Bad Software: A Consumer Protection Guide.

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WHAT'S NEW

September 16, 2000 -- Modest reorganization of the site to start moving back to software consumer protection rather than focusing so intensely on UCITA.

The following notes are archival, covering the NCCUSL meeting that approved UCITA and the history of this site until then. Up to August, 1999, this site was the primary opposition web page to UCITA. Since then, the 4CITE coalition was formed to take the lead role in the UCITA opposition and their web page is the one that should be the primary information site.

FLASH: MEETING ON UCITA / ARTICLE 2B

Op-Ed on UCITA (Kaner & Pels, available for free use by the press, July 1999). This page is updated by Cem Kaner, hosted by Cem Kaner and David Pels. Summary of objections (Kaner, July 28, 1999).

News: July 29, 1999 --- UCITA PASSES NCCUSL Previous updates

The National Conference of Commissioners on Uniform State Laws (NCCUSL) voted to promulgate UCITA by a vote of 43 to 6, with 2 states obstaining. The states voting against the bill were Alaska, Iowa, Minnesota, Nebraska, North Carolina, and Utah.
I reported yesterday that 14 Attorneys General had sent a letter to NCCUSL opposing the bill. Here is the text of that letter. Another 11 co-signed that letter yesterday. Here is the text of the second letter. It is very unusual to have opposition like this to a bill, especially to a bill that was approved by NCCUSL.
With opposition from a very broad coalition, the fight now goes to the states.

We believe that UCITA will

Because of this, we are asking you to write your state's Governor and your state legislators to urge them to vote against this bill.Until we post a replacement, this letter could serve as a model.

UCITA is primarily supported by software publishers, some computer manufacturers, and some banks.

UCITA has been opposed by:

.UCITA has been sharply criticized by the United States’ Federal Trade Commission.

NCCUSL originally wrote UCITA in partnership with the American Law Institute. The ALI called for "fundamental revisions" in UCITA (then called Article 2B) and later withdrew its support and participation in the project (Braucher analysis article) (memo from the former ALI members of the 2B drafting committee).

Please read the background material and then write a letter to the commissioners from your states. We provide a sample letter for people who don’t have time to compose their own.

Background on UCITA

The Uniform Computer Information Transactions Act (UCITA) is a 350-page proposed new law. It will govern all contracts for the development, sale, licensing, maintenance, and support of computer software, plus most contracts for information (such as books) in digital form. Vendors of other products that contain software, such as computers, can also bring their products within the scope of UCITA, rather than Article 2 of the Uniform Commercial Code, a law that is much friendlier to consumers and small businesses.

In various forms, UCITA has been under development for about 12 years. For the last four years, it was called Article 2B and was drafted as a proposed amendment to the Uniform Commercial Code.

The strength of UCITA is that it creates a uniform law governing a wide range of transactions. It unifies the laws across the states and it resolves some differences in legal treatment of computer-related services and sales/licensing of packaged software.

The problem with UCITA is that the drafting has been dominated by lobbyists for software publishers. The drafting committee is independent of these companies and is trying in good faith to write a decent bill. But committee members (and its chair) have repeatedly expressed the belief that the bill cannot pass without the support of The Industry, and The Industry (trade association’s lobbyists) has repeatedly threatened to withdraw its support if this or that position was not written into (or kept in) the draft law.

Don’t get us wrong about this. We’ve worked in the software industry (usually as managers) for most of our adult lives. We appreciate NCCUSL's enthusiasm for protecting America's fastest growing industry. But when a legislative drafting committee lets itself be too heavily influenced by a single industry’s lawyers, the result is a law that is just too imbalanced. Over the past four years, we (and many others) repeatedly proposed compromises or alternatives that we believed were win-win solutions. The results were negligible. Look at our detailed analyses of September 1996 (part 1, part 2), October 1997, December 1997, August 1998, October 1998 and November, 1998. The same issues came up year after year, with no genuine progress, year after year.

There are many analyses in the articles, and we encourage you to read them. But to give you a taste, here are just a few examples of the rules under UCITA:

Backers of UCITA insist that it leaves consumers and small businesses with our existing rights, and gives us new ones. But it doesn't. That's why every consumer advocate we know (including Consumers Union and Ralph Nader's Consumer Project on Technology) has called for termination of the UCITA project. A July 9, 1999 analysis by the Federal Trade Commission points out that UCITA allows software companies to place "restrictions on a consumer’s right to sue for a product defect, to use the product, or even to publicly discuss or criticize the product." The analysis concludes, "we question whether it is appropriate to depart from these consumer protection and competition policy principles in a state commercial law statute."

