Ponzi Scheme in Online Video Game

In August 2011, thousands of players of the video game EVE Online found out that they were victims of an in–game Ponzi scheme. Players invested virtual currency in an in–game virtual company that paid out high returns supported by other players’ investments. In just eight months, the people who ran the Ponzi scheme pocketed over 1 trillion ISK—the game’s virtual currency—worth an estimated $51,577 in real U.S. dollars (link). An interesting twist is that the two people who ran the Ponzi scheme describe the story about how they did it and why they did it on their Web site.

I’ve written previously about the potential financial value in online accounts and digital property, especially in video games. Where there is financial value, there is the potential for unscrupulous or criminal actions to try and take that value. As Francis Bacon wrote, “Opportunity makes a thief.”

In estate planning, it’s important to protect passwords, online accounts, and digital property—especially digital property with financial value—when a person becomes incapacitated or dies. For video games and virtual worlds, some are free to play, and others require monthly or annual access fees to preserve the account and keep the account active. Some virtual worlds and virtual property require active management and maintenance to preserve and maximize the financial value. When the person becomes incapacitated or dies, consider changing the passwords used to access the account to prevent unauthorized access. Whether or not the video game character, items, or virtual currency can be transferred depends on the video game Terms of Service contract—some companies allow transfers but others don’t. Also, be alert for unscrupulous activity in the video game or virtual world, and consult a video gaming expert if you need assistance.

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Estate Planning and Digital Music: Copyright Termination Rights

I’ve written before about estate planning for digital intellectual property rights and specifically about estate planning and digital music. An August 15, 2011, article in The New York Times by Larry Rohter titled “Record Industry Braces for Artists’ Battles Over Song Rights” talks about the upcoming January 1, 2013, date when copyright “termination rights” start to take effect under the 1976 Copyright Act, and how those rights could impact the music industry.

In general, under the 1976 Copyright Act, an author or artist who has transferred or licensed a work that was created after 1977 has a right under 17 U.S.C. § 203(a)(1) to terminate that transfer or license during a five–year period starting thirty–five years after the date that the rights are transferred or licensed. So, for works created on and also transferred or licensed on January 1, 1978, that five–year period starts January 1, 2013. If the author or artist is deceased, the person’s heirs (who are determined under 17 U.S.C. § 203(a)(2)) have the right to terminate the person’s lifetime copyright transfers or licenses.

As the article mentioned above points out, the termination rights in music recordings created after 1977 could have significant value, and artists and their heirs should consider their options to protect and maximize the value of the works. However, the article also points out that the record companies and the Recording Industry Association of America generally believe that these copyright termination rights do not apply to most sound recordings. Instead, they believe the master recordings are works for hire that belong to the record company not the artists—works for hire are excluded from the termination rights under 17 U.S.C. § 203(a).

As I’ve mentioned before, digital music sales are expected to exceed retail sales of CDs soon, which could make these music copyright termination rights even more valuable. So, if you are working with a musician or a musician’s estate, consider the options available for termination rights in their copyrighted works.

Also, separate from the issue of termination rights, consider whether the artist’s publishing contract pre–dated digital music distribution. Although record companies typically take the position that the same contract terms apply to both physical sales of CDs and to digital music sales, some artists have been challenging this and have been attempting to renegotiate the terms of their digital music sales.

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How to Remove Your Ex From Your Social Networking Accounts

When you part ways with your spouse or significant other, how do you remove your ex from your e–mail, Facebook, Google+, Twitter, and other social networking accounts? An article written by Alan Henry called “How to Banish Your Ex from Your Digital Life” posted today on Lifehacker gives tips on how to do exactly this, with step–by–step instructions for Facebook, Twitter, Google+, e–mail, instant messaging, text messages, and telephone calls.

This is is helpful checklist to use when a friend or family member is going through a divorce, legal separation, or break–up. It’s also a good reminder of how interconnected our digital lives have become and how challenging it is to disconnect with circumstances change.

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Value of Internet Domain Names in Estate Planning and Probate

Today, I saw an interesting article about the value of Internet domain names, especially as more mobile devices move to “apps” instead of Website–based services. The July 20, 2011, article was written by Austin Carr and appears in Fast Company magazine. The article suggests Internet domain names still have value—and a startup company might spend $50,000 or so to acquire the right name.

I’ve written several times about estate planning issues involving Internet domain names, including here and here. In a previous posting, I also mentioned that about 70 new Internet domain names are created every 60 seconds. Not all of these names will have financial value to third parties, but some of them could have surprising value, as mentioned in the article above.

For purposes of an inventory or estate tax return, it make sense for fiduciaries to get an appraisal of an incapacitated or deceased person’s Internet domain names from an appraisal service like Sedo or Afternic. But the best determination of value is still to auction or sell the domain name to a third party, if they are willing to part with it. The article above also links to a blog posting by Fred Wilson, a venture capitalist, and his posting makes some interesting additional points about how a startup company might value and acquire an Internet domain name.

