NetAction Notes

Published by NetAction Issue No. 37 May 11, 1998
Repost where appropriate. See copyright information at end of message.

IN THIS ISSUE:

ACTION ALERT: Proposed Law Targets Software Consumers and Developers
About NetAction Notes

ACTION ALERT:
Proposed Law Targets Software Consumers and Developers

Circulate this action alert through July 31, 1998

Consumer action is urgently needed to prevent the adoption of commercial law changes that will exempt software purchases from traditional consumer protection laws, enable the software industry to dictate the terms of software purchases by validating "shrinkwrap" licenses, and threaten the rights of software developers to make competing programs. NetAction is urging consumers and software developers to immediately contact the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL) and demand that adoption of UCC Article 2B be delayed until the language can be revised to address consumer concerns.

Consumers can fax the request for a delay to ALI and NCCUSL from NetAction's fax server, at: http://www.netaction.org/fax/, or write to them at the addresses listed below. Faxes and letters should be sent to the two organizations through July 31, 1998.

Background on the Issue

Q: What is the Uniform Commercial Code?

A: According to Cem Kaner, a consumer-oriented attorney who has been participating in discussions about the proposed amendments, the UCC is the dominant commercial law in the United States, and is also the basis for the Convention for the International Sales of Goods, which governs international commerce. Software industry representatives and consumer advocates have been working for more than two years on amendments to the UCC to govern the sale of software.

Q: Why should consumers be concerned about the UCC?

A: Amendments are being proposed to the Uniform Commercial Code (UCC) which would replace existing customer protections with new rules governing not just the sale of software, but its development, documentation, licensing, support and maintenance. The proposed changes, referred to as Article 2B, would also expand the intellectual property rights of software publishers and -- in the words of one software developer -- make it possible for software companies to "screw over their customers."

Q: What will the proposed amendments mean to consumers who purchase software?

If Article 2B is adopted as proposed by the software industry, consumers who purchase software will, in the process of installing the software, be consenting to a legally binding licensing contract that was not disclosed to them when they made the purchase. Consumer protection laws generally provide that, if there are conditions or terms associated with the purchase of a product or service, these conditions or terms must be disclosed to the consumer at the time of purchase. Article 2B lets software publishers avoid disclosing the terms associated with use of their software until *after* the consumer has purchased and installed it.

Todd Paglia, an attorney with Ralph Nader's Consumer Project on Technology (CPT), explains why this provision is a bad idea:

"In a typical software transaction, how many purchasers will realize the following: 1. Although it seems as though the product is simply being installed, they are being asked to consent to a license, and 2. The license is legally binding. Relatively few purchasers will realize either of these points. But how many of this small group will know that, even though they already paid for the product and have begun installation, they are able to refuse to agree to the license terms and return the product for a refund? Even fewer purchasers would make it to this point. Assuming that a purchaser gets this far, what have they accomplished? They have to start the process all over in the hopes that their second choice product will have more reasonable license terms. This system will exhaust even the most persistent consumers and it is unworkable."

Q: Are there other provisions in Article 2B that would be harmful to consumers?

A: Yes, there are many other problems with Article 2B. For example, an early draft of Article 2B included language that provided some assurance to consumers that software publishers would make reasonable efforts to eliminate viruses from software purchased in stores (although no such assurances were required for software purchased off the Internet). But in response to concerns raised by the industry, this minimal assurance was deleted from the current draft, and with them any protection that might have been afforded to consumers who purchase software from irresponsible sellers. Moreover, software publishers would be able to include a waiver of any responsibility for viruses in the license -- which as noted above would not be disclosed to the consumer at the time the product was purchased.

Paglia discusses CPT's main concerns with Article 2B in a memo to the American Law Institute, on the web at http://www.cptech.org/ucc/ali3-10.html. More background on Article 2B is at http://www.cptech.org/ucc/ucc.html, and in James Gleick's "It's Your Problem (Not Theirs)" at: http://www.around.com/agree.html.

Q: Will Article 2B effect the quality of software that consumers buy?

A: The quality of software is likely to decline if Article 2B is adopted. According to Kaner:

"In its zeal to protect the worst software publishers from consequences arising from their worst products, Article 2B will change the economics of mass market software publishing as a whole. The effect will be increased pressure on publishers, especially mid-size publishers, to ship product prematurely. And let the customers eat the cost. This is bad policy and it will damage our industry severely over the long term."

Q: What effect will Article 2B have on software developers?

A: The proposed change threatens the rights of software developers to create competing products.

Kaner has listed some of the issues that software publishers would be able to include in their licensing agreements under Article 2B. These may effect software developers as well as consumers:

Kaner has written extensively on the UCC amendment, and his articles are on the web at http://www.badsoftware.com.

Q: What can consumers and software developers do to ensure that traditional consumer protections are applied to software purchases?

A: Amendments to the UCC must be adopted individually by each state. Typically, this is accomplished by introducing a bill with the language of the proposed UCC amendments. Before this occurs, however, the proposed amendments must be approved by the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL). ALI will be meeting on May 15 to consider the proposed amendments, and NCCUSL will consider them at a meeting in late July.

Consumers and software developers can contact ALI and NCCUSL immediately and urge them to delay adoption of Article 2B until it is revised to address consumer concerns.

NetAction has prepared a letter requesting a delay: http://www.netaction.org/action/licenses.html.

Or, fax or mail your own letter to:

Mr. Gene N. Lebrun, Chair
Professor Curtis R. Reitz, Secretary
Mr. Bion M. Gregory, President
National Conference of Commissioners on Uniform State Laws
676 North St. Clair Street, Suite 1700
Chicago, Illinois 60611
Fax: (312) 915-0187

The complete current draft of Article 2B is on the NCCUSL web site at http://www.law.upenn.edu/bll/ulc/ucc2/2b498.htm.


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