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Click here ... and lose your rights Are state legislatures about to sign away consumer and jurisdiction rights all for the promise of an e-commerce windfall? By Robert Lemos, ZDNet News UPDATED March 13, 2000 7:34 AM PT

"To bring more e-commerce bucks to your state, click 'Accept.' "

That's the pitch the software industry hopes to sell to 49 state legislatures during the next year, as the Uniform Computer Information Transaction Act, or UCITA, a controversial 350-page legislative proposal aimed at strengthening licenses on software and digital information, is presented to the states. But opponents -- which include the Federal Trade Commission, Consumers Union and an alliance of 20 companies -- warn UCITA will instead undermine consumers' rights and lead to shoddy software development.

If passed by those 49 state legislatures, UCITA promises to create a unified framework governing the licensing of software and information, much in the same way that the Uniform Commerce Code maintains a well-understood legal foundation for the sales and leasing of real-world goods.

For its proponents, UCITA adds more "certainty" to today's sales of information and software, aiming to make e-commerce contracts (such as shrink-wrap and "click-wrap" licenses) more binding.

"It's necessary for businesses and consumers to have certainty in online transactions and software purchases," said Rebecca Gould, vice president of public policy for the Business Software Alliance, the foremost proponent of the current proposal. "(To date) it has been uncertain whether a contract's provisions will hold (in every state)."

Yet, critics say, consumers and buyers care less about the applicability of law and more about fair licensing.

"The only 'certainty' is that (the software companies) will win in every court case brought against them," said Skip Lockwood, director of the 4CITE Coalition, a group of more than 20 companies rallying against the proposed legislation. "That's not the kind of certainty that consumers want. They want to know that their credit card numbers are safe ... that they can bring back a product if they are not satisfied with it."

Birthing pains Nine years ago the two groups responsible for updating the Uniform Commerce Code -- the American Law Institute (ALI) and National Conference of Commissioners for Uniform State Laws (NCCUSL) -- hoped to do just that: promote fair transactions in the age of information while creating a solid framework for companies wanting to sell information and software.

The result would have been a modification to the current Code and dubbed UCC Section 2B if the two groups could have agreed on the outcome. However, by early 1999 it was evident that the ALI and NCCUSL did not agree. End result: The ALI refused to sign the "final" proposal last July.

"The ALI considered that the draft was not ready," said Michael Greenwald, one of two deputy directors for the Pittsburgh-based organization. "Since both parties are needed to agree on the UCC, the solution was to make it a separate uniform act."

Twenty years ago such a disagreement would have scuttled the proposed legislation, said Michael Froomkin, a professor at the University of Miami's School of Law, sending it back to the drawing board. In the information age, though, the clout of the software industry -- worth $140.9 billion in U.S. revenue in 1998, according to the BSA -- was enough to keep the proposal moving forward.

"The establishment is not as strong as it used to be," he said.

Thus, UCITA was born.

Better rap for shrink-wrap? For consumer advocates, the infant legislation is a terror. UCITA will help the software industry reach a goal that has long been a Holy Grail: turn shrink-wrap licenses into bedrock contracts.

Currently, many provisions of those shrink-wrap licenses and their online counterparts -- "click-wrap" licenses -- run afoul of consumer protection laws and are considered unenforceable in most of the United States.

For example, some current licenses require users to give up the rights to: -any content made with the software; -travel to a different country to file a claim against the maker; and -delete the product if any part of the license is violated.

Those are the rights of the software creator, and they should be enforceable, said the BSA's Gould. "When you buy a book today -- yes, you are buying the paper -- but you are also licensing the copyright to the material," she said. While UCITA does not apply to real-world books, it could apply to the electronic variety.

Treating information differently depending on its method of distribution -- such as paper vs. digital -- may seem to defy logic, but the BSA and others believe that digital information deserves special treatment. They also argue that special treatment is what consumers want.

"One reason software is protected by licenses, and not dongles, is because people don't want to spend five minutes playing with the back of their computer," Gould said.

