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Consumers have little legal protection from software foul-ups

September 9, 1998
Web posted at 5:45 PM EDT

by Jane Morrissey

(IDG) -- You download a hot new piece of software, open it up, and kablooie! Your system crashes, the program won't run, and your data has been corrupted. Or maybe your PC has been infected with a virus. But when you complain, the software vendor says that, by accepting the terms under which you were permitted to install the package, you've released it from liability.

Can vendors get away with this? You bet, and a proposed model law for governing software as well as contracts in the digital domain in general may carry on the tradition. It's called Article 2B, an extension of the Uniform Commercial Code that's been in the works for three years. One of the two groups of volunteer lawyers responsible for drafting 2B recently met with industry and consumer groups to strike a better balance between the interests of vendors and their customers. The upshot: Consumers gained some ground, but concerns about the draft persist--and 2B could become law in the year 2000.

The UCC -- the bible for state laws regulating business transactions throughout the U.S. -- is a joint project of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. The drafters of 2B are trying to develop laws to fill a legal vacuum relating to the buying and selling of digitized information. The controversy lies in the language of this near-300-page tome, which favors vendors over customers. The rising tide of consumer complaints has already prompted the drafters to delay promulgation of 2B for a year; NCCUSL and ALI now expect to finalize the wording of 2B in 1999, and they plan to present it to state legislatures early in 2000.

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Why all the fuss? To start with, Article 2B validates the existing concept of shrink-wrap licenses (those throwaway contracts inside the product box) and so-called click-wrap licenses (those stupor-inducing, hardly-ever-read "I agree" online contracts). When you purchase software, you buy only the right to use it; the vendor dictates the terms of use. In the opening example, the vendor included a product warranty disclaimer--a common industry practice.

Under the proposed standards of 2B, if you don't like the terms of the contract, you can get a refund and recover "incidental damages" such as shipping expenses. But if the software damages your data, you could be out of luck. You can sue, certainly, but forget about small claims court. In all likelihood, the vendor has specified where and under what law you can seek redress. Vendors may even profit from their mistakes; 2B contains no provision forcing them to reimburse you for tech support. Of course, most reputable vendors will take care of you. But there's no guarantee.

That's better

Drafters have offered various compromises in 2B, but consumer advocates contend that many of these supposed protections are riddled with loopholes. Moreover, none of the proposals on the consumer side have been accepted by the drafters, says Cem Kaner, an attorney and vocal 2B opponent. For example, one early draft would have held vendors accountable for viruses, but that provision was dropped due to industry opposition.

At the recent annual meeting of NCCUSL, commissioners passed a motion that -- if preserved -- would beef up consumer protections. The motion proposes barring licensing terms that contravene public policy, including clauses of Article 2B that restrict free expression, such as one notorious provision that would prohibit consumers from criticizing a vendor's product. If such anticriticism clauses ever became law, magazines might not be able to publish negative product reviews.

Consumers groups are encouraged by the recently proposed changes. But drafters are free to alter the language and may water it down. Furthermore, the software industry has objected to the proposed changes. And without industry support, 2B will die, says Mark Nebergall, vice president and counsel for the Software Publishers Association.

Ultimately, Article 2B could still have a negative impact on consumers. Better to speak up now than to suffer the indignities of biased legislation later.

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