Software and information vendors may want to review the enforceability of their computer software or information related licenses including shrink-wrap or click-on licenses in light of a proposed new uniform law.
The Uniform Commercial Code (UCC)
The Uniform Commercial Code or U.C.C. has been adopted in virtually every state and provides legal guidance concerning contract formation, terms, and remedies. There have been efforts to adapt Article 2 of the U.C.C., which covers sales of goods, to more specifically address issues concerning computer software, information, and other technology products and services, as well as considerations for electronic commerce. For years, committees of the National Conference of Commissioners on Uniform State Laws (“NCCUSL”), the American Law Institute (“ALI”), the American Bar Association, and other groups have examined the possibility of creating a new article to the U.C.C. that would address an alleged mismatch between the U.C.C. aimed at the sale of tangible goods and new contract relationships in which information or intangibles were the focus of the transaction.
On April 7, 1999 the ALI and NCCUSL announced that they were abandoning their efforts to jointly promulgate a new Article 2(b) for the U.C.C. Instead, NCCUSL moved ahead by itself and independently issued rules for such transactions in a freestanding uniform act called the Uniform Computer Information Transactions Act (UCITA). The UCITA was officially adopted by NCCUSL on July 29, 1999.
Uniform Computer Information Transactions Act (UCITA)
The UCITA is the first uniform law that would govern software licenses and has sections related to the enforceability of shrink-wrap and click-on licenses and establishes rules for what law governs, how to create electronic contracts, and what default rules apply to contracts created on-line. The UCITA still follows general principles of contract law. It represents a movement towards licensing of information and away from the sale of copies. Thus a vendor may retain more control over the product. Some critics have suggested that there is no need for such new law. While the UCITA has many supporters, it has also been characterized by some as a confusing statute with over 335 pages of text and reporter’s notes. One of the concerns involves the UCITA’s use of “manifestation of assent after opportunity to review” as the touchstone for contract formation relative to shrink-wrap and click-on license agreements. The UCITA requires that there be an opportunity to review and reject license terms before payment and delivery, with a right to a refund if the terms are not acceptable.
UCITA also provides new warranty rules for software including a new implied warranty of merchantability (the program is “fit for the ordinary purposes for which such computer programs are used”).
NCCUSL & UCITA in Minnesota
NCCUSL is an organization of lawyers, professors, and judges who draft proposals for uniform and model laws such as UCITA and then work towards their enactment at state legislatures. The UCITA will likely be presented to the Minnesota state legislature for consideration and possible enactment. However, the Minnesota Attorney General has opposed enactment of the UCITA and the Minnesota NCCUSL representatives voted against the implementation of the law. In the meantime, knowledge and understanding of the UCITA and its provisions are essential to anyone interested in the preparation of enforceable software and related licenses. For more information on the UCITA, see www.ucitaonline.com or www.nccusl.org.
A website has also been established by an organization opposed to UCITA known as Americans for Fair Electronic Commerce Transactions (AFFECT). For information on why some groups oppose UCITA see www.ucita.com.