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2B Then Not 2B:
The Uniform Computer Information Transactions
Act and Consumer Contracts.
By: Steven A. Leahy (December 2001)
I.
Introduction
Computer technology is less than
50 years old, and has been available to the general public for just over 20
years.[1] Yet software and database products, along
with information and online services, will fuel the economic engine of the new
millennium.[2] Cyber-time, it seems, moves more quickly
than does industrial time.
The Uniform Computer Information
Transactions Act (“UCITA” or the “Act”) purports to be “a statute for our time.”[3] A close examination of the Act, however,
reveals that the provisions dealing with mass-market transactions of computer
information are already obsolete and harmful to consumers.
In this paper I will examine the
Uniform Computer Information Transactions Act.
First, I will explain what UCITA is.
Next I will examine mass-market licenses. After that, I explore the most dangerous UCITA provisions. Finally I will conclude that states and
other jurisdictions should not enact UCITA.
II.
Background
UCITA “is a proposed state
contract law developed to regulate commercial transactions involving intangible
goods such as computer software, online databases and other information
products in digital form.”[4] Although today UCITA is a stand-alone
uniform act, it was originally envisioned as an addition to Article 2 (Sale of
Goods) of the Uniform Commercial Code (“UCC”).[5] In order to understand why UCITA is no
longer useful, one must first examine the background of the Act.
A.
In the Beginning
The Uniform Commercial Code is a
collection “of various statutes relating to commercial transactions including
sales, leases, negotiable instruments, bank deposits and collections, funds
transfers, letters of credit, bulk sales, documents of title, investment
securities and secured transactions.”[6] Almost every jurisdiction in America has enacted
the UCC, with only minor variations.[7] Because commercial transactions often
involve companies in different jurisdictions, a uniform commercial statute
facilitates commerce.[8] Therefore, changes to the UCC are
significant, and jurisdictions are likely to adopt them quickly.
In 1987 the Permanent Editorial
Board (“PEB”) of the Uniform Commercial Code conducted a preliminary assessment
of UCC Article 2.[9] Relying upon that assessment, the PEB and
the American Law Institute (“ALI”) along with the National Conference of
Commissioners on Uniform State Laws ("NCCUSL" or the
"Conference") decided to appoint a study group “to identify major
problems of practical importance in the interpretation and application of
Article 2 and to recommend possible revisions.”[10]
After numerous meetings, a
Preliminary Report, and evaluating approximately 40 comments on the Preliminary
Report by interested parties,[11]
the PEB issued its recommendations in a Final Report.[12] Based on its study, the group recommended
that UCC Article 2 be revised.[13] One of the “good” reasons the PEB cited for
revising Article 2 was “[t]echnological development and innovation such as
electronic data interchange.”[14] Thereafter, in 1991, the PEB appointed a
drafting committee and a reporter to implement its recommendations.[15]
B.
The Drafting
Process
The UCC is drafted independently
of any governmental agency and voluntarily adopted by individual jurisdictions.[16] In this section, I will describe the
organizations responsible for drafting the UCC and other uniform and model
laws. Then I will discuss the drafting
process used to promulgate what became UCITA.
1.
Organizations
The Uniform Commercial Code “is
generally viewed as one of the most important developments in American law.”[17] For more than 50 years, two organizations
have worked in tandem developing and monitoring the UCC: the National
Conference of Commissioners on Uniform State Laws and the American Law
Institute.[18]
i.
