SAN MATEO (07/31/2000) - UCITA (UNIFORM COMPUTER Information Transactions Act) and business-to-business dot-coms are a match made in licensing hell. I don't just mean for business-to-business customers; the b-to-b dot-coms themselves will find UCITA turns one of their biggest challenges into a nightmare.
As you can see from our Special News Report this week (see "The Licensing Game"), there are more than enough licensing issues -- even without UCITA -- for ASPs (application service providers), digital exchanges, and other types of b-to-b Internet services to consider. In particular, a significant challenge facing dot-coms is getting customers to make the leap of faith required to entrust their business data to an outside party. So one thing customers will likely want to know is, what if something goes wrong?
We are all aware that even small technical glitches can result sometimes in big financial losses, and inevitably there will be some b-to-b disasters. Will dot-coms be held responsible for damages caused by every stray bug?
Under UCITA, you would assume the answer would be no, because keeping customers from suing over bugs is the whole point of the law, right? Well, not entirely.
It is true the customer would be unable to hold the dot-com responsible for its mistakes, but only if the customer has accepted a shrink-wrap/click-wrap agreement with all the standard disclaimers. And that won't always be the case, particularly given that leap of faith, which can spook potential b-to-b customers anyway.
What's the alternative? The best answers will have to wait until dot-coms further evolve their licensing models, but for now I suspect most are relying on a simple solution: a contract services, work-for-hire model. In other words, the customer "hires" the b-to-b service much as it would hire a contract programmer. The dot-com provides its services at a particular rate, and as long as the customer is happy, the customer keeps paying. If the customer is unhappy but can't prove some form of gross negligence or bad faith, its principle recourse is to fire the b-to-b service and find somebody else. It's not the perfect model for b-to-b dot-coms, but for now it's going to have to do.
But in UCITA states (in two months Maryland becomes the first), a services contract won't work how b-to-b dot-coms expect. As with everything in UCITA, it's difficult to explain how its convoluted twists and turns produce this effect. Basically, it goes back to something I've said many times: UCITA is bad for customers, but it's even worse for small developers. Any b-to-b dot-com that can't get a customer to accept a shrink-wrap/click-wrap will find itself in the same boat.
UCITA proponents point out that the law contains a host of implied warranties including some new ones. They are all easily disclaimed by language you'll already find in most shrink-wrap licenses, but they typically aren't disclaimed in service contracts because no implied warranties exist in that kind of relationship.
Under UCITA, however, there are many such warranties in any services contract involving "computer information." Without disclaimers, a b-to-b dot-com will be granting customers an implied warranty of merchantability that programs will be fit for ordinary purposes. Data provided by the service will be warranted free of inaccuracies due to a failure to take reasonable care. If the provider is aware of the customer's specific purposes, there likely would be an implied warranty of fitness for those purposes. A b-to-b dot-com that can be considered a system integrator because it chooses off-the-shelf products to include as part of an overall system it offers. That "integrator" then becomes responsible for an implied warranty that the components of the system work together.
(That's really scary when you consider those off-the-shelf products probably aren't warranted to work at all.) And if something goes wrong and the b-to-b dot-com is found in breach of contract, it is liable for unlimited consequential damages under UCITA's default rules.
Naturally, the b-to-b dot-com can ask the customer if it's OK to include disclaimers of all these warranties in the contract. That will be easy, right?
"Say, you don't mind if we include language that says there's no warranty of product quality, no warranty that we'll take reasonable care to assure data accuracy, and no warranty that this information, our efforts, or the system will fulfill any of your particular purposes or needs, do you?" That will go over great with customers who aren't even sure they want to do this.
If you're mystified as to why UCITA works this way, you shouldn't be. Just remember the law was designed by and for large software publishers. Large software publishers are themselves frequently licensees of small software developers, and so they had to make sure all the rules that allow them to abuse their customers wouldn't bite into those relationships. Quite a piece of work, isn't it?
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