UCITA Debated

BOSTON (06/05/2000) - The Uniform Computer Information Transactions Act (UCITA) is a draft law that seeks to bring consistent rules to software contracts and licensing agreements.

It was created and adopted by the National Conference of Commissioners on Uniform State Laws and was sent last July to the legislatures of all U.S. states and territories for consideration. But UCITA has been plagued by controversy almost since work began on drafting it back in 1996.

Opponents - and there are many - say UCITA is too broad and gives far too much power to software vendors.

"The simple case is that it is a bad thing for consumers of any type, whether you are an individual or a business," says Randy Roth, director of corporate purchasing at Principal Financial Group in Des Moines, Iowa.

"The only organizations it is good for are the software vendors," Roth adds.

"Don't call it UCITA, just call it the Licensor Protection Act."

Skip Lockwood, director of Washington-based For a Competitive Information and Technology Economy (www.4cite.org), a coalition of end users and trade associations opposed to UCITA, agrees.

"UCITA is anticompetitive and is counter to the whole economic model we have been currently using," he says.

‘Rules of the Road'

UCITA was born out of a need to have common, legally enforceable rules governing software contracts at a time when the Internet is rapidly changing the way people buy and use software, explains UCITA proponent Keith Kupferschmid, intellectual property counsel for the Software & Information Industry Association (SIIA) in Washington.

"UCITA sets out the rules of the road for licensing of software products, especially in the online environment," he says.

UCITA is very similar to the Uniform Commercial Code, which covers physical products and goods. It establishes the legal rights of software buyers and sellers. It covers standard and custom-developed software licenses and those that deal with online access of software. It addresses issues such as shrink-wrapped and online click-through licenses, warranties, transfer of ownership rights, contract terms, disputes and vendorliability for defects.

Current laws are inadequate and open to varied interpretations in different states, says Kupferschmid.

Also, currently there aren't uniform contract laws that apply to custom-developed software, he says. Such issues are becoming more important as people use the Internet to cut across state lines when buying software, Kupferschmid adds.

"The only uniform rules out there apply to tangible goods - not the software on a CD-ROM, but on the CD-ROMitself," Kupferschmid says.

One of the principal concerns among opponents of UCITA is that it automatically validates all the terms and conditions in shrink-wrapped licenses, click-through agreements and default clauses without giving users much course for legal redress, Lockwood says.

"Under UCITA, those terms are just enforceable, period. It's the law," he says.

For instance, UCITA allows software companies to avoidliability for damage caused by defective software, even though the problems were undisclosed to the customer at the time of purchase.

Another major concern is a provision that says users who don't uphold software licensing agreements could have their software shut down remotely by the manufacturer.

Other issues include provisions prohibiting the transfer of software between companies, even in mergers and acquisitions, and other rules that tie buyers to agreements that were disclosed only after purchase.

The ability of each state to amend UCITA, and the fact that not all of them may eventually enact it, also weakens its potential of becoming a widely accepted law, critics claim.

Supporters such as the SIIA dismiss such concerns and claim that customers remain free to negotiate their own terms with vendors. Important provisions - such as a 15-day notice period before a vendor can disable software, for instance - ensure consumer protection, say SIIA officials.

Cautiously Moving Ahead

But the controversy has caused states to exercise extreme caution as they move to enact UCITA.

The Virginia Senate was one of the first legislative bodies to approve the act, but enactment has been deferred to July 1, 2001, to accommodate provisions aimed at ensuring consumer protection.

Maryland also approved UCITA, and it appears to be poised to become the first state to enact it this October.

Iowa, meanwhile, is trying to pass "bomb-shelter" legislation that would prevent consumers in the state from theeffects of UCITA.

Some states, including Hawaii and Illinois, have considered UCITA and have decided not to move forward with it.

Although the legislation isn't expected to be ratified by every state, it is expected to be introduced in all 50 states and territories during the next year and a half.

Lockwood says that more discussion about UCITA will only increase the ranks of his opposition group, 4cite.org.

"I expect I will be adding more members," he says.

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