[Blogmeister’s Note: Recently, the CommLawBlog Contracts Guy, Steve Lovelady, conferred with Kathy Kleiman, Fletcher Heald’s Internet Maven, in the preparation of transaction documents involving the sale of a broadcast station, a sale which involved a number of important Internet-related assets. The two concluded that 20th Century asset sale/purchase agreements – even agreements that contracting parties still use, often out of force of habit – don’t include adequate provisions for 21st Century intellectual property issues. They prepared the following post based on that experience. The Contracts Guy is especially grateful for the Internet Maven’s extensive familiarity with the Internet, which came in handy in identifying and capturing the substance, and value, of a station’s online intellectual property assets.]

 Contracts for the purchase/sale of broadcast stations are a bit like recipes. Particular broadcasters and their lawyers tend to have their favorite versions which include provisions that they happen to like. Maybe they drafted those provisions themselves. Maybe the other party to some deal they did a long time ago drafted them and our particular broadcasters (and their lawyers) liked the way the provisions worked. Who knows?

Whatever may be the case, when a new deal pops up, those broadcasters (and their lawyers) normally don’t waste time creating a brand new asset purchase agreement from scratch. No. More often than not they rummage through their file of previous deals. When they find a contract that comes close to the outlines of the new deal, they tweak the old contract as necessary to make it work for the new deal – just as a chef, in assembling a new meal, starts off with tried-and-true recipes that can be tweaked here and there to accommodate the guest’s tastes and the ingredients available.

That approach tends to work well. It’s efficient and economical. And it affords contracting parties the psychological comfort of using documents they’re familiar with.

But reliance on the old can cause problems. Contracts handed down from year-to-year and deal-to-deal may need to be freshened up, just like old recipes. And that’s particularly true with respect to broadcast deals in the 21st Century.

Nowadays, radio and television stations are making substantial investments in a wide range of intangible assets that can provide better communication with younger audiences – websites, domain names, Twitter feeds, Facebook pages are obvious examples. If you’re buying a station, you’re probably expecting to acquire all those intangible assets, which can reflect a station’s image almost as much as its actual on-air content. But historically, the notion of “intellectual property” assets in a broadcast deal tended to be limited to call signs and jingle packages, with maybe some software manuals thrown in for good measure. Suffice it to say that intellectual property provisions derived from agreements struck decades ago don’t begin to address the range of important considerations relating to 21st Century intellectual property interests.

What happens to these valuable intellectual property assets when a station is sold? Based on our recent experience sorting through these issues in a couple of deals, we have assembled the following tips.

First and foremost, both buyers and sellers should know what online intellectual property the station owns, has licensed and has permissions to use. Too many to fully enumerate here, they include:

  • Websites and domain names
  • Twitter and Facebook accounts
  • Trademarks for call signs, slogans and domain names
  • Copyrights for website materials (such as photographs and videos).

Once these assets have been identified, it’s a good idea to include a separate schedule listing them all in detail. But that’s not the end of the job – it’s just the beginning.

Each of the various items will often bring with it a number of subsidiary questions that should be resolved as part of the negotiation process. For example:

Websites and domain names. Who owns the website content – the station, some website designer, a third party? What’s the best way to transition the website to a new owner? Who owns the domain names and what needs to be done to get them transferred to the purchaser?

Twitter and Facebook accounts. Does the station have these accounts? Are they part of the assets to be acquired? If so, the asset purchase agreement should clearly provide that the seller will provide the buyer the most up-to-date version of any and all necessary user ids and passwords – social media sites don’t do much good if you can’t access them and control their content.

Trademarks. Trademarks play an increasingly important role in the registration and protection of online intellectual property. A growing number of stations are seeking to register their call signs, slogans, on-air characters, domain names and more as trademarks. For a purchaser, key questions include: what trademarks exist, who owns them, and will they transfer with the station?

Copyright. Copyright protection online is an issue that makes headlines regularly. If an active website is part of the station transfer, the purchaser should request adequate documentation of all copyrighted material posted on the website, including purchases, licenses and permissions for celebrity photographs and videos. (After the transfer of the website content, it will not be a sufficient legal defense that the prior owner was the one originally responsible for posting copyrighted material on the website.)

It’s also not a bad idea to get a handle on any website and Internet policies that the seller has imposed with respect to station-related online activities. For example, are the station’s Facebook pages run by its on-air talent personally, or through the station? Do station employees have their own Twitter feeds that are tied into the station? Are there limits to what can be posted or tweeted? Whatever happens, you don’t want a disgruntled ex-employee sending out unauthorized tweets or posting unauthorized material on the newly-acquired station’s Facebook page.

It is critically important that transitions of Internet intellectual property be handled easily, smoothly, and quickly. This can best be accomplished if appropriate provisions are written clearly into our 21st century agreements. We are obviously looking at a newly developing area of transactional law practice. Of course, no single stock answer fits each situation – each transaction is different and needs to be assessed and handled differently. But recognition of the need to focus on these questions is an essential first step.