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December 5, 2002

The Fine Print

The latest version of UCITA looks new, but is it improved?

by Justin Kestelyn

New research from Walker Information suggests that fewer than half of IT customers want to continue to do business with their current suppliers, and that nearly one-third feel "trapped" in that relationship. With software manufacturers pushing hard for commercial practices such as those reflected in the Uniform Computer Information Transaction Act (UCITA), is it any wonder?

Originally envisioned as changes to U.S. commercial code that died in Congress after ferocious opposition, the proposals that constitute UCITA were revived by the National Conference of Commissioners on Uniform State Laws (NCCUSL) as state legislation in 1999. Since then, lobbyists have been hopscotching from statehouse to statehouse, achieving their mission only in Maryland and Virginia thus far.

UCITA is designed to create a uniform code governing transactions that reflects the intangible nature of software; according to the NCCUSL, it will "bring U.S. commercial law into the information age." Most arguments against UCITA — and there are many — are expressed in the context of shrinkwrap software intended for the consumer mass market. However, the effects on business licensees, although not as well-publicized, would be equally significant.

The pro-UCITA forces are marshaling for a final push on the heels of some amendments that they believe will make UCITA more palatable. But will they?

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The proposal has been partially defanged: Some of the original provisions that induced the most fervent opposition among consumers as well as business licensees were amended by the NCCUSL last August. But if passed in your state, UCITA will still affect how you negotiate license deals with software vendors and how your vendors enforce them.

The most glaring example is the infamous self-help remedy, in which software manufacturers would have had the legal right to electronically disable user software via "time bombs" during a license dispute. This provision should send a chill through managers of strategic IT systems (not to mention security experts): Under self-help, your vendor could theoretically shut down your mission-critical systems should it consider your organization in breach of contract — which, as we all know, is often subject to interpretation. The August amendments include a ban on electronic self-help, although opponents suggest extant loopholes that would permit it.

Even so, the legislation suggests troubling changes to commercial code, including a narrowed definition of express warranties and restrictions on the expectation of license duration and numbers of users. (A license would extend for a "reasonable" period of time and for a "reasonable" number of users unless otherwise indicated.)

Give the pro-UCITA forces some credit: They responded to withering criticism in positive ways by making it reflect more of the interests of the entire software community, not just the manufacturers. Nevertheless, their efforts probably fall short: Even the American Bar Association continues to oppose UCITA, and after reading the revised language for yourself, you may feel the same way.