Uniform Computer Information Transactions Act (UCITA) Doomed to Crash — Consumer Rights Prevail Over Uniformity in Electronic Transactions
 
October 13, 2003
 
Vito A. Costanzo- Los Angeles
Shelley G. Hurwitz- Los Angeles

Consumer groups have successfully pulled the plug on legislation that sought to resolve conflicting state software licensing laws in order to protect software developers and their intellectual property.  The Uniform Computer Information Transactions Act (UCITA), which was once thought of as a framework for fostering uniform software transactions, has been rejected in all but two states. 

Originally intended as an amendment to the Uniform Commercial Code (UCC), UCITA creates a uniform commercial contract law that makes terms commonly found in “click-wrap” contracts (that typically appear on your screen when you first install software) enforceable, binding contracts.  Currently, courts are free to disregard such terms, and instead apply principles of common law, copyright law or other laws to govern software transactions, leaving software company executives and their attorneys to speculate about what law a particular court in a particular state will apply to the software transaction at issue.

UCITA has been supported by such pro-business organizations as the Business Software Alliance (BSA), The Dun & Bradstreet Corporation, Computer Software Industry Association, DaimlerChrysler Corporation, and the Silicon Valley Software Industry Coalition.  According to David Crane, who testified on behalf of BSA before the Maryland legislature, "If contract law fails to keep pace with technology, buyers and sellers throughout the world will not enjoy the full benefits and efficiencies of e-commerce. UCITA is a critical step in establishing legal provisions that will create a level playing field in the Digital Age.”

Consumer groups do not agree.  UCITA has been opposed by such groups as the American Library Association, the Consumers Union and the Free Software Foundation.  One group that has been exceptionally vocal is Americans for Fair Electronic Commerce Transaction (AFFECT), which described UCITA as “a dangerous, anti-competitive, anti-business, anti-consumer measure.”  Those who oppose UCITA maintain that the legislation would only benefit large licensors by protecting them from lawsuits, and allowing them to escape any consequences of unsafe or bad products.  For example, UCITA characterizes software contracts as "licenses" rather than sales.  Consequently, consumer protection laws normally applicable to sales transactions may not apply.

The consumer groups also contend that making those disclaimers generally found in the terms of “click-wrap” contracts fully enforceable will act as a disincentive for software companies to improve their products.  Perhaps most disturbing to these groups is the fact that consumers will be inescapably bound by terms that they are not made aware of until they purchase (or under UCITA, ”license”) the software product, and have opened the package, making it not returnable to most retailers. 

UCITA has thus far only been adopted in Maryland and Virginia.  For almost a decade, the National Conference of Commissioners on Uniform State Laws (NCCUSL), had spearheaded a vigorous enactment campaign and supported several rebootings of the Act in the hope of gaining wider support.  However, it has now ceased all efforts to help states introduce and enact the bill; all but guaranteeing its demise. 

So strong has the opposition to UCITA been that four states, West Virginia, Iowa, Vermont and North Carolina, have passed so-called defensive “bombshelter legislation” to shield their citizens from the enactment of UCITA in other states.  Such legislation renders choice of law provisions that make UCITA the governing law, inapplicable and instead makes the laws of that state apply to software transactions.  For example, the West Virginia law[1] provides that a choice of law provision contained in a “computer information agreement,” which provides that the contract is to be interpreted pursuant to the laws of a state that has enacted UCITA “is voidable and the agreement shall be interpreted pursuant to the laws of [West Virginia] if the party against whom enforcement of the choice of law provision is sought is a resident of [West Virginia] or has its principal place of business located in [West Virginia].”

The practical implication of the anticipated failure of UCITA is that software transaction laws will remain conflicting, uncertain and unstable.  Courts at the beginning of the last century largely believed that “[t]he stability of business depends upon the stability of the laws under which it is conducted, and nothing can more readily create unrest in the business world than the fear that the laws themselves are unstable.”[2] Vehement opposition to UCITA at the beginning of this century perhaps reflects a trend of consumer rights taking precedence over a unified approach to electronic transactions. 

For more information, e-mail Vito Costanzo at vcostanzo@hklaw.com or Shelley Hurwitz at sghurwitz@hklaw.com, or call toll free, 1-888-688-8500.

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