E-Business 101 Parts 1 and 2: Taxonomy and Anatomy - Anatomy - The Asset Structure of an E-Business
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It is equally important to understand the anatomies of web based businesses and their assets. The location of the Assets may have significant implications for tax liabilities, the methods for recording ownership and perfecting security interest, and jurisdiction.
One of the key aspects of the Web is the relationship between a CLIENT and a SERVER. The Client and server need not be in geographic proximity.
The CLIENT accesses a web site via a BROWSER (commonly used Browsers include, Netscape Navigator, Microsoft Explorer and AOL's browser). The Client may be a desktop computer, a laptop computer, a personal digital assistant (PDA) or a web enabled wireless phone.
Somewhere there will be a SERVER: Hardware on which the data and programming that forms the basis of a web site is stored and operated (many e-businesses will, in fact use multiple redundant servers). In some cases, its location will impact which courts have jurisdiction over disputes. If the Server is owned by the e-business then the hardware is personal property that should be considered Equipment under Article 9 of the Uniform Commercial Code (CGS §42a-9-109). If the e-business leases the Server, then the lease agreement should be treated as an executory contract.
Each Server is identified by its IP ADDRESS. The IP Address is a numerical code attached to a specific server, much the way that a telephone number is associated with a specific telephone line. In today's environment, there is probably not much real value in any specific IP Address. Like a telephone number, the IP Address will constitute an intangible asset under CGS §42a-9-106.
In some cases, the crown jewel of a website may be the DOMAIN NAME. The Domain Name is the alphanumerical code used to identify a particular IP Address such as the ones for the Servers for goSKInewengland.com or Priceline.com. Domain Names can be worth many millions of dollars. When a user types the domain name into a browser, the browser will retrieve the first page of the web site associated with the Domain Name (usually index.html) from the server whose IP address is associated with that domain name. The Domain Name is an intangible asset under CGS §42a-9-106. The Domain Name may also represent a valuable TRADENAME, TRADEMARK or SERVICEMARK. The web site may also have other intellectual property such as additional Trademarks and Servicemarks. In subsequent issues we will discuss the methods for protecting rights and interests in Domain Names and the related trademarks.
Many web sites will also include unique CREATIVES (copyrighted or copyrightable artwork, graphics, animation and sounds) and DELIVERABLES (data, software, music, etc. that can be downloaded from the website) as well as proprietary SOURCE CODE (the code that tells the user's browser how to manipulate the data to form images on the screen and to perform other functions and services provided by the web site). With the Source Code one can modify or copy portions of the software. For this reason, software creators guard their code jealously. What they tend to distribute is a licensed version available in compiled form that is readily usable, but not subject to editing or reverse engineering. The Source Code may be protected by copyright. In some circumstances it may also possible to treat the Source Code as a trade secret. These too are general intangible assets as defined by CGS §42a-9-106. In subsequent issues we will discuss the methods for protecting rights and interests in these intangibles and issues to watch out for, like inadvertent copyright infringement.
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