News: July 29, 1999 --- UCITA PASSES NCCUSL Previous updates

The National Conference of Commissioners on Uniform State Laws (NCCUSL) voted to promulgate UCITA by a vote of 43 to 6, with 2 states obstaining. The states voting against the bill were Alaska, Iowa, Minnesota, Nebraska, North Carolina, and Utah.
I reported yesterday that 14 Attorneys General had sent a letter to NCCUSL opposing the bill. Here is the text of that letter. Another 11 co-signed that letter yesterday. Here is the text of the second letter. It is very unusual to have opposition like this to a bill, especially to a bill that was approved by NCCUSL.
With opposition from a very broad coalition, the fight now goes to the states.

News: July 28, 1999 --- UCITA PASSES CRITICAL VOTE Previous updates

The following AGs have also signed onto the AGs' opposition letter:  California, Arkansas, Arizona, Florida, Minnesota, Mississippi, Missouri, New Jersey, Tennessee, West Virginia and Wisconsin. This brings the total to 25.

If you don't like UCITA, and you haven't yet written to the Commissioners in your state, NOW IS YOUR LAST CHANCE. The National Conference of Commissioners on Uniform State Laws (NCCUSL) are meeting in Denver now. The final vote on UCITA will be July 29.

Opposition by Attorneys General of Connecticut, Idaho, Indiana, Iowa, Kansas, Maryland, Nevada, New Mexico, North Dakota, Oklahoma, Pennsylvania, Vermont, Washington, and the Administrator of the Georgia Fair Business Practices Act -- SEE JULY 27 UPDATE.

By 37 yes, 11 no, the NCCUSL passed a resolution to present UCITA to a vote by the states (state reps in nccusl) for final approval either tomorrow or Friday. Essentially this was equivalent to rejecting a motion to table.

The vote tomorrow will probably be very close to today's vote. I am told that at least one state voted YES today (yes, don't table it) in order to vote NO on the final product tomorrow. But it is unlikely that many states will change their vote. Some of the no-votes will turn into yes's in solidarity with the commission's decision.

I will probably not cover the conference tomorrow and Friday, though I will post some updates to http://www.badsoftware.com as more material comes in and as part of the development of an archive of opposition for use in the state legislatures.

NOTE: I DO NOT HAVE ENOUGH MONEY TO CONTINUE MY WORK ON AN UNPAID BASIS. I AM NOW LOOKING FOR ALLIES AND SPONSORSHIP. I've done this work on my own time and nickel for 3.5 years. Legislative work is harder, more expensive, and involves skills that I haven't developed. If you are a profit or nonprofit organization that would like to sponsor my work or retain me to work on this on your behalf, please let me know. If you are a friend with a few bucks to spare, please hang onto them for now. I am not going to take money from private individuals until and unless I am working with a properly organized group that can take donations, do appropriate bookkeeping, and so on.

Now, here are my notes from today's meeting (typed on the fly, pardon the spelling mistakes.)

=====================================

This is my 5th email status report on UCITA. Most of the content of the last 4 is on my website, http://www.badsoftware.com, either on the front page or archived (currently) at http://www.badsoftware.com/whatsnew.htm. The email notes have a bit more detail of interest to writers. If you want them, send me a note.

This message covers the closing debate and the vote out of the Committee as a Whole (the full body of NCCUSL). A vote yes here, sends the bill to a vote by state, on Friday. The odds are very high that approval in this vote will mean approval in the vote on Friday.

My website summarizes a letter just distributed from 14 Attorneys General. They asked NCCUSL to table the UCITA project, pointed out ways (contrary to the claims of the proponents of UCITA) that UCITA takes away consumer protections, fails to give consumers new protections, and legalizes business practices currently illegal or ineffective (unenforceable). The spin in the hallway is that AGs from the other states (such as California) refused to sign this letter and (must) disagree with it. My understanding is that several other AGs are haggling over a different opposition letter, getting the wording just so. Hopefully, their letter will arrive soon.

This memo's notes are more detailed because I am primarily listening and typing, rather than meeting with commissioners. I am not covering every change made to UCITA, just the ones that I think are interesting.

The debate opened with a discussion of revised section 103 (scope). After scathing criticism of this 2-page section, the drafting committee made a few revisions.

On the floor is a motion to delete Section 103(e). Section 103(e) allows opt-in of certain transactions (that is, letting the contract specify that the product at issue is covered by UCITA rather than some other law). The language of 103 (e) and other sections is collectively so complex that Commissioners who have carefully read the draft are sharply disagreeing about whether and to what extent embedded software can be brought under UCITA. If the embedded software can be brought in, then the hardware that the software is embedded in can usually also be brought in. I think that it is certain that a typical computer, bundled with software, would typically be sold under UCITA rather than under UCC Article 2, the current law of sales. The drafting committee says that this doesn't allow embedded software (usually, or almost always) and that it povides important protections against unreasonable opting in. Others say exactly the opposite. My bet is that judges will reach sharply different conclusions because the language is so unclear.

