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Intangible assets
How to recognize special challenges in licensing digital content

he widespread use and ease of access to digital content has resulted in some of the biggest changes in copyright law both in terms of new statutes and case law. This can be attributed to the ease with which digital copies can be made and the fact that those copies do not result in any degradation of quality, leading to their widespread distribution both legally and illegally. The nature of digital content makes the license agreement much more important than before, says Stephen T. Kong, shareholder, Corporate and Intellectual Property Groups at Stradling Yocca Carlson & Rauth. We as lawyers are always worried about what rights are granted to a client who wants to do something with the digital content because it often is only the specifics of the legal agreement that means the difference between a lawful and an infringing use. Smart Business spoke with Kong about licensing digital content to ensure proper legal protections are in place. What is it about digital content that creates such unique legal issues? The proliferation of high-speed Internet has made it easy for individuals to create and transmit digital content. Previously, the physical nature of the non-digital good acted as a practical deterrent to infringement. Booksellers couldnt make illegal copies of books in an efficient and profitable manner for the purpose of reselling them. By contrast, Amazon has many licensing agreements in place to distribute digital versions of books formerly available exclusively on tangible media. The reality of video streaming paved the way for services such as Hulu and Netflix, which are thriving because people care less

STEPHEN T. KONG Shareholder, Corporate and Intellectual Property Groups Stradling Yocca Carlson & Rauth (424) 214-7013

SOCIAL MEDIA: Find Stephen T. Kongs profile on LinkedIn at

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and less about owning a copy of a movie as long as they can get a streamed version relatively on demand. All of this adds up to the need for copyright law to adapt. What does it mean to license digital content? Theres a fundamental difference between licensed and owned content. Many companies are dealing primarily with licensed content, which is owned by someone who has given permission to another to display or distribute their content. Whoever owns the copyright rights can control aspects of the distribution, reproduction, modification and display of the copyrighted content. In the digital world, you generally cant do anything with digital content that doesnt involve exercising one of those protected rights. What drives licensing lawyers crazy is when copyright owners of digital content grant to their licensee the right to use digital content. Since use is not one of the enumerated rights under copyright law, arguments can arise as to what rights are actually granted. How is ownership determined? The general default rule is the creator of a work owns the work; but for companies, there is a key exception. Generally, anything created by employees for

their employer in the course of their employment results in the employer owning the copyright rights in the work product. So large media companies employing writers have a large amount of copyrighted works available for distribution in many avenues. What are some important aspects of licensing digital content? A licensor can slice and dice copyright rights in many ways, usually to preserve markets for other licensees. Certain geographic markets may be set aside for others. The copyright owner may wish to have different licensees exploit different channels of distribution. All of this makes the role of the licensing lawyer very important because the license agreement needs to be carefully reviewed in the context of determining the scope of a licensees rights. Making the licensing lawyers task a bit more complicated sometimes is the existence of agreements written before the advent of digital technology. There was no law governing Internet radio royalties until Internet radio became a reality, and older agreements reflect the fact that a freelance writer would not necessarily have thought to grant or explicitly deny rights for republication of an article in different digital formats.

2013 Smart Business Network Inc. Reprinted from the April 2013 issue of Smart Business Los Angeles.