The NCCUSL
The National Conference of
Commissioners on Uniform State Laws is a 109-year-old organization working for
the uniformity of state laws.[19] The Conference is made up of over 300
judges, lawyers, and law professors appointed by each state, the District of
Columbia, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands.[20] Each jurisdiction is free to determine how
many commissioners to appoint and how they are selected, although most
commissioners are gubernatorial appointees.[21]
The Conference has drafted
hundreds of uniform laws “setting patterns for uniformity across the nation.”[22] For example, the Conference has drafted the
Uniform Anatomical Gift Act,[23]
the Uniform Child Custody Jurisdiction Act,[24]
the Uniform Electronic Transactions Act,[25]
the Uniform Probate Code,[26]
the Uniform Partnership Act,[27]
and the Uniform Limited Partnership Act.[28]
In order for an act to be
approved by the Conference, it must first withstand years of extensive
consideration by drafting committees.[29] Only after the drafting committees are
satisfied with a tentative draft is it presented to the entire Conference at an
annual meeting for initial debate.[30] The Act is reviewed “section by section, at
no less than two annual meetings by all commissioners sitting as a Committee of
the Whole.”[31]
If the Committee of the Whole
approves an act, the membership votes on its acceptance.[32] Each state is allowed only one vote. “A majority of the states present, and no
less than 20 states, must approve an act before it can be officially adopted as
a Uniform or Model Act.”[33] Only after this process is completed is it
presented to legislatures in each jurisdiction to be considered.[34] Thereafter, the Conference members act as
advocates for the proposed law in their home jurisdiction.[35]
ii.
The ALI
In 1923 a group of Judges, Lawyers and law professors conducted a
study known as "The Committee on the Establishment of a Permanent
Organization for the Improvement of the Law."[36] That study found “two chief defects in
American law, its uncertainty and its complexity.”[37] In order to correct these defects, the
Committee recommended that an organization be formed.[38] Thus, the American Law Institute was born.[39]
ALI’s charter declares that its
purpose is “to promote the clarification and simplification of the law and its
better adaptation to social needs, to secure the better administration of
justice, and to encourage and carry on scholarly and scientific legal
work."[40] Today, ALI is authorized to have as many as
3000 elected members.[41] Members are selected based on “professional
achievement and demonstrated interest in the improvement of the law.”[42]
Soon after the
ALI was formed, the organization focused on correcting the uncertainty in the
law by developing restatements of basic legal subjects.[43] For example, the organization completed the
first Restatements of the Law for Agency, Conflict of Laws, Contracts,
Judgments, Property, Restitution, Security, Torts, and Trusts between 1923 and
1944.[44] Since then, the ALI has updated the original
Restatements and added additional areas of law.[45]
In addition to
the Restatements, the ALI has focused on correcting the complexity in the law
by developing model statutory formulations such as, the Model Penal Code, a
Model Code of Pre-Arraignment Procedure, the Model Code of Evidence, and a
Model Land Development Code.[46]
In order for a Restatement or
codification project to gain ALI approval it must first withstand an arduous
process.[47] First, once the Officers and Council approve
a project, a Reporter is appointed to prepare an Initial Draft.[48] The Reporter must be an expert in the field
of law being considered, “usually a legal scholar.”[49] Second, the Initial Draft is submitted to a
small group of advisors. The advisors
make suggestions and revisions to the Initial Draft.[50]
Third, the revised draft is
submitted to the Council of the Institute (the “Council”) for further analysis
and consideration.[51] The Council is made up of “some sixty
prominent judges, practicing lawyers, and law teachers.”[52] The Council may send the revised draft back
to the Reporter, or to the Annual Meeting for membership review as a Tentative
Draft.[53]
If the Tentative Draft is
presented to the membership at an Annual Meeting it is discussed, debated and
released to the public.[54] After that, the membership can approve the
Tentative Draft, subject to any modifications, or send it back to the Reporter
and Advisers for further revisions.[55] After a Final Draft has been prepared, it
is submitted to the Council and the membership for final approval.[56] “When the project has been approved by both,
the official text of The American Law Institute is prepared for publication.”[57]
2.
