UCITA opposition turns up heat

Opponents of the vendor-backed UCITA software licensing law will meet here this week to seek major changes, including a prohibition of "self-help," a provision that lets a vendor shut down a user's system remotely. UCITA's backers have signaled a willingness to delete this shutoff provison, but critics say that alone isn't enough.

UCITA is a model act sponsored by the National Conference of Commissioners on Uniform State Laws, which has urged all states to adopt it. Even if that body agrees to alterations, however, the impact of those changes remains in question. That's because UCITA has already been adopted by Maryland and Virginia, and companies say vendors are beginning to cite those states' laws in their software licensing contracts.

"We were doing business with one software company that fought more than usual to have Maryland law in the contract," said Dave Weidenfeld, senior counsel at fast-food giant McDonald's Corp. in Oak Brook, Ill. "We would not do the deal if Maryland law was used, and eventually they caved in."

Weidenfeld said McDonald's is adding warranties to its software contracts to ensure that it's covered against financial damages that may result from downtime should a vendor invoke the self-help measure.

Michael Gratz, intellectual property counsel at Milwaukee-based Boyle, Fredrickson, Newholm, Stein & Gratz SC, said the law makes it difficult for all but the largest companies to push back against unfavorable contract terms.

"Some things will be revised or tweaked. UCITA ties the customer's hands and adds extra hoops that you must go through to negotiate around the law," said Gratz. "If you don't recite the mantra exactly, then you may run into problems that cause a breach of contract."

The NCCUSL drafting committee will meet next weekend. The meeting was spurred by the American Bar Association, which recently considered asking for major revisions to UCITA but held off, pending this meeting. Opponents are seeking broad changes addressing click-wrap licensing, limits to damages and electronic self-help in the Uniform Computer Information Transaction Act, as the law is formally known.

UCITA's opponents are hopeful that the most contentious part of the proposal, electronic self-help, will be dropped. That provision allows vendors to electronically disable software for a breach-of-contract violation. But users say it's a ticking time bomb that will increase litigation and create undue risk.

"This type of automatic restraint introduces a new level of risk to the business," said Roland Salvato, manager of contract and vendor relationships at Blue Shield of California. "If a vendor has the power to automatically disable the software code, then that gives them an unfair power over us."

UCITA's proponents, which include Microsoft Corp., America Online Inc. and trade groups that represent software companies, have asked the UCITA drafting committee to remove the self-help provision in an amendment proposal.

But opponents say that doesn't go far enough. They want UCITA to prohibit any kind of disabling capability, just in case vendors try to apply self-help under existing commercial law. As long as vendors believe self-help is possible, they will build back doors that give them access to software and put systems at risk, said Gordon Pence, intellectual property counsel at Caterpillar Inc. in Peoria, Ill. "It's a security risk. Even if used properly, it's still a security risk."

Another issue for opponents is click-wrap licensing, in which users "click" to accept licensing terms that could inadvertently cause a contract breach, said Kevin Hudson, executive director of the Caucus Association of High Tech Procurement in Winter Park, Fla.

UCITA's opponents, which have formed a broad coalition representing manufacturing, financial services and library groups, believe they have built enough clout to seek changes. The upcoming meeting follows the blocking or stalling of UCITA in at least eight states this year, including Texas, a key technology state. "I would hope that sends a message to the people who are trying to get it passed," said Miriam Nisbet, legislative counsel for the American Library Association in Chicago.

Still, it remains to been seen whether a compromise is possible. Opponents have submitted 80 pages of amendments, almost as long as the law itself, and many believe UCITA can't be fixed. If UCITA fails to win adoption, pressure will grow on Congress to set a uniform law, a process no side may like, said Carlyle "Connie" Ring Jr., chairman of the NCCUSL's drafting committee. "Ours is an open process where we at least try to maintain rational dialogue," said Ring. He added that he hopes the meeting can "enlarge the base of support" for the law.

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