use are normally agreed to electronically (by clicking ‘I Agree’) at the time of entering into a contract with the owner of a digital asset. It is therefore essential that end users of a digital asset read and understand their rights with respect to the asset when entering into a contract with its owner. Often, customers fail to read the Terms of Use and accept them by default. That may result in accidental breach of the owner’s rights to the digital asset by its end user, who may face the risk of possible litigation.
Our Services
Solicitors of Pavuk Legal specialize in the area of Technology Law and may advise you on various issues related to your digital assets. We may assist you in developing and implementing the most effective legal mechanisms to protect your ownership and proprietary rights to digital assets used in your business.
Many other essential hot topics for business owners is all found in the book Nobody Else’s Business. Nobody Else’s Business is about helping business owners live the life they want to live, now and in the future. It is the ultimate guidebook for succession planning of modern Australian businesses.
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