Does Bankruptcy Affect Your Web Site?

As use of the Internet becomes more widespread, more people will obtain intellectual property rights in Web sites they create and domain names they own. Are these considered assets for the purpose of bankruptcy?

Under the bankruptcy code, any intellectual property rights of a debtor are considered property of the bankruptcy estate.

However, the bankruptcy code does not determine the scope of intellectual property rights, which are defined in copyright law, trademark law, or patent law. Under these laws, Web sites and domain names have various copyright and trademark rights. If a debtor owns those intellectual property rights in the Web site, they will be considered part of the bankruptcy estate.

Factors to Consider
Determining the value of a particular intellectual property right, such as the value of a Web site or domain name, is somewhat difficult. Many factors must be considered:

Whether the domain name or Web site is in use
Whether it is generating income and how much
Whether the Web site or domain name has value and is in a market that generates advertising income from other businesses
Intangible Value
In the bankruptcy context, treatment of Web sites and domain names as assets of the debtor remain are uncertain. These items are intangible, with no easily ascertainable value, particularly where a Web site and domain name are personal in nature and not for profit. In this case, the bankruptcy trustee may believe the value, if any, is negligible.

However, where the Web site and domain name are owned and operated by a debtor in connection with his or her business, there may be significant value. Currently, no exemption amount exists for these types of intellectual property rights.

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