CongressLine – The Proposed U.C.C. Article 2B – Pandora’s Box

The NCCUSL Website homepage states that its mission is to “promote uniformity in state law on all subjects where uniformity is desirable and practicable.” Work on Article 2B began in the early 1990s when members realized that commerce had changed forever with the advent of online technologies, but the law had not. The Internet, as we all know, is a chimera, ever changing, bursting with new technologies and new ideas every time we sign on. Can it be tamed without being destroyed?

One of the drafts more controversial provisions concerns “shrink wrap” licenses currently used by software companies which are called “mass-market contracts” under UCC 2B. A shrink wrap license states that the buyer has only purchased a set of rights, determined by the manufacturer, to use the product. These licenses often contain terms which attempt to severely limit the product’s warranty, the company’s liability and sometimes determine the choice of law, or even require arbitration, if the consumer were to engage the company in a lawsuit. The majority of shrink wrap licenses can only be read once the software has been paid for and loaded onto your computer. These licenses are rarely held up in court.

The UCC states that buyers are to be shipped a perfect product, but the mass-market contract would allow the manufacturer to do otherwise, possibly without redress. Consumers are concerned that industry will relax their standards once such licenses become uniform law and the buyer’s rights are limited by the contract. There is also the possibility that manufacturers could punish users who violate the terms of the license with a remote disabling of the software, leaving the user in the lurch.

Intellectual Property & Contract Law in the Information Age

Software Business Alliance

Defenders of UCC 2B contend that there are many consumer protections built into the proposed code. If a buyer rejects a license upon opening up the software, 2B requires a full refund and will compensate the customer if their computer was damaged during installation (if the license can only be read upon installation). Also, “unconscionable” or unacceptable contract terms are not allowed under the proposal and can be struck down in court. Moreover, if buyers begin to flex their muscles and actually exercise their right to reject the contract, perhaps manufacturers would develop more consumer friendly terms. For a discussion of 2B from the side of the manufacturer, please go to the website of the Software Business Alliance.

The library community has voiced concerns about many aspects of UCC 2B, but the issues which have surfaced concerning mass market contracts and “fair use” are extremely troubling. If a contract places restrictions on the fair use of a publication (which is currently protected by copyright), libraries would have to start charging patrons for using items on a “per-use” basis or risk violating the terms of the contract. Undoubtedly, access to information in libraries would be severely limited. The American Association of Law Libraries (AALL) Washington Affairs Representative sent a letter to Professor Raymond Nimmer about this and other problems the library community has with 2B.

Another issue which could arise once UCC 2B is presented to the individual states for a vote is an industry relocation rush to the states which adopt the proposal first. The next problem to surface would be how to resolve conflict of laws questions when law suits erupt between parties in UCC 2B states and non-UCC 2B states. There is also the question posed by the sale of a mixed good, one involving both tangible and information based technology – which Code should the parties obey? These are only a few of the conundrums which arise when this pandora’s box is opened.

There are numerous consumer oriented Websites on UCC 2B, so please access the following for more information: The Consumer Project on Technology – (this is a protest page); Cem Kaner’s BadSoftware: A Consumer Protection Guide; The Gripe Line, and AnchorDesk. All of these sites and articles have references to other UCC 2B related websites, as well.

Jumping to the legislative arena, Sens. Judd Gregg (R-NH) and Joseph Lieberman (D-CT) have cosponsored legislation which would, among other things, establish a commission to develop model legislation for a uniform system of Internet transactions. S. 1888, “The Internet Fairness and Interstate Responsiblity Act” was introduced in March. The Senators have indicated that they may try to attach their bill to Sen. Ron Wyden’s (D-Ore) broader Internet taxation bill, S.442, which has been reported out of committee and is awaiting Senate floor action. For a summary and full text of S. 1888, as well as a side-by-side comparison with similar measures, please go to:

Although UCC 2B was originally scheduled for a full vote before the NCCUSL at the end of this July, they have decided to postpone the necessary state-by-state vote until the Summer of 1999. At that meeting, the draft must be approved by a majority of (and at least 20) states present at the conference before it can be sent to ALI for review. Once 2B has surmounted these obstacles, the individual states must vote to adopt it before becomes law. Sensing that the end is near, consumer groups have been given the impetus to mobilize. Postponing the vote to 1999 has certainly given them more time to garner support for their position. The jury is definately still out on this very important and sweeping proposal and too much publicity could bring it to a screeching halt.

Consumer Project on Technology

Cem Kaner’s BadSoftware: A Consumer Protection Guide


Summary and full text of S. 1888

Posted in: CongressLine, E-Commerce, Licensing