The language dealing with writers and movies and entertainment products has also been revised. It seems clear that contracts to write an article or a book will be governed under UCITA if the work is to be published electronically, under other law if the work is to be published in print, under both if the work gets published both ways, and under either one alone if the contract says so. The choice of law specified in a contract will make a big difference to the meanings of the words. Books for writers (on how to be a successful freelance writer) will be much more complex.

The motion to delete section (e) was soundly defeated.

Section 103(e)(3) provides some mischief that is typical of UCITA.

 (2)  An agreement that this [Act] does not govern a
 transaction does not alter the applicability of Section
 217 or 816 and, in a mass-market transaction, does
 not alter the applicability of unconscionability,
 fundamental public policy, or good faith under this [Act].

Remember that a transaction is not in the mass market if it involves a site license, a discount below normal retail price, involves quantities that are not typical of consumer quantities (like, 1 copy of the software), an access contract, a purchase outside of normal retail channels, or software that is not intended for the general public as a whole (for example, an accounting package for dentists is for dentists, not for the general public.) Much software sold to small businesses will be non-mass-market, but shrinkwrapped with nonnegotiable language.

So, software sold to small businesses, etc., can have contract clauses that exempt the publisher from the duty of good faith (common law of contracts in Texas apparently has no good faith rule), and from the doctrines of unconscionability and non-conflict with fundamental public policies.

========
Motion on section 103: Because the drafting committee made the repeated claim that Section (e) should be preserved because it restricts the ability of companies to opt their contracts into UCITA. So, one of the Commissioners said, that the following language is what the committee said:

 (e) the parties may not agree that this act, or
 any part of this act, governs the transaction in
 whole or in part, or that other law governs the
 transaction, or that this act does not apply,
 except as in this subsection.

This matches my impression of what several committee members said during the debate.

As the mover said, "I am trying to make you an honest committee, to make your language match up with your statements."

The committee opposes the motion on the grounds that this language might have unintended consequences. They accepted instead a much narrower modification that added 3 words in the middle of the section (too complex to type, minor impact).

The motion failed overwhelmingly.

=========================
Section 204 was amended by the committe. The terms of a shrinkwrap contract can no longer override previously negotiated terms. (More precisely, the statute has gone back to being silent on the matter, leaving the issue for the courts to decide, but a later amendment to 204 leaves room for a court to accept a material change from a clickwrap.) The statute has gone back and forth between approving and being silent on this issue.
========================

Section 304 -- contract modifications, deleted subsections (b) and (c). Where the parties agree to a procedure for modifying the contract, the act no longer specifies that (section b) in a mass-market transaction, the customer can cancel the contract if the change is material and in a non-mass-market transaction, the customer cannot cancel the contract and (section c) the contract can specify the notification procedure (e.g. post terms at the internet web site) unless the procedure is manifestly unreasonable. This section was specifically attacked by the 14 attorneys general as enabling practices that they (as prosecutors) currently target as illegal. The section is amended to be silent, saying that modifications are OK but not approving or banning any procedure.

You might want to look at the current Ed Foster column at www.infoworld.com, dealing with modification by @HOME network. I'm not going to summarize his article for fear of unintentionally making an error (and thereby libelling the network). Check it out.

MOTION -- restore (b) and (c) but add a term that vendor cannot modify a term in a non-negotiable contract. Failed.

MOTION -- restore (b) and (c). This one is backed by the committee. And appears to have been accepted without vote by the committee as a whole.

WHOA! -- SECTION 304 TERMS ARE BACK. IN AN ONGOING CONTRACT (e.g. a contract for a year of service), CONSUMERS CAN BE NOTIFIED OF A CHANGE IN THE TERMS OF THEIR CONTRACT BY AN INCONSPICUOUS POST ON THE WEB. IF THEY LEARN OF A CHANGE IN TERMS, THEY CAN CANCEL THE CONTRACT. IF NON-CONSUMERS WANT TO CANCEL THE CONTRACT IN THE FACT OF A MATERIAL CHANGE, TOUGH NOOGIES.

===============

Discussion of published information content and the user interface of software. Yesterday there was a painful debate about user interface errors. The drafting committee promised to make a small change in the implied warranty of merchantability, saying that coding errors in the user interface would not be excluded from the warranty, as is all of the rest of informational content. The committee didn't do this.

Here's the hypothetical. Suppose that you have clipart of horses. The horses show up unacceptably blurry. The question is whether the blurriness of the pictures violates the implied warranty of merchantability. (They are unusable.) The committee answer is No. What if the blurriness is there because of a programming error? (Yesterday, Commissioner Patchel -- the commissioner involved -- thought that the programming error would result in a warranty violation, but today the committee says no).

Next, do you have an express warranty under section 404? No, not even if there are express representations in the contract that these are pictures of horses or good pictures of horses or 600 dpi pictures of horses. Section 404 says that there is no warranty for representations about the published informational content (like clip art).

