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UCITA: Terms and Conditions Not Acceptable

by Glen Emerson Morris

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In the long term, UTICA will go down as just another marketing blunder the software industry is justly famous for. In the short term, it's going to take a lot of work to stop UTICA, but it will probably be worth the effort.

A few years ago the government launched an attempt to modernize the Uniform Commercial Code, the aging set of laws that standardize contract law governing interstate commerce. Known as Article 2B, the revised law was intended to resolve legal issues raised by the evolution of digital commerce. Unfortunately, the law's drafting team was hijacked by the influence of the software industry to the degree that Article 2B was eventually opposed by many of the industries it was intended to protect. With minor modifications, Article 2B has resurfaced as The Uniform Computer Information Transaction Act (UCITA,) and it will probably be coming to your state legislature within the next two years.

UCITA is being opposed by a large and diverse set of interests, including the National Association of Broadcasters, the Newspaper Association of America, the Magazine Publishers of America, the Federal Trade Commission, Consumers Union, Ralph Nader, and the Attorneys General of 26 states. In fact, few laws in American history have been opposed by such a wide and unrelated set of interests. Many of these groups have a number of different reasons for opposing UTICA, but they all share one common reason; they buy software that comes in boxes, and in the boxes, come documents stating the terms and conditions of the sale.

The heart of UTICA is a concession to the software industry that makes the terms and conditions in the software package legally binding, no matter how extreme they are, with very few exceptions. UTICA also allows the software industry define software as something that is leased, not sold, and establishes that terms of that lease can be rewritten by the software publisher at any time. The list of special favors UTICA gives the software industry goes on, and it adds up to a familiar pattern.

In a number of ways UTICA is reminiscent of the laws congress passed to protect the tobacco industry. A new category of products is being created which is neither goods nor services (like cigarettes were neither food nor drug,) and it's a product category that's subject to its own law, a law largely written by the industry it was intended to govern. Also, as with cigarettes, consumers don't need to be told of problems with the products, even if the problems are known at the time of sale. Consumers are also prevented from finding out how the products work internally, much like cigarette ingredients were kept secret, and the right of consumers to sue to recover damages is substantially limited, or eliminated completely.

UTICA goes even further than the tobacco industry protection laws in some ways. Under UTICA, consumers could be prevented, under civil penalty, of even telling other consumers about problems with a software product. UTICA also makes it a criminal offense for any user to decompile a software program and determine how its code works, even if it's just to fix a serious problem the software publisher won't fix for them.

These are tough restrictions on products offered as off the shelf solutions for e-commerce, and they may not help the software industry as much as it would hope. In fact, they may even hurt it. How many businesses will trust an electronic cash register that comes without a guarantee? How many businesses will buy a transaction processing system from a company that will assume no liability if it fails? How many businesses will risk using a database to keep their customer's credit numbers secure that came from a company feels that no obligation to tell them the system can be cracked by a 13 year old kid in five minutes?

There's also the issue of certainty. Under UTICA, shrinkwrap software developers could change the conditions of the lease, after the product had been paid for, at any time, unilaterally, simply by notifying the users by e-mail. This could prove a difficult issue for buyers of stock photography for advertising. If a user couldn't agree to the revised terms of use, their only option would be to return the digital images, and all copies, to the software's publisher. Under Utica, that could be interpreted to include all copies of catalogs and sales material the photos were used in, even if it cost a small fortune.

The idea behind contract law is to create mutually agreeable and enforceable conditions for doing business. The idea of creating a class of products, as UTICA does, which gives one side of the agreement the ability to revise the contract at will, seems to contradict the purpose contract law in general, and the express purpose of the Uniform Commercial Code. UTICA won't reduce uncertainty, it will create it.

For a number of reasons, UTICA is likely to loose, it's just a question of whether its defeat will be in state legislatures, or in the marketplace. It would be least expensive to kill UTICA politically, though, given the deep pockets of the software industry, it wouldn't be easy.

In the long term, UTICA will go down as just another marketing blunder the software industry is justly famous for. In the short term, it's going to take a lot of work to stop UTICA, but it will probably be worth the effort.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

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