Face Off: Is UCITA Good News for CIOs?

FRAMINGHAM (03/15/2000) - A controversial law to govern software contracts and access to online information is being introduced in state legislatures. Called the Uniform Computer Information Transactions Act (UCITA), this proposed law is sponsored by the National Conference of Commissioners on Uniform State Laws (NCCUSL).

YES: JOHN MCCABE, LEGISLATIVE DIRECTOR AND LEGAL COUNSEL, NCCUSL CHICAGO CIOs face difficult decisions when acquiring software for their businesses.

They deal with enough technical and market decisions without adding a confusing legal environment.

The basic laws governing sales and common contracts do not fit software transactions. There is hope, though. UCITA is the first balanced set of rules, relying on the familiar commercial law, for these transactions.

Most software contracts are licensing contracts, which makes sense for software transactions. Software is too easily copied, which presents a threat to its economic value. Software is never static. Intellectual property rights and update and service obligations are involved. The license covers all the problems and characteristics of these transactions.

UCITA provides basic rules for licensing computer information. Under UCITA, a CIO will better understand licenses because UCITA clearly states contract rules and remedies for breach of contract. It determines when the contract governs (mostly) as opposed to when statutory rules apply. Clear law means better legal advice and better contracts.

While UCITA has been controversial, you must carefully consider the criticisms, some of which are serious misreadings. American business has been well served by the rules that govern sales of goods and leases of personal property.

Freedom of contract is primary. UCITA adapts those familiar rules to software transactions. Your businesses already buy and sell goods under similar legal principles. UCITA will serve your interests just as well.


If users don't take action against UCITA, they could find their software providers suddenly outfitted with new legal armor, more impervious than ever to their concerns and complaints.

To snooker legislators, the NCCUSL has produced a white paper with hyperbole such as: "UCITA is a uniform law that is urgently needed if we are to keep this country's economic engine running." But the huge growth in technology recently was accomplished without the benefit of UCITA. The nation's economy will not rise or fall because of this law, but it could make things worse for large and small software customers, already concerned about poor quality and vendor unresponsiveness.

"Click. That's the sound of another American...agreeing to surrender his or her rights." That's how USA Today began a story about UCITA, capturing its central feature--explicitly validating click-wrap and shrink-wrap "contracts," in which the terms are either in the box or embedded in software and first available for reading on delivery of the product.

Under ordinary contract law, which governs software acquisitions, click-wrap and shrink-wrap terms are of doubtful enforceability. If something goes wrong with a product, in most states the producer can't count on its terms governing, so it is therefore more likely to settle a dispute.

NCCUSL claims UCITA is based on "freedom of contract," but that means both parties agreeing to terms they want. It would be more accurate to call UCITA regulation on behalf of producers, making it easier for software companies to dictate terms to their customers. With click-wrap given clear legal protection, producers would only increase their use of it and be less willing to negotiate or settle, even with big customers. Information executives should encourage their companies to join the growing opposition to UCITA.

Which side of the debate are you on? Visit comment.cio.com and make your thoughts known. Send column ideas to faceoff@cio.com. Edited by Meg Mitchell.

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