So, is there a warranty that these cliparts will be usable or will correspond to the pictures on the box? Well, the statute says that a warranty might be created under the common law, so you might be able to look outside of UCITA and find a warranty.

After more back and forth, Patchel finally made a motion, opposed by the committe:

 replace 403(c) with "there is no warranty under subsection (a) with regard to the accuracy, subjective appeal, marketability with regard to information content." (this is a paraphrase, I dropped a couple of words)

Soundly defeated.

The discussion skipped the issue of user interface programming errors or designh errors other than presentation of what we would all call content (such as clip art, text, etc.). Coding errors in the UI and design errors that, for example, lead to predictably excessive rates of serious user errors, are within "published informational content" and will be treated like mistakes in a newspaper article.

============
Section 503 discussion

The committee reaffirmed its commitment to allowing companies to limit transferability of mass-market software, etc. A commissioner asked what about video games that I want to give to St. Mary's School. The claim was made from the podium that many copies of CD-ROMS are sold today without any license restrictions and thus would have no restrictions. (This is entirely outside of my experience.) So the commissioner asked again, what about the computer games? The response again was that these games are often sold without licenses or without restrictions on transferabilty and therefore there is no problem.

I am ASTONISHED by this claim. Having worked as a manager at Electronic Arts, I know a bit about games.
 (a) Every game that I know of that was sold in the retail market was sold with a license
 (b) Once transfer restrictions are legalized, many executives will want to put in transfer restrictions.

The argument from the podium is that is too easy and cheap to make copies of information. But Patchel comes back again and again and says, what about my giving my own copy of the game? I am NOT talking about pirating a bunch of copies. I am talking about my only copy. The committee rejects this again and again.

Motion: prohibitions against transfer in the mass-market should not be allowed by UCITA. You should be able to give away (and not keep a copy of) your only copy of a game or other mass-market product.

The discussion is strange. It is as if several commissioners have never heard of the copyright act because they keep talking about protecting companies from the risk of multiple copies being made from one master. That is already illegal (sometimes a felony) under the copyright act.

the committee promises to make it clearer that there is a PRESUMPTION that mass-market software is transferable, but shrinkwrap licenses could restrict transfer.

The motion failed 61-67.

Committee agrees that a term stating that transfer restrictions in a mass-market contract must be conspicuous. But they can still appear in a don't-see-it-until-after-the-sale, nonnegotiable shrinkwrapped contract.

These close votes are sad, because several commissioners have left over the past few days, some losing interest after Article 2 was killed. Some people expressed disgust and anger openly (muttering phrases like "legislation for sale") after that decision and some of those are no longer here. I can't help but wondering whether the full 300 would be voting more customer-sensitively than the remaining 128.
 

Section 801, amendment to delete "(b)  A court may deny or limit a remedy other than for liquidated damages if, under the circumstances, the remedy would put the aggrieved party in a substantially better position than if the other party had fully performed."
============

CLOSING DEBATE

Opening argument by Chairman Ring: Eloquent argument characterizing this as an electronic commerce bill.  The primary argument in favor of approving this is that if we don't approve it now, the federal government will create their own law. (NOTE: As I've mentioned in the past, the NCCUSL comes out of the US state's rights movement. An argument that an area of the law will be federalized plays well here.) (It is amusing to see this bill, largely written before e-commerce was a big deal, and with relatively little discussion of the e-commerce sections of the bill during the committee meetings, is characterized as an e-commerce statute.)

Perlman (I believe that he is now Vice-President elect of NCCUSL). Speaking to table. Says that this legislation is too detailed, too committed to technology we know, is based only on a partial knowledge based -- its specificity will be a hindrance to progress. The bill is too complex to be understood. Long list of substantive concerns. But the debate here today still gives lingering, serious, widespread concerns with substance of the Act. Additionally, this is not only a commercial statutes. Parties come to contracts in this field with a significant body of intellectual property rights, which have been carefully balanced in federal law. This bill has an impact on IP rights, it has an impact on research and technology that should be acknowledged.

Politics: There is considerable passionate opposition to this statute. There is not a substantial probability that this act will be uniformly adopted. Much of opposition is just waking up. Prudential insurance just woke up now, because CIO was previously 100% focused on Y2K. After January 2000, more large companies will wake up.

Perlman discussed the extent to which legislatures pass NCCUSL bills based on trust in the NCCUSL process. Can each commissioner here honestly defend to their governor that this bill is a consensus bill that deserves the usual NCCUSL support? There is a lot of opposition, you have to be able to say that there is opposition but this is a great statute.

I'll continue notes, but without naming commissioners. It is traditional to not name commissioners in notes like these.

- Pro -- this is an excellent bill, worked on literally for years, we need a uniform law for this material, and it is unfortunate how many commissioners are responding to the work of irresponsible lobbyists.