"We support UCITA, but there is a lot there that we had to swallow as well. The unconscionability clause is a good example," she said. That clause gives a judge the right to declare a license "against conscience," meaning that the contract is so unfair that it should not be allowed -- an outcome that has happened perhaps a dozen times in the past two decades.

"Everybody wins, everybody loses," Gould said.

But will it be the consumer who loses the most? James Love, director of the Consumer Project on Technology, a group founded by consumer advocate and Green Party presidential candidate Ralph Nader, said UCITA will take a set of regulations designed for agreements between law-savvy businesses and individuals and enforce them against the mass-market consumer.

"The majority of people, A, do not read the contract of service that they buy, and B, even if they did, would not understand most of what they read," Love said.

The BSA and NCCUSL argue that consumers who don't like their licenses can return the software -- a right guaranteed by UCITA. That will lead to free-market forces determining what's a good license, BSA's Gould contended.

On the other hand, 4CITE's Lockwood questions whether there can be any choice in software when Microsoft Corp. (Nasdaq: MSFT), the BSA's biggest member, owns the majority of the market for operating systems and applications suites. "That (free-market argument) assumes a level playing field," he said. "They're trying to tell me that if I don't like Windows licensing I can just dump all the software I own, and my data, to switch to an Apple or Linux computer? I have made a commitment to a platform that goes far beyond $45 for an application."

UCITA, Lockwood argued, will produce one-sided agreements that put the consumer in a weak position. Here are just some of the examples of anti-consumer tactics deemed legal by the proposed legislation:

Companies will be able to spy on a consumer's computer to make sure all license requirements are obeyed.

Companies could also turn off the software without notifying the user if they believe the user violated contract provisions.

Licensors could require that users not publicize flaws in software and that any legal actions be held in front of mediators in the jurisdiction of the company's choice.

The possible abuses of the UCITA are so egregious that its opponents read like a veritable "Who's Who" of technology policy: 26 state attorneys general; the FTC; software developer organizations, including the prestigious Institute of Electrical and Electronics Engineers and the Association for Computing Machinery; consumer advocates; large software customers such as insurance companies; five major library associations; the entertainment industry (though opposition is now muted following an exemption for their content); and more than 100 law professors.

Furthermore, consumer advocates seem justified in their unwillingness to bet on the software industry's good intentions. Three years ago a proposed amendment to the UCC -- known as the McManus amendment -- hoped to make illegal any provisions of shrink-wrap licenses that were unconstitutional. The seemingly common-sense proposal was voted down.

Time running out Such anti-consumer law has resulted from the fierce competition between states for a share of what their politicians see as the Gold Rush of the 21st century: e-commerce.

"State legislators often give an unreasonable amount of emphasis to winning business for their state over other states," said Richard Stallman, president and founder of the Free Software Foundation and arguably the most influential voice in the fast-growing Linux community. "They often do this without regard to whether the country as a whole will benefit or suffer as a result."

Already, one of the 50 states has signed on with the software industry. Two weeks ago, Gov. James S. Gilmore of Virginia signed that state's version of the bill into law. While his office did not respond to repeated calls for comment, a statement stressed the "clarity" in contract law that would result, and that the "increase in electronic transactions also will perpetuate the Internet revolution and the growth of Virginia's technology and manufacturing economies."

Rather than attract the software industry, however, such rules could not only scare other businesses away, according to the University of Miami's Froomkin, but could give corporate law departments a whole new reason to exist.

"Every time a business buys a piece of software they are agreeing to a contract," he said. "Do you want your general counsel looking at the contracts for every piece of software bought by an admin?"

That has Froomkin and other opponents asking for UCITA to be sent back.

Some states are listening: While laws based on UCITA are under consideration in Maryland, Delaware and New Jersey, legislators are starting to study the issue rather than give it the rubber stamp, as has been done with previous UCC legislation.

In fact, while Virginia passed the legislation, it did so with amendments, including one that delays its enactment until July 2001 so that legislators can study the issue.

Better late than never.,4586,2455460,00.html

-- Lynn Ratcliffe (, March 14, 2000

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