Drafting UCITA
As pointed out earlier in this paper, the UCC Permanent Editorial
Board appointed a drafting committee and a reporter to begin the long process
of drafting the revisions to Article 2 of the UCC in 1991. In 1993, after many meetings, the drafting
committee adopted a policy of bringing licenses, leases, and service contracts
“into Article 2 through a ‘hub and spoke’ configuration.”[58] They reasoned that, by analogy, Article 2
already governed the transactions represented by the spokes.[59] Therefore, a revised Article 2 ought to
account for these transactions directly.[60]
The "hub" was to
consist of general contracting standards common to all “transfers of personal
property," such as good faith and reasonableness, as well as specific
rules that were shared by each spoke.[61] The “spokes,” on the other hand, were to
represent principles unique to the sale of goods, licenses, leases, services
and other commercial deals.[62] In addition, this flexible approach would permit
future unforeseen transactions to be easily incorporated into Article 2.[63]
In July 1995 the Drafting Committee abandoned the hub and spoke
architecture after the NCCUSL concluded that the concept was unworkable.[64] Instead, a new drafting committee was
appointed.[65] The new committee was to draft a separate
Article, designated Proposed Article 2B.[66]
From 1995 through 1999 the
Article 2B Drafting Committee met many times.[67] Early on, it was apparent that the Committee
was going to have a difficult time reaching agreement.[68] In 1997, the ALI formally objected to
Article 2B's approach to intellectual property.[69] The Drafting Committee did not change
course.[70]
In 1998, the ALI called for
“fundamental revision” to Proposed Article 2B’s contracting scheme because its
“approach was far removed from traditional notions of contracting.”[71] Again, the Drafting Committee did not make
the revisions requested.[72] Finally, in 1999 the ALI withdrew its
participation in the Drafting Process after the ALI Council refused to submit
the Tentative Draft to its members for consideration.[73] Without ALI’s participation, Article 2B
could not become a stand alone Article of the UCC.[74]
The Conference, however, chose to
proceed alone, renaming Proposed Article 2B the Uniform Computer Information
Transactions Act.[75] Thereafter, on Thursday, July 29, 1999 at
their annual conference in Denver, Colorado NCCUSL’s members formally adopted
UCITA.[76]
C.
Overview
UCITA has been introduced in a
number of jurisdictions.[77] Two states, Maryland and Virginia, have
passed the Act with some alterations.[78] Before judging the usefulness of the Act, we
must first look at the Act’s overall makeup
1.
Structure
Because UCITA began as part of
the UCC, it follows that UCITA is patterned after UCC Articles.[79] And, like the UCC, UCITA is “based upon the principle of freedom of
contract,” most provisions are merely “default rules, applicable only if the
parties do not specify some other rule.”[80] In addition, similar to the UCC, UCITA
claims to be a statute that is “not regulatory, but [is] intended to facilitate
and support commercial practice and to support its evolution through agreement
and trade practices.”[81]
UCITA is made up of 9 parts: (1) General Provisions, (2)
Formation and Terms, (3) Construction, (4) Warranties, (5) Transfer of
Interests and Rights, (6) Performance, (7) Breach of Contract, (8) Remedies,
and (9) Miscellaneous Provisions.[82] Each part is divided further into sub-parts
and sections.[83] In all, in addition to the 9 parts, the Act
has 21 sub-parts,[84] 108
sections,[85] and spans
more than 340 pages (including the Official Comments).[86]
2.
Purpose
The Conference promulgated UCITA
because they saw a need to “support and
facilitate the realization of the full potential of computer information
transactions.”[87] Furthermore, the Conference wanted to
“clarify the law”[88] and
“expand[] commercial practice in computer
information transactions by commercial usage and agreement of the parties.”[89] The Conference hopes that the UCITA will “promote uniformity of the law with respect to
[computer information transactions] among States that enact it.”[90]
3.
Scope
UCITA is “[a] commercial contract code for the computer information
transactions.”[91] Computer information transactions
(“CIT”) are defined as "an agreement ... to create, modify, transfer, or
license computer information or information rights in computer information....