- Pro -- my state passed Article 9 based on our statements that there was little opposition, etc. There is a difference between the situation of Article 2 and UCITA. There were considerable opposition, pressure groups, against Article 2. Difference between Article 2 and UCITA. Article 2 we have uniformity today and people are generally satisfied with it. There is no great hue and cry to do anything with it. There was significant opposition to the article 2 revision, and the caliber of the opposition to article 2 is much greater than the opposition to ucita. I don't see the kind of opposition (motion picture and insurance) can't compare to the opposition to Article 2, which is much more powerful in the legislatures. This isn't part of the UCC. If we pass this and it isn't acceptable, that won't be the first time that we will pass an act that didn't go anywhere. We pass these because we see a need for the states to serve as a laboratory, where the states can work with this bill, find out what amendments are needed and we can go from there.

-- pro -- in considering the opposition to the act, keep in mind to the daunting task that was handed to this committee. Govern an industry that is growing faster than any industry ever known. A terrific job has been handed to this committee. The opposition to this act is largely based on misunderstanding and fear of the unknown. There is opposition because the act may not be acted in a perfect fashion. We don't draft perfect act, never had,never will. The time to act is now.

-- pro -- my state is not creating any more manufacturing or farm jobs, but technology companies are thriving. It is symbolic that we are debating this act in a tech center. The supporters of this bill are nasdaq, amex, trade associations representing thousands of large and small technology companies and financial service companies. These are who have fueled our economy. Many of us in this room are invested in these companies. These companies have made informatoin america's predominant export. Vote the pocketbooks of your constituents and your states.

-- pro -- I shudder to think that some other body might try to draft an act on this matter. When I look at the talent of this room, I cannot believe that in 8 years and this kind of talent, we cannot submit this to our states. This is a good act, we may have to adopt technical amendments next year, but we must get out there and do our job. I tried to study this act, and with the help of connie and Mr. Maher, the principle objections (there were 5) were based on misrepresentation of the act. They had not read the act. It will be our job next year to correct these misrepresentations, and there will be a lot of them. We must be actively involved in dispelling these doubts. We leave our clients at the door in these meetings. We represent the states. The critics of this act feel that they are representing an ox that is being gored. They have a right to do that, but we must represent our states,not the clients.

-- Gene Lebrun (president) reminds the conference that you can support the bill here but not introduce it in your state if it is not appropriate for your state.

Opposition -- this bill is like a program that is being shipped with too many known bugs, being rushed to market to beat the competition. We have a reputation for quality. We need to debug this act before releasing it.

Opposition -- I don't understand the act. When I try to put the definitions and scope, I end up in a wilderness as to how they apply. I teach commercial paper. I used to tell students that you can understand Article 3 if you know what the law is. Unfortunately, there is no other law to help you understand this Act. I have confidence that if we deferred this Act, we could get a much clearer product. I also don't agree with many of the policy decisions in this act. That happens in all acts, but we should consider the combination of unclarity, opposition, and policy choices.

Pro -- I support but urge the executive to work with the committee to clear up the meaning of the act.

Con -- I oppose this, not because I have clients opposed, or because I have listened to any oppositions, but I am concerned about the breadth of the opposition, from attorneys general to consumers to industries who are in opposition. There is such a depth of lack of understanding and a depth of opposition that I cannot support it. In other articles, we were able to resolve opposition. I don't want to kill this bill, but it deserves more attention and thought.

pro -- vantage point of small law office or solo practitioner. This industry will be 1.3 trillion dollars in commerce by 2003, that 2006 will mean that half of americans will work in this industry. 80% of softwaer companies have 12 or less employees. part of our obligation is to help the small law firm. 85% of americans receive legal advice from firms of 5 persons or less. you must give us a road map. this isn't an area of law we can ignore. how can we ignore 50% of our economy?

pro -- it's very important that we send this act out with a strong vote, so that committee can deal with changes that are necessary. NCCUSL policy -- having procured a hearing of the act in your state, it is not your responsibility to support it.

pro -- we can send this to the states and let the committee work on this bill. This will make for a better act. This committee did everything they could. If it was possible to achieve consensus they would have done it. It's just not possible for some acts that are brand new to achieve consensus in the drafting process. Instead, you have to promulgate it and let the committee chair to work in the legislative process to bring people together.

pro -- we should not shirk our responsibility in the face of opposition.

closing remarks by perlman

i remained steadfast in my opposition to the motion. this act does not cover 50% of the economy. The economy that it covers seems to be robust and what we do here has as much potential to jeopardize as to help. Unless it is clearly drafted, substantively right, and takes into account the different interests. Not all of the technology community favors this act. No consumer organization favors it. Every library association in the country opposes it. the motion picture association, retail federation, the staff of the federal trade commission, a variety of attorney generals, etc. Not all of the opposition is well informed. some of them are ill informed because of the way this draft is written. You can't tell them to not oppose it by saying they shouldn't be worried. I am not afraid of opposition, but I think we need to work hard for a year to make it a professional act for next year.

