Is electronic information “property”

By Allison Stanfield

Is electronic information “property”?  That is, can it be possessed and controlled in the same way that physical objects can be?  If one of your employees or a competitor obtains a database or set of files that resides on your network, does the law of property apply as if they had broken into your premises and made off with the office safe?

Two different courts, one in New Zealand and one in the United Kingdom, have recently considered the issue of data ownership. Each of the courts reached similar decisions which establish precedents in those countries and are also influential in other national jurisdictions such as Australia.

Under English law a person has the right, under certain circumstances, to hold on to tangible property in his possession pending payment of a debt owed. This is known as holding a lien over the property. In the case of Your Response Limited v Datateam Business Media Limited, the UK Court of Appeal was asked in 2014 to rule whether a company could hold on to a database while awaiting recovery of unpaid fees. The company responsible for maintaining the database refused to return it to the publisher until outstanding fees were paid and issued proceedings against the defendant for breach of contract. The judge held that the claimant was entitled to withhold the data and the defendant appealed. 

The question before the Court of Appeal was whether Your Response could have a lien over a database for unpaid fees.  Your Response posed a number of arguments that it indeed could exercise a lien over the database because (a) it can be considered to be a physical object because it exists in a physical form on servers, (b) the essence of possession is physical control, coupled with an intention to exclude others and that a person can properly be said to possess something if he or she is able to exercise complete control over access to it, (c) a database can be regarded as a document and (d) there is a distinction to be drawn between choses in action and other kinds of intangible property, such as an electronic database.  

As to (a), the court accepted that physical changes are brought about on the storage medium upon which the information is stored, however, the court considered that this did not render the information itself a physical object capable of possession independently of the medium in which it is held and in the electronic world the “distinction is of some importance because of the ease of making and transmitting intangible copies”.  Further, the court noted that there is a distinction between a disk or other medium on which data is held (the disk being a tangible object) and the data itself (which is not).  

With respect to (b), that is, the issue of control, the court said that while possession is concerned with the physical control of tangible objects, practical control is a broader concept, capable of extending to intangible assets, which the law would not regard as property at all.  While the respondent was entitled to exercise practical control over the information constituting the database, it could not exercise physical control over that information, which was intangible in nature.  

As to (c), whether a database is a “document”, the court discounted this argument, as the basis on which the argument applied, concerned discovery, which was not in issue in this matter. Finally, with respect to (d), that is whether a database is a form of intangible property different from a chose in action, the court did not accept that argument.  Rather, it is intangible property and therefore not subject to a chose in action.

Copyright & Intellectual Property law

Although intangible property may not physically exist, it is still subject to ownership principles such as acquisition, transfer and sale.  To determine what we have rights over data under property law, it is important to establish “exclusivity” This right of exclusivity is the hallmark of property law, so it is important to note that both Copyright and Intellectual Property law serve to grant the owners of intangible property with exclusive rights. 

Australia’s Copyright Act 1968(Cth) s30 grants the owner exclusive rights and the Patents Act 1990(Cth) s 13 grants exclusive rights to the patentee.  Both IP and Copyright property can be transferred by the will of the owner, much like selling title to land, or assigned or licensed, much like leasing real property. 

In Dixon v The Queen, the New Zealand Court of Appeal this year had to determine whether a digital video recording was “property” within Crimes Act 1961 (NZ) s 2.  That section defines property as including “real and personal property, and any estate or interest in any real or personal property, money, electricity and any debt, and any thing in action, and any other right or interest”.  

The court determined “after careful consideration”, that “electronic footage stored on a computer is indistinguishable in principle from pure information.  

“It is problematic to treat computer data as being analogous to information recorded in physical form.  A computer file is essentially just a stored sequence of bytes that is available to a computer program or operating system.  

“Those bytes cannot meaningfully be distinguished from pure information.  A Microsoft Word document, for example, may appear to us to be the same as a physical sheet of paper containing text, but in fact is simply a stored sequence of bytes used by the Microsoft Word software to present the image that appears on the monitors”. The court then looked at whether the definition of “property” was intended to cover electronic information.  The court said that it accepted that “legal concepts of property are constantly evolving to reflect societal changes and new developments.  

“We acknowledge too that at the same time as it created new computer-related offences, the New Zealand Parliament amended the definition of property.  However, the amendment was limited. 

 It consisted only of the addition of money and electricity.  Parliament must be taken to be aware of the large body of authority regarding the status of information and in our view had it intended to change the legal passion, it would have expressly said so by including a specific reference to computer-stored data”.

“Tangible” versus “Intangible” Property

The case of Dixon v The Queen, outlined above, does raise an interesting question in relation to the value of intangible property. Whilst the Court held that intangible property, such as the CCTV data, is incapable of being stolen, it was held that if the storage medium was stolen that would qualify as theft. The important consideration to grapple with is that the storage medium itself, without any data on it, is obsolete. It is the CCTV footage, the data, which forms the contentious issue of this case. 

These recent cases demonstrate that electronic information poses challenges not previously considered in the law.  Further, upon examining other decisions and the realm in which we now live, it is evident that there are perhaps inconsistencies developing in the law, which will need to be ironed out of the coming years

 In the meantime, we will continue to grow and expand our use of electronic information across the globe, and the law, which has so far developed over centuries around paper, will slowly evolve too.

Allison Stanfield is the founder and CEO of International, a firm specialising in digital evidence.