A transaction is not included merely because the parties' agreement includes
that their communications about the transaction will be in the form of computer
information."[92] UCITA “does not apply to ‘information,’ but
to contracts and agreements regarding computer information.”[93]
Computer information (“CI”) is
broadly defined as "information in electronic form which is obtained from
or through the use of a computer or which is in a form capable of being
processed by a computer. The term includes a copy of the information and any
documentation or packaging associated with the copy."[94] Furthermore, the term “information” includes
“data, text, images, sounds, mask works,
or computer programs, including collections and compilations of them.”[95]
The Act regulates all software transactions, whether on the web or
prepackaged. In addition, the Act
covers license agreements to assess news sites, electronic information services
and databases, contracts with Internet Service Providers, and agreements for
web hosting services. If the Act
governs a transaction, it removes the transaction from UCC Article 2 because
the Act defines the transaction as a “license”[96]
rather than a “sale”.[97] In addition, the scope of the Act is broad
enough to encompass other transactions that may not otherwise come under
UCITA.
i.
Excluded
When determining what transactions fall within the Act’s scope, it is
logical to begin with what is definitely excluded. First, contracts dealing only with tangible “goods,” that is “all
things that are movable at the time relevant to the computer information
transaction”[98] are not
covered by the Act.[99] Furthermore, the Act specifically excludes
contacts dealing with financial services,[100]
insurance services,[101]
traditional movies, television, records or cable,[102]
compulsory licenses,[103]
employment contracts,[104]
transactions where CI is “de minimus,”[105]
telecommunications,[106]
and transactions specifically covered by sections of the UCC even if these
contracts would otherwise fall under the UCITA.[107]
ii.
Mixed Transactions
When “a transaction includes computer information and
goods” UCITA applies “to the part of the transaction involving computer
information.”[108] Mixed transactions involve goods with
embedded software. For example, if a
consumer buys a television that includes a software component, the Act applies
to the software component, but not to the other television parts.[109]
The Act applies to all
transactions where “giving the buyer or lessee of the goods access to or use of
the program is ordinarily a material
purpose of transactions in goods of the type sold or leased” [emphasis
added].[110] For example, if a consumer purchases a
computer, preloaded with software, the sale of the computer and the software
fall within the Act. Just what is a
“material purpose” is left undefined.
iii.
Distinct Transactions
Distinct Transactions are those
transactions that are part computer information and part other subject
matter. For example, a customer may
purchase software along with other office products. The Act explicitly applies to the part of the transaction that
involves computer information.[111] In our example, the Act would apply to the
software, but not necessarily to the paper, pens, chairs, blank computer disks,
etc. “[T]he general rule is that the
rules of the Uniform Commercial Code apply to their subject matter and [UCITA]
applies to its subject matter.”[112]
Although the Act spells out when
UCITA applies and when it does not, the parties are free to elect which scheme
governs an agreement (i.e. UCC, UCITA, Common Law, Foreign Law, etc.).[113] The general rule is “that parties can agree to have [UCITA] apply to an entire transaction,
part of a transaction, or none of a transaction.”[114] Therefore, transactions that may not
otherwise fall within the Act’s scope may still be subject to it, as long as “a material part of the subject matter to which
the agreement applies is computer information” and the parties agree to it.[115]
As a practical matter, sellers of
a variety of consumer goods that embed minimal software within, such as
televisions, cameras and VCRs, could opt-in to UCITA, thereby exempting those
sales from the UCC and other laws.[116] In addition, if a customer purchases a
variety of goods (as in the office supply example above) the vendor can opt-in
to UCITA and bring the entire transaction under the Acts’ domain.
III.
