Would you buy a computer software package whose warranty could be changed or disclaimed at any time by its manufacturer? That could be shut down or repossessed if its vendor decided you weren’t complying with the terms of its license? Whose license let the seller sue you for libel or slander if you bad-mouthed it in public?
Critics say those scenarios, and worse, could face every buyer of computer software programs if the Ohio General Assembly adopts model provisions of the new Uniform Computer Information Transactions Act (UCITA).
Proponents of the uniform law, pending legislative action in at least a half-dozen states, say UCITA (pronounced “you-SEE-tah”) will close a major gap in the emerging field of electronic commerce law. Software manufacturers and vendors would finally be able to enforce provisions of licenses that take a thousand different forms, and which often are upheld or struck down only after lengthy, costly court battles.
“The stakes are jobs,” says Lee McCorkle, a member of the committee that drafted UCITA and general counsel and secretary at Wendy’s International Inc. in Columbus.
Legislation to adopt UCITA provisions has not been introduced in Ohio. But most observers agree it’s just a matter of time. And once a bill is filed, “This thing is like quicksilver — it can shoot through [the legislature] very quickly,” says Skip Lockwood, director of For a Competitive Information and Technology Economy (4CITE), a Washington, D.C.-based nonprofit cross-industry coalition dedicated to defeating UCITA.
McCorkle says, “Any business that is in business today is in the business of licensing software.”
Thus, he and others argue (albeit, from diametrically opposite viewpoints), UCITA is a law every business owner should know more about.
Ignorance/bliss
“I don’t know that anybody’s knowledgeable about UCITA in the business community,” says Michael D. Stovsky, partner in charge of the Internet and e-commerce practice at Ulmer & Berne LLP in Cleveland.
Few companies or entrepreneurs know UCITA, observers agree, though many trade and professional associations and business advocates have already taken sides. In favor: the Business Software Alliance (including software bigfoot Microsoft Corp.), the Software Information Industry Association, the Computer Software Industry Association and the Silicon Valley Software Industry Coalition.
Opposed: the American Intellectual Property Association (representing 10,000 intellectual property lawyers), the National Retail Federation (which identified “grave problems” with UCITA, without calling for outright rejection), 26 state attorneys general (perhaps notably, not Ohio’s) and Consumers Union.
“I oppose the way this law is written,” says Gordon Pence, intellectual property counsel for Caterpillar Inc., in Peoria, Ill. Yet the original goals — establishing uniform national software licensing standards based in contract law — are laudable, he adds. “It’s just the implementation of the law that I oppose.”
Pence says that under UCITA, Caterpillar — and many other businesses — could be stuck with useless software it could not return for the purchase price. Large companies negotiate site licenses, Pence notes, which charge a fee to install a software product on many computers. But small businesses, consumers, and even larger companies that need a program only for a few computers, must accept boilerplate licenses written by vendors, he says.
Since software licenses are usually visible only after the shrinkwrap has been broken and the software has been installed, Pence and others say vendors under UCITA will have no legal obligation to issue a refund for a defective or useless program.
UCITA proponents argue that no software product can be warranted against all defects; “perfect” merchantability is impossible in complex products such as computer programs, say McCorkle (speaking as a member of the UCITA drafting committee, and not for Wendy’s) and others. Buyers retain their right to reject products that do not “conform to the contract,” supporters say, though opponents note that, under UCITA, the vendor or manufacturer can write the contract to say more or less anything it wants.
Lockwood, at 4CITE, says legislators in Maryland passed an amendment to pending UCITA legislation that would extend return protections for most businesses.
“But it has not come easy,” he adds.
Another potential problem comes from UCITA’s concept of “electronic self-help,” says Lockwood. This provision allows software vendors to electronically shut down programs if the manufacturer or vendor decides the user has violated terms of the license.
“That’s a very big problem we see with” UCITA, Pence says.
These provisions can be invoked unilaterally by the vendor, and UCITA software licensing terms can be unilaterally changed by the vendor. While the model law requires that vendors notify customers of changes by e-mail, Pence and Lockwood point out that there is no provision requiring a vendor verify the customer received its notification.
Observers say UCITA, a 300-plus page model document, contains numerous other controversial provisions, many of them not well understood in the developing field of computer law.
For example, opponents claim a company that buys another company might have to pay again for all the software the purchased company bought. UCITA proponents say that under Uniform Commercial Code Article 2, purchased software remains transferable unless the transfer would have a substantial negative effect on the vendor or manufacturer, or unless the transfer is prohibited by precedents already established under federal copyright and patent law.
Also, opponents argue that software vendors under UCITA can choose among the various states’ implementations of UCITA to enforce the one that best suits their needs. Supporters argue that consumers can review licenses for such provisions, and reject products with licenses they believe are onerous.
Past as prologue?
“We don’t know what [UCITA] is going to look like in Ohio yet,” notes Stovsky, who drafted digital signature legislation, still pending in the Ohio General Assembly, which would largely be superseded by UCITA.
Properly defined, UCITA is the draft model law fashioned over the past decade by the National Conference of Commissioner on Uniform State Laws, a body of 300 lawyers appointed by state governments to draft uniform and model state laws, in conjunction with the American Law Institute, a body of lawyers and judges that reviews those drafts.
“UCITA as we now call it has a messy parentage,” notes Sheldon W. Halpern, professor of law at The Ohio State University College of Law, and a member of ALI. Originally titled Uniform Commercial Code Article 2B, the draft was meant to address gaps in UCC Article 2 dealing with the application of intellectual property and copyrights to contract law in the sale of intangible goods, he says.
Yet, after NCCUSL finished its draft, the ALI rejected it last April as being unbalanced in favor of licensors — that is, vendors and manufacturers of software —against licensees, i.e., consumers. NCCUSL then restarted its drafting procedure, without review provided by the ALI.
“So what we’re going to have is a new body of law,” says Stovsky, noting that UCITA would codify at least a half-dozen implied warranties on software and make them enforceable by courts in all states. However, Stovsky says, the application of those rights would depend on their inclusion — or, detractors say, would more likely be disclaimed — by vendors and manufacturers in the licenses that accompany their products.
“I don’t think it’s going to sail,” says Halpern of UCITA. “I think it has too many problems. Too many interests are opposed to it, and it’s just not clean enough.”
Lockwood says opponents are gearing up around the country to fight the model law, though short legislative sessions and aggressive lobbying by software companies among legislators eager to court them, work against the opposition.
Further, Stovsky says, states can basically cut and paste their own versions of the law. Virginia, the first state to enable the legislation, nevertheless delayed its effective date to July 2001, pending a committee report on its impact. Iowa is considering legislation that would deny application of another state’s UCITA on citizens of that state.
“Whether [UCITA] is enacted in the model form is the real question,” Stovsky says.
Ohio tends to follow the model code when it comes to considering uniform state laws such as UCITA, Stovsky says. But he doesn’t expect lawmakers in Columbus to set the pace — Buckeye legislators won’t be among the first 10 states to adopt the law, he predicts.
Halpern notes that model state laws sometimes stall before they pick up enough momentum to become the “uniform” standards they were originally written to be.
“I don’t think it would be the end of civilization as we know it if [UCITA] passed,” Halpern says. “But I’d rather it started again.”
How to reach: In favor of UCITA, www.ucitaonline.com; against UCITA, www.4cite.org