Splitting Intangible Assets in Divorce – Part 2: Digital Libraries

As a follow-up to “Part 1:  Travel Miles & Reward Points,” we’ll discuss digital libraries.

A digital library—the accumulation of hand-picked music, books and movies—can be a contentious element in a divorce. Judges probably don’t care which spouse downloaded songs on iTunes or built the Kindle library. The court likely will treat a digital library like any other asset, such as the SUV or mixer.

However, we need to think about digital libraries differently. You know that fine print we “accept,” but never read? It says when you pay 99 cents for a song on iTunes, you actually receive a license to use iTunes software to hear the song, but don’t own the music. Read the iTunes fine print here.

Let’s apply this to a divorce with a substantial iTunes library. What the couple really owns is a legal right to use the product, not outright ownership. The registered individual is the only one allowed to use the product. Per Apple, “The content purchased from the iTunes Store is permanently associated with the account from which it was originally purchased.”[1]

Depending on the fine print, a judge’s ruling might not replace the user agreement, which states ownership can’t be transferred. However, the judge could award something else in lieu of the iTunes/Kindle files. Here’s an example.

  • Each iTunes song costs about $1.29.
  • The couple owns 5,000 songs.
  • There is an asset of about $6,500.
  • The court might assign $3,250 of another asset, such as cash, when dividing the bank accounts.

The law has yet to catch up with the modern sense of ownership. Until then, it may take some creativity to reach an “equitable distribution” of your digital library.

[1] http://www.apple.com/legal/internet-services/itunes/us/terms.html#AM

 

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A member of BKD’s Forensics & Valuation Services division, Julia provides forensic accounting, fraud investigation and litigation support services. Her 14 years of public accounting experience include audit, tax, due diligence, business valuation and Sarbanes-Oxley internal controls documentation.

Julia’s forensic investigative experience includes fraud investigations for clients ranging from small private companies to large health care systems. Her reports are tailored to the end user, including law enforcement, senior management, opposing counsel and insurance agencies.

Julia Mast – who has written posts on BKD Forensics.


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