FRAMINGHAM (03/03/2000) - John Rudin, CIO at Reynolds Metals Co. in Richmond, Va., is in the vanguard of a high-stakes political battle against a controversial law that's pitting users against software vendors, the Uniform Computer Information Transactions Act.
And it's a fight that could have broad implications for user companies in every state - especially if vendors rush to use Virginia law as a basis for software licenses.
Virginia's Legislature is on the verge of sending UCITA, which establishes the rights of software buyers and sellers and covers topics such as shrink-wrapped licenses and vendor liability for defects, to the governor for his expected signature. It may be the first state to adopt the measure as part of a move to make the state attractive to high-tech businesses.
But Rudin helped organize many of Virginia's major employers into a lobbying counterattack, winning two important legislative concessions: Implementation of UCITA will be delayed until July 2001, after a study committee, made up in part of user companies and vendors, reviews the law.
Rudin said UCITA gives vendors powerful leverage in contract negotiations. For instance, a "self-help" provision in UCITA would allow licensors to threaten disruption of a licensee's systems through automatic restraints, such as a "time bomb" that could shut down a program, he said. A user company can go to court to seek an injunction, but the prospects of a costly legal fight may prompt a user to "succumb to the demands of the licensor. So there's a real power shift that occurs," he said.
Rudin likened it to being held hostage.
Rudin said he hopes Virginia's study committee will "make sure [UCITA] is a broad-based law that is fair to both parties" and bring a series of amendments to Virginia's Legislature.
The National Conference of Commissions on Uniform State Laws adopted UCITA in July. The conference recommends commercial code law and sends it to the 50 states for their adoption. Only a handful of states have introduced the measure.
Large businesses, theoretically, should be able to negotiate contracts with vendors that protect and exclude provisions they don't want, say UCITA supporters. In these contracts, UCITA would apply only as a default rule in areas not covered by the contract.
"Parties in particular situations are always free to modify the contract," said Mark Uncapher, a vice president at the Information Technology Association of America. "This is just a fail-safe or fallback set of provisions."
But Randy Roth, director of corporate purchasing at Principal Financial Group in Des Moines, Iowa, said his ability to negotiate with large vendors is already limited.
"Microsoft basically owns our desktops. We have no clout with Microsoft," said Roth. With other vendors, once their software becomes part of a mission-critical system, the vendor knows it. "I don't have a choice of saying, No, I don't want your product anymore.' I'm in tight with them. I have to have it," said Roth.
Roth said he is skeptical that Virginia's study committee can fix UCITA.
"Anybody that really sits down and reads it understands how convoluted, how filled with holes, how hard to understand and how nasty it is to a standard business," he said.
UCITA supporters argue that the measure gives predictability and uniformity to software licenses. And they are also telling early adopting states that UCITA may be a potential high-tech economy builder.
Uncapher said vendors would have to establish a physical presence in states that adopt UCITA to be able to apply it to their contracts. "That's an advantage [for a state] in a very competitive marketplace," he said.
But Cem Kaner, a Santa Clara, Calif.-based computer law attorney and leading opponent of UCITA, said UCITA was written such that a vendor based in one state could say the laws of UCITA apply in a second state in which the product is sold.
It's unclear how skeptical judges in other states will treat a contract provision that stipulates that the laws of a certain state applies to their states. "The answer to that has been subject to tremendous amounts of wishful thinking and propaganda," Kaner said.