Mass-market Licenses
The most far-reaching provisions
of UCITA are the provisions dealing with mass-market Licenses (MML).[117] The Act defines a MML as “a standard form
used in a mass-market transaction.”[118] Further, a mass-market transaction is
defined as “a consumer contract,”[119]
and includes most other retail computer information transactions “with an
end-user licensee.”[120] The definition is intended “to avoid
artificial distinctions among business and consumer transferees in an ordinary
retail market.”[121] Online contracts, however, are distinguished
between business and consumer transferees.[122] “Business acquisition of software through
online access and other non-retail transactions are outside of the definition.”[123]
A.
Mass-market
Overview
Computer information Vendors have
relied on mass-market licenses since the earliest days of the computer age.[124] They originated because copyright and patent
law lagged behind technology.[125] In the 1970s and early 1980s courts had not
yet decided if copyright and/or patent laws applied to software.[126] As a result, software publishers sought to
protect their products through trade secrets law.[127]
The problem arose: how can a
publisher claim trade secrets status for software that is widely distributed?[128] Publishers solved the problem through the
“legal fiction that they were really licensing rather than selling their
software. Because the ‘license’
contained provisions that required customers to keep the software confidential,
the trade secrets contained therein could be protected.”[129]
1.
Defining Forms of Mass-market Licenses
In a mass-market scenario,
software vendors seek to bind consumers to the terms of their form licensing
agreement by attempting to create a “reverse unilateral contract."[130] In other words, vendors ask the customers to
purchase software, then, in addition, ask them to undertake performance (use
the software) if the customer agrees to the license terms assessable only after
the purchase. Generally, vendors rely
on three different forms of license agreements to accomplish this purpose:
shrink-wrap, click-wrap, and browse-wrap licenses.
i.
Shrink-wrap
The term “shrink-wrap license”
originated from the earliest prepackaged software sales. The most basic example involves a “single
piece of paper containing license terms which has been wrapped in transparent
plastic along with one or more computer disks.”[131] The publisher intends for the customer to
read the license terms before opening the package.[132] Once having read the contract, the customer
may decide to agree to all terms by breaking the shrink-wrap and using the
software (manifesting assent), or may decline by returning the unopened package
to the dealer for a refund.
Quite often, the license
agreement is not located on the outside of the product where the customer can
read it, but located inside the box or inside a user manual. In those instances, the computer disks are
sealed in an envelop, a customer manifests his or her assent by breaking the
seal on the envelop, using the software, and not returning it to the dealer for
a refund.
Of course, the idea that the
customer has read the agreement, understood its terms, and consciously assented
to them may be fiction. But, no matter,
the shrink-wrap was broken and the customer’s assent obtained.
ii.
Click-wrap
The next generation license is
the “click-wrap license.” Combining the
act of “clicking” a computer mouse and the name “shrink-wrap” arrives at the
term “click-wrap.”[133] Upon installing purchased software, a
customer is presented with a message on his or her computer screen asking for
assent to the agreement. The customer
must manifest his or her assent to the terms of the contract by clicking on an
“I agree” icon.[134] The software will not allow a customer to
proceed to installation “unless and until the icon is clicked.”[135]
In a prepackaged software sale, a
click-wrap license presents the terms of the license before the customer uses
the software, but after he or she has paid for it. The click-wrap license improves upon the shrink-wrap in that the
customer must see the license before using the software and commit some act,
even if he or she doesn’t read the agreement.
Often, a click-wrap license is combined with a shrink-wrap license.
A variation of the click-wrap
license is the “web-wrap” license.[136] The difference is the platform of
commerce. Web-Wrap Agreements are
click-wrap agreements presented to a potential customer in an online environment.[137] In addition to selling software online, a
web-wrap license may also be used to allow a customer access to online content.[138] For example, a newspaper site may require
registration before allowing web surfers to read stories.[139] After registering, a reader is presented
with an agreement stating terms of the license for using the information
contained therein.[140] Only after the visitor manifests assent by
clicking the “I agree” icon may the visitor access the content of the web site.
iii.
