September 8, 2000

Contact: Audrie Krause
Phone: 415-215-9293


SAN FRANCISCO -- In comments filed today in Washington, D.C., NetAction is asking the Federal Trade Commission (FTC) to ensure that consumers who buy software are protected by the same law that governs the sale of other consumer products.

The Magnuson-Moss Warranty Act of 1975 mandates that product warranties be clear, understandable, and disclosed prior to purchase so consumers know the terms and can compare warranties on competitive products. But the common practice in the software industry has been to disclose the warranty terms after the consumer had bought the product, and often in technical language that is not easily understood.

The FTC is looking at the issue because of a proposed state law -- the Uniform Computer Information Transaction Act (UCITA) -- that would confirm the industry's practice of disclosing warranty terms after the sale. UCITA accomplishes this by designating the software purchase as a "license" of intellectual property rather than the purchase of a consumer product.

NetAction explained its objections to this approach in comments prepared by David R. Rice, a law professor at Roger Williams University School of Law. The comments were co-signed by Computer Professionals for Social Responsibility (CPSR) and CompuMentor.

"The market reality for consumers is that the transaction is fundamentally a sale of a product to the consumer, not a license of intellectual property rights," Rice asserts in the comments.

"Its focus should be on market realities with emphasis on adequate protection of consumers," he added.

NetAction is also recommending that the Commission ensure that consumer protections are "technology neutral" by adopting a Trade Regulation Rule to ensure that the same protections apply whether software is purchased in a box from a retail store, or downloaded from a website.

"A copy distributed online differs only in terms of the means of distribution," noted Rice.

The FTC solicited comments on UCITA to help identify issues that the Commission should consider at a public forum on UCITA scheduled for October 26-27 in Washington. The Commission staff raised concerns about UCITA when the proposal was being debated.

The software warranty issue was initially considered by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) as an amendment to the Uniform Commercial Code. At that time, it was referred to as the "shrinkwrap" license proposal.

The ALI ultimately opposed the proposal, but after further debate it was approved by the NCCUSL in July 1999 and sent to state legislatures for consideration. UCITA has also been criticized by the Attorneys General of 26 states, many law professors, consumer groups, software developers and librarians.

So far, only the Virginia State Legislature and the Maryland General Assembly have approved UCITA. But Virginia delayed its implementation until July 2001 in order to consider the concerns that have been raised about it, and Maryland approved an amended version. It is expected to be introduced in all 50 states within the next two years.

Individual consumers are not the only software purchasers who will be hurt if UCITA is adopted. NetAction executive director Audrie Krause noted that public institutions such as schools and libraries, as well as nonprofit organizations and small businesses will also be effected.

"UCITA's licensing terms are so restrictive that they threaten to diminish the potential benefits of technology for everyone," said Krause.