Ring

There's not much for me to say, the arguments pro and con have been well developed. As a matter of personal privilege, I think what we have introduced is a professional job.  I've practiced law for a long time, and I've never filed a perfect brief. But my clients wouldn't have been well served if I waited to file the perfect brief. Wth respect to the policy choices, I have never agreed to any draft's final choice since 1976. Part of the greatness of this conference is that we all have a fair opportunity to debate the policy choices, and the collective wisdom of the conference.

Roll Call vote of the states. Motion is to submit UCITA to a vote of the states tomorrow.
AL abstain
AK no
AZ-yes
Ark yes
CA -yes
CO yes
CT no
DE yes
DC yes
FL yes
Georgia no
HI yes
ID yes
IL yes
IN yes
IO no
KS yes
KT yes
Lou no
Maine yes
MD yes
MA no
MIC yes
MN no
MissisS abstain
Misouri yes
Montana  -- not voting.
NE  no
NEvada yes
NH - not voting
NJ yes
NM yes
NY yes
NC no
ND yes
OH ys
OK yes
OR yes
PA yes
PR -- not voting
RI yes
SC yes
SD yes
TN yes
TX yes
Virg Isl yes
Utah no
VT no
Virginia ye
WA yes
West virginia yes
Wisconsin yes
Wyoming yes
 

News: July 27, 1999 --- Updates Daily during the UCITA debate. Previous updates

If you don't like UCITA, and you haven't yet written to the Commissioners in your state, NOW IS THE TIME. The National Conference of Commissioners on Uniform State Laws (NCCUSL) are meeting in Denver now. They will finish debating UCITA today. The final vote on UCITA will be July 29. Op-Ed on UCITA (Kaner & Pels, available for free use by the press, July 1999). Summary of objections (Kaner, July 28, 1999).

The Attorneys General of Connecticut, Idaho, Indiana, Iowa, Kansas, Maryland, Nevada, New Mexico, North Dakota, Oklahoma, Pennsylvania, Vermont, Washington, and the Administrator of the Georgia Fair Business Practices Act wrote an 11-page letter of opposition to UCITA. (I am told that North Carolina's AG has written a separate letter of opposition.) The AGs identified several ways in which UCITA takes away consumer rights. They then said:

"In our view, the prefatory note and reporter's comments incorrectly present the proposed statute as balanced and as leaving 'in place basic consumer protection laws' and 'adding new consumer and licensee protections that extend current law'. It may be that the drafters of this statute believe the policy choices it embodies are necessary or desirable for the development of e-commerce. However, in instances in which provisions are described as new consumer protections, such as the contract formation and modification provisions discussed below, consumers actually have fewer rights than they do under current law."

UCITA allows publishers or online services to "send" you notices by posting them to their website. You "agree" to this when you click OK while installing software. They can then modify their service contract with you (or send you other legal notices) by posting a notice to that site. The AGs said:

"From a practical point of view, it has been the experience of the Attorneys General that offerees simply do not monitor online locations for contract modifications. Indeed, attempting modification in such a manner is so unlikely to actually inform offerees of a proposed modification that the Attorneys General have taken the position that any such modification procedure is illegal under current law. . . ."
"The Attorneys General believe that reasonable notice should be defined to mean a method of notice that is calculated to give actual notice. . . . In addition, the Attorneys General believe that there is no instance in which it is acceptable to enforce a modification of terms if the offeree is unwilling to accept them. . . ."
"In our experience as law enforcement officials, we have found that there is a substantial elment in our society unconcerned with matters such as consumer goodwill, who will exploit any method to gain advantage in their dealings with others. As it currently stands, UCITA is an open invitation to those persons to exploit our citizens."

The AGs concluded:

"The overriding purpose of any commercial code is to facilitate commerce by reducing uncertainty and increasing confidence in commercial transactions. We believe that UCITA fails in this purpose. Its rules deviate substantially from long established norms of consumer expectations. We are concerned that these deviations will invite overreaching that will ultimately interfere with the full realization of e-commerce in our states. . . .
For these reasons, the Attorneys General respectfully request that NCCUSL table its UCITA project."

