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Opponents blast proposed U.S. software law

July 12, 1999
Web posted at: 11:54 a.m. EDT (1554 GMT)

by Dorte Toft


BOSTON (IDG) -- U.S. state legislatures may soon pass the Uniform Computer Information Transaction Act (UCITA), a proposed law that opponents characterize as a gift to IT vendors, a threat to software buyers and a legal mess.

The draft statute has been proposed by a private organization consisting of more than 300 lawyers, judges and law professors. The organization -- the National Conference of Commissioners on Uniform State Laws (NCCUSL) -- assists in making laws uniform across state borders in the U.S. Traditionally, most or all U.S. states pass the organization's recommendations into law.

The members will meet in Denver, Colorado between July 23 and 30 to vote on the IT statute and other issues.

The NCCUSL previously participated in drawing up a law on the sale of goods, which today provides a minimum level of protection for U.S. consumers.
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The proposed UCITA also relates to transactions between buyers and sellers, but in relation to intangible goods such as software. The act further regulates the licensing of a product. The proposed law covers software, multimedia interactive products, data and databases, the Internet and online information.

According to the NCCUSL, consumers should welcome the new law. "UCITA provides (consumers) protections equal to or more than current law," said Carlyle "Connie" Ring, chairman of the NCCUSL committee that worked on the statute, in a written statement recently sent to all the members of NCCUSL ahead of the Denver meeting. He also stated that there is an unquestioned need for uniform new rules in this area.

"Not true," opponents of UCITA have said during several years of heated debate. They claim that consumers are better protected by using existing laws such as the one on the sale of goods. They also say that it is far too early to create special laws in this area. Not enough cases have been tried in court yet, and many in the legal community lack understanding of the subject, UCITA opponents say.

Law Professor Jean Braucher at the University of Arizona is among the opponents. "The draft statute will make it very easy for software publishers to disclaim all liability for the quality of their product and to provide no meaningful remedy," Braucher wrote in an article, just published in the July issue of the UCC Bulletin, a legal newsletter.

The UCITA relies on detailed regulation to protect the vendors and is both premature and unsound in its policy tilt, according to Braucher.

The harsh words are necessary, Braucher said, adding, "It's the truth." For example, the law will make it possible for vendors to give disclaimers, to reduce their potential liability, which buyers cannot not see until the product is paid for. Braucher referred to shrinkwrapped software and the "click during installation" model of assent, adopted in the UCITA.

Braucher also criticized the proposed act for making it legal for a vendor to cut off a buyer's transfer rights.

"If you later want to sell the software or give it to a relative or charity, you will have to ask the vendor for permission. But if you bought a book, such a demand is against the law," Braucher said. The UCITA thereby eliminates a second-hand market.

"It is my impression that this law is driven by the desire of some software publishers who want to protect their interests even more than the existing laws allow them to," Braucher added.

According to the letter from UCITA's Ring, the following software industry organizations are supporting the draft -- industry antipiracy body the Business Software Alliance (14 members, among those Microsoft Corp, Lotus Development Corp. and Adobe Systems Inc.), the Software Information Industry Association, Silicon Valley Software Industry Coalition and the Computer Software Industry Association.

Not one consumer organization is supporting the draft, but the list of consumer organizations protesting against it is a long one.

The U.S. Federal Trade Commission (FTC), an independent agency responsible for safeguarding the interests of consumers, in October 1998 wrote to the UCITA drafting committee expressing concerns and giving recommendations for changes. The FTC still has concerns relating to the new draft of the UCITA that will be voted on, the IDG News Service has learned. Today or more likely Monday, the FTC will send another letter to the drafting committee explaining the problems it has with the proposed act.

The members of the NCCUSL are also being bombarded from other quarters.

Several organizations of IT professionals are against the law because its new rules could hinder them in performing their job as efficiently as they have done before. It will, for example, become more difficult to ensure integration between products, they say. This is because the UCITA would ban the reverse engineering of software, a method of development often used to construct links between products.

Additionally, businesses using the software have protested, including companies participating in the Society of Information Managers (SIM), which has 2,700 members.