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U.S. Savings Bonds Will Only Be Sold Digitally

On July 13, 2011, the U.S. Treasury announced that they will no longer sell paper–based savings bonds after 2011—starting in 2012, U.S. savings bonds will only be sold digitally. Existing paper savings bonds can still be redeemed at financial institutions. But, for new savings bond purchases, it means that, starting in 2012, you must have access to the Internet to open a TreasuryDirect account and to buy/sell U.S. savings bonds.

According to the press release, the Treasury has been selling U.S. savings bonds electroncially since 2002, but according to a USA Today article, only 11% of U.S. savings bond sales in the past year have been electronic puchases.

For personal representatives (executors), trustees, guardians, and conservators, this is another reminder of the need to look beyond the paper records of a deceased or incapacitated person. The press release mentions that the move to using digital U.S. savings bonds is an advantage because “Investors will no longer have to worry about misplacing, losing or storing paper savings bonds.” But, how will the investor’s fiduciaries and family members know that the investor owned any digital U.S. savings bonds? This is another reminder of the need to keep track of yet another important online account and password so that fiduciaries and family members can find and access the person’s valuable or significant property.

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Can the Government Compel You to Reveal Your Passwords?

In a law enforcement investigation, can the government compel you to reveal the passwords to unlock your encrypted storage devices and data? That’s the issue that the United States District Court for the District of Colorado must decide.

I recently wrote about “Government Searches of Cell Phones, Computers, and Digital Property.” It is important for personal representatives (executors), trustees, guardians, and conservators to know their rights if they believe there is a current or potential future law enforcement investigation or civil suit involving the incapacitated or deceased person.

Beyond just having the government search and seize the data stored in cell phones, smartphones, computers, and storage media, the government in U.S. v. Ramona Fricosu is now asking the judge to compel the defendant to reveal her password to an encrypted storage device. Basically, the government believes there are incriminating documents and data stored in a laptop computer found in Ms. Fricosu’s bedroom, but the government has not been able to access that data because it is encrypted. This raises an interesting Fifth Amendment issue, as well as important data security and privacy questions. The Fifth Amendment protects an individual from being compelled in a criminal case to be a witness against himself or herself. The question is whether this protection extends to passwords and data encryption.

The Electronic Frontier Foundation has written an amicus brief (PDF file) arguing that the Fifth Amendment should protect Ms. Fricosu from being compelled to decrypt the data. A July 11, 2011, article by Declan McCullagh on CNET explains more about the background in this case and the government’s position regarding the encrypted data. It will be interesting to see what the court decides.

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Government Searches of Cell Phones, Computers, and Digital Property

In my January 12, 2011, seminar presentation at the 45th Annual Heckerling Institute on Estate Planning in Orlando, Florida, I spoke about estate planning for passwords, online accounts, and digital property. As part of that seminar, I spoke and wrote about preserving potential “electronic evidence,” including data stored in cell phones, smartphones, computers, and storage media during a probate estate administration or trust administration. This also applies to guardianships and conservatorships.

If there is a current or potential future law enforcement investigation or civil suit involving the incapacitated or deceased person, it is important to preserve potential electronic evidence to avoid obstruction of justice or contempt charges. Simply turning on and booting up a smartphone or computer can overwrite or wipe out data that may be useful in a forensic examination. So, consider using an independent computer forensics company to make an exact image copy of the storage media to preserve the original data and to preserve the chain of custody of the electronic evidence. If the incapacitated or deceased person is charged with a crime, the family members and fiduciaries should consult with a criminal defense attorney about available objections and how to assert and preserve privileges in the investigation.

Today, I noticed that the Electronic Frontier Foundation released a quiz about your rights if the government attempts to search your cell phone or computer. After you take the quiz, you can read their summary of your rights in a government search of your digital property, with citations to the most recent cases and authorities. The EFF also has a one–page handout with tips for talking with police when they ask to search your cell phone, smartphone, computer, or digital property. This handout also may be useful for personal representatives (executors), trustees, guardians, and conservators if they believe there is a current or potential future law enforcement investigation or civil suit involving the incapacitated or deceased person.

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Digital Property Created on the Internet Every 60 Seconds

On MSNBC’s Technolog, I read an interesting posting from June 16, 2011, by Rosa Golijan titled What Happens on the Internet Every 60 Seconds. These statistics come from an Infographic by Shanghai Web Designers (larger image), and, as Ms. Golijan points out, these statistics haven’t been verified.

Assuming these are accurate estimates, it is amazing to see how quickly digital property is created. The valuable and significant digital property items should be included in a person’s estate planning for incapacity and death so that family members and fiduciaries can efficiently access, protect, and transfer these items.

