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LEGAL ISSUES

The UCITA: An Act Designed to Squash Your Rights

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The Uniform Computer Information Transactions Act (UCITA), a commercial code for software licenses and other computer information transactions, is picking up steam with its recent adoption in the state legislatures of Virginia and Maryland. The UCITA is also picking up loads of criticism as a growing number of consumer and legal groups warn of the negative effects such a law would have on consumers of computer software.

Good Intentions Gone Awry

The UCITA, initially called Article 2B, was first conceived almost 10 years ago to be a modification to the Uniform Commercial Code (UCC). The UCC, a set of default rules governing commercial disputes related to the sale of goods, needed additional rules that applied to the intellectual property nuances of the technological age.

The American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL), the two parties behind the UCC and responsible for drafting Article 2B, last year couldn't come to an agreement on the contents of the article. In fact, the ALI so opposed the provisions of Article 2B that it actually withdrew from the drafting project in early 1999 and refused to sign the final proposal, a first in the 50-year history of the UCC. Since approval from both the ALI and the NCCUSL is necessary for a modification to the UCC, the NCCUSL moved ahead with the final proposal and shaped it into a separate act, the current UCITA.

Many opponents of the UCITA support the initial goals with which the act was conceived. Its purpose was to:

  • Be what the UCC is to the sale of goods -- the backbone of commercial law for software licenses and computer information transactions.
  • Set uniform guidelines for software and computer information license agreements.
  • Provide a single standard to avoid legal confusion when transactions are made across state lines.

Many feel that despite the good intentions behind the UCITA, the software industry's strong effect on the drafting process has spoiled the initial attempt to provide fairness to all parties involved in the licensing of software and digital information (software industry representatives sat in on open drafting sessions of the act, but no consumer group representatives were present).

What's Wrong with the UCITA

Opposition to the UCITA is growing as the reality of its potential effects sinks in. Those who have explicitly spoken out against the UCITA or expressed concern about it include:

  • Federal Trade Commission senior staff
  • 26 state attorneys general
  • Consumer Federation of America, the Consumer Project on Technology, and the U.S. Public Interest Research Group
  • Association for Computing Machinery
  • Institute for Electrical and Electronic Engineers
  • Newspaper Association of America
  • Five major library associations
  • The entertainment industry

How is it that so many diverse groups find the UCITA to be threatening? The answer lies in the act's numerous provisions that remove liability from and give advantage to software development companies, putting customers in a vulnerable position.

Some of the most onerous results of the passage of the UCITA would include:

The validation of postpayment disclosure of terms. The UCITA would make enforceable the terms of a contract that is only presented to the customer after the sale. This is called the "terms inside the box" approach.

The creation of doubt as to whether existing goods-related consumer protection laws would cover software transactions.

Software producers' choice of law and forum in mass-market transactions. This means that a software company could force consumers bringing a suit against it to take their claim to a forum anywhere in the United States, or even possibly outside it. The location chosen could be so remote that a consumer would not be able to afford the cost of litigation.

The failure to answer the question as to whether or not contractual restrictions on public discussion of software product flaws can be enforced. Many software licenses prohibit the customer from disseminating negative information about the product. Even if the courts were to find that such restrictions are not legal, the fear of being litigated against by software companies is enough to silence many publications and individuals.

The allowance of self-help provisions that enable software vendors to incorporate devices within a product whereby the vendor could disable it from a remote location. If a software company believes that a customer is violating the terms of the license agreement, it could reach in and disable the software, potentially leaving the consumer in a bad situation. The ability to hold the deactivation of software over consumers' heads gives the software company improper leverage in cases where it may actually be in the wrong.

The failure to require software companies to disclose known defects in the products they are selling. Consumers would have to discover these defects on their own.

The full enforceability of shrink-wrap and "click-wrap" licenses in a court of law. This would require businesses to devote huge amounts of resources toward the analysis of contracts for every piece of software purchased.

The foregoing are just a few of the negative developments that could result from the passage of the UCITA. In general terms, the UCITA would encourage software companies to produce shoddy products and give consumers little or no recourse for protecting themselves.

UCITA advocates argue that consumers will always have the right to return a product should they find the terms of the license or the quality of the software to be displeasing. But that's of little reassurance when so many products, such as Microsoft Windows, dominate the market and leave no room for choice.

The Battle Continues

For the UCITA to become law, it must be passed by all U.S. state legislatures. The more states pass the bill, the more pressure other states will be under to OK it as well. Virginia (home of America OnLine and pro-software-industry Governor Jim Gilmore) and Maryland have already adopted the UCITA, and Delaware, Hawaii, Illinois, and Oklahoma have introduced the bill into their state legislatures. Many other states are under pressure from the software industry to move the UCITA along quickly or risk the loss of software development business.

Small online businesses that rely heavily on the software products they use should be concerned about the UCITA and the recent developments giving it strength. While opposition to its passage continues to grow, the fight against the UCITA is currently disjointed. To take part in discouraging your state legislature from passing the UCITA, you can do the following:

Find out the status of the bill in your state at the site for Computer Professionals for Social Responsibility.

Learn what's being done to fight the UCITA by checking in with state and local consumer organizations in your area. The Consumer Federation of America provides a number of links to consumer organizations in various regions of the country.

Contact your local legislators and let them know how damaging the passage of the UCITA could potentially be to your business. An effective sample letter used to contact commissioners on the NCCUSL, highlighting many of the main issues, can be found on the Bad Software site.

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