Self-Help: Motion to delete was defeated.  There was a motion to delete the most controversial provision in UCITA, Section 816, which allows a vendor to disable a customer's program without a court order, by sending a message (like an e-mail message) to the computer on which the program is running. This section has improved a great deal over the past year, to the extent that the drafting committee  repeatedly claimed in debate that as worded, it provides great benefit to customers. The debate missed what I think is the "real" risk of this statute (this gives the vendor permission to create a security hole in their customer's systems. These will be inevitably exploited by disgruntled former employees of the vendor or by "hackers"). Sharon Marsh Roberts (Gov't Relations chair of Independent Computer Consultants Association) and I circulated a memo on self-help to NCCUSL members attempting to explain this and reiterating an alternative proposal. Security issues were also raised by Barbara Simons (President of the Association for Computing Machinery). Unfortunately, security issues played only the tiniest role in the debate. Several of the Commissioners understand the issue, but some seem to consider it unimportant. For example, one Commissioner who I respect greatly explained to me that the security issue is not a problem for NCCUSL to worry about because if extortionists or hackers tried to exploit the security hole, that would be grounds to sick the FBI on them. I responded that it is better to be able to lock your door than to call in police later, but this line of argument seems unpersuasive at this meeting. When UCITA comes to state legislatures, maybe this argument will be more effective there.

The UCITA drafting committee spent much of today making minor revisions to UCITA, to respond to questions and objections from the floor. The proposed revisions will be reviewed tomorrow (July 28) morning, followed by the first of two votes to be held on the overall bill.

Notes on Article 2 -- Reprinted by permission of Chris Hoving
Date: Mon, 26 Jul 1999 08:46:10 -0500
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Subject: NCCUSL puts off Rev. 2 & 2A till next year
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 At the 12-noon close of the Sunday session at the Denver NCCUSL
meeting, President Gene N. Lebrun made the stunning announcement that Revised
Article 2 (along with 2A, of course) would not have a final vote this year,
but would have to be carried over to next year.  While the reason given was
simply that more work needs to be done, the full explanation appears to lie
in the strong opposition to the current draft of a number of major  (auto,
gas, manufacturing, etc.) industries (the signatories to a full-page negative
ad in last Friday's USA TODAY).
 Revised 2 Drafting Committee Chair Lawrence J. Bugge opened
consideration of the draft Saturday afternoon by calling the industries'
objections "disingenuous."  Then Arizona Commissioner James M. Bush bluntly
reminded the other members that any revised UCC article must have "reasonable
chance of being enacted in a substantial number of jurisdictions."  He didn't
think the current draft met that test, and uniformity would be lost.  Later,
Don Cetrulo of Kentucky addressed one of the major concerns of the industries
by moving to delete subsection  (b) of 2-105:  a nonnegotiated term in a
standard form given to a consumer is unconscionable if it (1) eliminates the
contract's "essential purpose" ; (2) conflicts with expressly-agreed-to
material terms; or (3) "imposes manifestly unreasonable risk or cost."  After
spirited debate, in which the industries' concerns (unwarranted litigation;
otherwise legal terms - e.g., non-usurious but high interest -- thrown out)
were dismissed by some on the drafting committee as "the sky is falling," the
motion failed by a vote of 70 to 38.   The next day a "beyond the reasonable
expectation of the consumer" clause was added to mitigate the perceived
breadth of (b)(3), however.
 The Sunday session had opened with an agreement by Massachusetts
Commissioner Stephen Y. Chow to withdrew his motion to have placed in
brackets 2-103(b) -- Rev. 2 does not apply to "computer information
transactions" -- pending adoption in that jurisdiction of the UCITA.  Chair
Bugge said that the Comments would state that in the event that Rev. 2 was
adopted first, the courts could rely on the common law and, by analogy, some
Article 2 provisions.
 There were other drafting changes and defeated motions, of course.  A
more detailed account will appear in a subsequent issue of the UCC Bulletin.

Chris Hoving
Managing Editor
UCC Bulletin/UCC Reporting Service
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More on Article 2 -- Reprinted by permission of Chris Hoving
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 The fallout from the decision to carry over Rev. 2 to next year is
being felt.  Although not yet officially announced, several reliable sources
told us that both Reporter Richard E. Speidel and Associate Reporter Linda J.
Rusch have resigned.  We were also told that only Drafting Committee Chair
Lawrence J. Bugge was informed of the carry-over decision prior to the
announcement to everyone in the room.  One supporter of the draft told us:
"We've been rolled and the integrity of [NCCUSL] has been compromised."
Another said that the resignations (with possibly more to follow) might give
the opponents of the draft a chance to pack the committee with people that
share their views.

Chris Hoving
Managing Editor
UCC Bulletin/UCC Reporting Service
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News: July 26, 1999 --- Updates Daily during the UCITA debate.

If you don't like UCITA, and you haven't yet written to the Commissioners in your state, NOW IS THE TIME.