From that Infographic, some of the interesting examples include:

  • Over 168,000,000 e–mails are sent every 60 seconds
  • Over 695,000 Facebook status updates are written every 60 seconds
  • Over 6,600 digital photos are added to Flickr every 60 seconds
  • About 600 digital videos are added to YouTube every 60 seconds
  • About 320 new Twitter accounts are created every 60 seconds
  • Over 100 new LinkedIn accounts are created every 60 seconds
  • About 70 new Internet domain names are registered every 60 seconds
  • Over 60 new blogs are created every 60 seconds
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Using Technology to Express Care, Support, and Sympathy

After reading the article by Bruce Feiler in The New York Times published on June 10, 2011, titled ‘You Look Great’ and Other Lies, I starting thinking about how people are now using technology to express their thoughts of care and support during an illness or thoughts of grief and sympathy after death. Mr. Feiler’s article lists six things you should never say to a person who is sick and four things you can always say. He went into more detail in a radio interview on NPR’s Talk of the Nation on June 14, 2011.

Technology can help us communicate efficiently over long distances, and it can help us spread a message to multiple people simultaneously. For example, we can use technology to send updates about a family member’s or friend’s illness, prognosis, treatment progress, and so on. We can use e–mails, text messages, Web pages, blogs, Facebook updates, Twitter updates, photos, and videos. There are even specialized services like Caringbridge that you can use as a hub to share information and support during a person’s illness. These technology tools can be useful for the family to share information quickly and efficiently, and social media tools can be used to connect, interact, and express support not just for the patient but also for the caregivers and other family members and friends throughout the process. And, as I’ve mentioned before, Facebook allows family members to leave the person’s Facebook account open as a memorial even after death so family members and friends can share thoughts and memories.

But, I think there’s a risk that technology also can depersonalize the care, support, grief, and sympathy—both for the patient and for the family member or friend expressing those thoughts. Having experienced a long–term medical illness in my own family, I appreciated all of the thoughts and communications from family members and friends, whether they were expressed in person, by telephone, by e–mail, or even by text message. But Mr. Feiler’s article points out that some people using the phrases and expressions in his article “are just falling back on a mindless cliché.”

My concern is that, while technology allows us to communicate over great distances, technology also keeps us at a distance from each other. In other words, being physically present to express feelings can have a profound emotional component that that I think is missing when we use technology. My guess is that may be the exact reason why people choose a telephone call, e–mail message, text message, or other technology to express their thoughts—because many people would like to avoid the emotional component. But that’s also one of the key points I take from Mr. Feiler’s article—many of his phrases to avoid are superficial comments and platitudes, and one of his recommendations is that “simple, direct emotion is the most powerful gift you can give a loved one going through pain.” I think this point also applies when we use technology to express care, support, and sympathy—express your emotions rather than avoiding your emotions.

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Rights Under Apple’s iTunes Terms and Conditions

On May 6, 2011, CNN posted an article titled “What You Should Know About iTunes’ 56–Page Legal Terms” by Umika Pidaparthy. I’ve been asked several times “what happens to my iTunes songs and any unused cash balance in my iTunes account when I die?” So, I thought this was an interesting article.

The article walks through some key points and issues in the current version of the Terms and Conditions for Apple’s iTunes Store (last updated June 21, 2010, as of the time of this posting). Topics include privacy, what happens if your downloaded content is lost or damaged, and licensing versus owning content.

Although not covered in the article, note that there is a difference in the Usage Rules for iTunes Plus Products (e.g., digital content such as songs and videos without digital rights management (DRM)) versus iTunes Products with DRM. See Apple’s Terms and Conditions, Part B (iTunes Store Terms and Conditions), Usage Rules Section, Subparagraph (vi). “Digital rights management” are security features that limit how you can use digital data. The iTunes songs and videos with DRM can only be used on five Apple–authorized devices at a time, and you can only burn an audio playlist to a CD up to seven times. The iTunes Plus Products (without DRM) do not have those restrictions—you can copy, store, and burn those songs and videos “as reasonably necessary for personal, noncommercial use” (subject to applicable copyright laws). According to Wikipedia, since April 2009, essentially all of the songs on iTunes are available without DRM. If you purchased older songs or videos with DRM, you can upgrade those songs or videos to iTunes Plus without DRM for a charge—more information is available on Apple’s iTunes Plus Frequently Asked Questions Page.

Another section of Apple’s Terms and Conditions that caught my eye is that unused balances of Apple Gift Certificates, iTunes Cards, and Allowances are not redeemable for cash (except as required by law) and are not transferable. So, for purposes of an estate inventory or an estate tax return, a deceased person’s unused balance in his or her iTunes account has no value (unless applicable state law would permit you to redeem it).

With respect to Apple’s Privacy Policy, Guy Tribble, Apple’s Vice President of Software Technology, gave testimony (PDF link) on May 10, 2011, before the Senate Judiciary Subcommittee on Privacy, Technology and the Law in a hearing on “Protecting Mobile Privacy: Your Smartphones, Tables, Cell Phones and Your Privacy.” His testimony gives more details about Apple’s Privacy Policies, what information they collect about mobile devices, and how they use it. Several others also testified at the hearing.

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