Business users will, just like consumers, lose ground when it comes to the terms of shrinkwrapped licenses, according to SIM.

Also, the law gives software vendors an extremely powerful threat in case of disagreements with users. In some cases, vendors are allowed to make the software stop functioning at a customer's site without going to court first. [See "Licensing Time Bomb," May 28]

The University of Arizona's Braucher pointed out another problem in her recent article in UCC Bulletin, namely, a limitation to the right of free speech. "Furthermore, UCITA enables the vendors to forbid the customers to publish results of tests of software or other criticism," Braucher wrote in the article.

SIM has supplied all its members with a draft of a protest letter, urging them to send it to NCCUSL members from their own state.

"If enacted, UCITA would increase our cost of doing business and adversely affect the economy of the states in which we operate," the letter states. It also claims that there is an imbalance in favor of the vendors "in both blatant and numerous subtle nuances woven throughout the law."

According to SIM Executive Director Jim Luisi, many IT managers have already posted the letter written on their companies' letterheads.

However, Fred H. Miller, law professor at the University of Oklahoma, expects the law to be passed. He is the executive director of the drafting committee on UCITA. "The permanent staff person, the corporate memory," is how he describes his job.

According to Miller, the law is needed because there are many issues in this area not being specifically addressed in existing legislation. "The law is unclear, and therefore there is a lot of effort to provide clear rules," he said. Different laws in different states may be preventing business across borders or raising the cost of them, according to Miller.

The software industry is very positive about the initiative, Miller said. Also, the balance struck by the proposed law between the vendors and the users is fair, he added.

According to Miller, the UCITA especially protects consumers. Enterprises have the power to negotiate conditions with software vendors, Miller said.

Asked whether the UCITA covers issues that arise when hackers use a bug in a software product to harm end-user organizations, Miller answered no.

Customers cannot use UCITA to sue software vendors for damages, even in cases like the recent attacks by hackers using the Melissa virus and the Worm.ExplorerZip to infect and crash e-mail systems. Both of the hacker attacks were made possible because of bugs in Microsoft's Explorer software.

"The Explorer issue was discussed, but the problem is formulating a workable rule," Miller said. It is often difficult to ascertain the source of the bug, and if the source is found, it is not easy to determine who bears the responsibility, according to Miller. Perhaps, there could have been ways in which users could have prevented such hacker attacks, Miller added.

Professor Braucher wouldn't be surprised if the draft statute is approved by the NCCUSL members. "But I know many people who are not happy with the content," she said. Loyalty and strong leadership by the organization may make them vote for the draft, she added.

"But, it is a mess," and a example of bad legal craft, Braucher said.

Such objections may be the reason why the NCCUSL's normal partner when it comes to making uniform laws, the American Law Institute (ALI), withdrew from the project in April. At that time, the draft statute was under consideration by both organizations as an extension of the Uniform Commercial Code, and was known as Article 2B of the Uniform Commercial Code. The UCC is a long-standing statute that codifies commercial practices throughout the various states and currently covers, among other things, sale of goods and the leasing of personal property.

The ALI explained its withdrawal from the Article 2B project in "The ALI Reporter," a newsletter, in the following way: "... the Council of the Institute continued to have significant reservations about both some of its (Article 2B's) key substantive provisions and its overall clarity and coherence."

The NCCUSL decided to carry on with the draft statute, renaming it the Uniform Computer Information Transactions Act. While the UCC codifies well-established practices, the UCITA involves high technology, an area that is still evolving, the NCCUSL's Miller said. So it makes sense to keep the UCITA separate -- at least for now -- from the UCC, Miller said. In fact, the UCC contains sections that were once separate statutes, until they became long-established, he said.

Miller also acknowledged that even if the draft UCITA is approved, the NCCUSL and the state legislatures "may have to make some corrections later."

But if the UCITA eventually is passed by state legislatures, becoming law, the American software industry will ship worse software than today, according to one of the most ardent opponents of UCITA, Cem Kaner, a lawyer and IT professional, based in Santa Clara, California.

The economic consequences of defective software will be less, according to Kaner.

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New Bill Rethinks Software Licensing Law
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Getting caught in the UCITA trap
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