Two amendments to UCITA passed yesterday. The first deleted most of Section 215. This section involved authentication of electronic signatures and it passed the risk of fraudulent use of an electronic signature (such as digital signatures created by someone who copied your private key) back to the person who owned the key. For examples of articles analyzing this, see Winn and Ellison 199a, FTC hearing (comments pro/con on this and other issues), Kaner, 1999, Kaner, Lawrence & Johnson, 1998, and Kaner, 1997. (There are many other papers in opposition. Check http://www.2bguide.com for examples.) The amendment scaled UCITA back to the approach taken in the Uniform Electronic Transactions Act, which leaves the issue more open for proof at trial.
The second amendment that passed was to Section 510 (one of the financing provisions). It cut back on some of the protections given to financiers.
There were extended discussions, sometimes with motions to amend, regarding

Nothing else passed. The main debates remaining today will involve remedy limitation and "self-help" (ability for a vendor to remotely shut down your software without a court order.) More news tonight.

The revision to Article 2 (the Law of Sales) has been tabled in the face of strong opposition from large businesses. My understanding is that the Reporter and the Associate Reporter (the two primary authors of the Article) have resigned. No official announcement has been made.

News: July 25, 1999 --- Updates Daily during the UCITA debate

Mid-day July 25--UCC Article 2 has been tabled. At the mid-day break, NCCUSL leadership announced that Article 2 would not be further considered this year. It will not be voted on this year. Instead it will be modified and reconsidered next year. This was simply announced, with no vote. The stated rationale was that it would take too long to complete the debate, but by this point, most of the issues in Article 2 had already been debated. I am informed that the decision was made at the start of the day, but the drafting committee was not informed (except for the committee chair) until the general announcement. Speculation is rampant that the committee will be replaced with others who are more willing to revise the law in favor of sellers.

If you don't like UCITA, and you haven't yet written to the Commissioners in your state, NOW IS THE TIME.

Article 2 (the Law of Sales) is being revised. The draft under consideration is floundering on the floor of NCCUSL. A variety of organizations (Gateway 2000, Alliance of Automobile Manufacturers, American Frozen Food Institute, American Gas Association, National Association of Manufacturers, United States Chamber of Commerce, many others) took out a full page ad in the July 23 USA Today (page 18C). They said that "The proposed revision to UCC Article 2 will not improve the law of sales, and we therefore oppose it." Several traditional businesses want  the same ability to hide terms from customers until after the sale as UCITA grants to software publishers. The Article 2 drafting committee has refused to modify the draft in this way. Manufacturers and resellers want to table Article 2 so that it can be changed in this (and other) ways next year. After UCITA passes NCCUSL this year, there will be tremendous pressure  to incorporate all of the consumer-hostile provisions of UCITA into Article 2 next year, thereby rewriting the laws governing toasters, cars, frozen foods, etc.

The draft of UCITA is sailing through. It was amended in one minor way (Section 209 was deleted. This involves rules for the submission of ideas.) Otherwise, all motions to amend have failed. This includes a motion requiring publishers to let web customers see the contract (that is, to provide them a link so that they can view the contract) before they pay their money or download the software.

There was an attempted demonstration yesterday, but demonstrators (with signs, etc.) were not allowed into the hotel. The UCITA debate will continue on Monday night. The vote will be on Thursday.

Additional July 25 update: Links to some of my Y2K papers

News: July 24, 1999 --- Updates Daily during the UCITA debate

News: July 23, 1999 --- Updates Daily during the UCITA debate

June 16, 1999

Added the following:

The Uniform Computer Information Transactions Act (UCITA) is a proposed new law that will govern all transactions in software, including contracts for sale, licensing, documentation, maintenance and support of computer software. It will also govern contracts involving electronic information (movies, music, text that you download or buy on a CD) and, at the vendor's option, can govern sales of computers and some other devices that are sold in conjunction with software.

This July, the National Conference of Commissioners on Uniform State Laws will vote on the Uniform Computer Information Transactions Act (UCITA) and the Uniform Electronic Transactions Act (UETA). UCITA is a broad statute, intended to govern all aspects of contracts that involve software, digitally stored information (such as movies, music and books on CDs), and (if so specified in the contract) goods that are bundled with software (such as computers). UETA applies to a broader set of transactions, but only with the limited objective of facilitating electronic contracting.


March 24, 1999

Added the following:

February 1, 1999: Added the following

 

October 20, 1998: Added the following

November 11, 1997: Added the following:

October 26, 1997: Added

October 10, 1997 Added:

Previously

Other material on software quality

 


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The articles at this web site are not legal advice. They do not establish a lawyer/client relationship between me and you. I took care to ensure that they were well researched at the time that I wrote them, but the law changes quickly. By the time you read this material, it may be out of date. Also, the laws of the different States are not the same. These discussions might not apply to your circumstances. Please do not take legal action on the basis of what you read here without consulting your own attorney.
Please direct questions or problems regarding this web site to Cem Kaner, Professor, Department of Computer Sciences, Florida Institute of Technology, 150 West University Blvd., Melbourne, FL 32901-6975.
Last modified:  September 16, 2000. Copyright © 1997-2000, Cem Kaner. All rights reserved.