Browse-wrap
A third license form is a
“browse-wrap” license.[141] A browse-wrap license is similar to the
click-wrap license.[142] However, instead of being presented with the
terms of the contract before a customer can proceed to access material online
or install or download software, the customer is merely offered an opportunity
to read the contract by clicking on an icon.[143] If a customer clicks on the icon, he or she
is presented with the full text of the license agreement.[144] The customer, however, is not presented with
the agreement automatically before gaining access to the software or online
content and the only act that manifests his or her assent to the agreement is
the act of assessing the content, or downloading or installing the software.[145]
For example, a web site may post
a “Terms of Use Agreement” somewhere within their site with a link to the terms
referenced on the site. The site
operator intends that all site visitors be bound by the Agreement, whether or
not the agreement is ever displayed, accessed or actually made known to the
visitor. The visitor manifests his or
her assent to the agreement simply by assessing the site.
2.
Enforcing Mass-market Licenses Without UCITA
In order to appreciate the
significance of the changes that the UCITA mass-market license provisions would
bring on, one must first study the present state of MML enforceability in the
courts. Over time, the courts’ view on
MML has evolved.
i.
Early Shrink-Wrap Enforceability
Early on, the enforceability of
shrink-wrap or click-wrap license agreements was questionable. Courts were reluctant to enforce one-sided
contract terms where the customer’s “manifestation of assent” came after he or
she had purchased the product. One of
the earliest cases deciding the enforceability of shrink-wrap licenses occurred
in the Third Circuit Court of Appeals in 1991.
The case was Step-Saver Data Systems, Inc. v. Wyse Technology.[146]
In Step-Saver, the
customer purchased prepackaged software from a vendor after ordering the
product over the telephone.[147] The vendor delivered the software with a
shrink-wrap license agreement that disclaimed all express and implied
warranties, including an express warranty the vendor allegedly gave to the
customer.[148]
After the customer had
difficulties with the software, the customer claimed that the vendor had
breached its express warranty.[149] The district court directed a verdict for
the vendor holding that the “form language printed on each package containing
the [software] was the complete and exclusive agreement between the parties.”[150] Therefore, the vendor successfully
disclaimed all warranties.[151]
The Third Circuit Court of
Appeals reversed.[152] Relying on the “battle of the forms”
analysis of UCC §2-207,[153]
the court reasoned that a contract was formed when the customer telephoned an
order to the vendor and the vendor shipped the software.[154] Thus, the terms of the contract were set
when the vendor delivered the product.[155] Subsequent terms contained in the
shrink-wrap license were not part of the agreement.[156] Consequently, the disclaimers located
therein were not valid.[157]
ii.
Shrink-Wrap Enforceability Becomes Acceptable
Today, shrink-wrap license
agreements are enforceable in many jurisdictions.[158] Often their enforceability is not even
questioned.[159] The Seventh Circuit Court of Appeals has tried
to clear up the ambiguity of the enforceability of shrink-wrap agreements with
two important decisions: ProCD[160]
and Hill.[161]
a.
ProCD, Inc. v. Zeidenberg
In 1996, the Seventh Circuit
Court of Appeals upheld the enforceability of shrink-wrap agreements in ProCD,
Inc. v. Zeidenberg.[162] In ProCD, a customer purchased
“information from more than 3,000 telephone directories” stored on a set of 5
CD-Roms.[163] [164] The Vendor offered the directories to
consumer markets and to commercial markets.[165] The only differences in the offerings were
the terms of the license agreements and the price.[166] The customer in this case purchased the
cheaper consumer version.[167]
The CD-Roms were packaged in a
box that clearly said the information came with “restrictions stated in an
enclosed license.”[168] The license terms were “encoded on the CD-ROM disks as well as
printed in the manual, and which appear[ed] on a user's screen every time the
software [ran]. The shrink-wrap license
limited the use to ‘non-commercial.’”[169]
The consumer offered the
information on an Internet web site on a pay-to-view basis to third parties,
violating the shrink-wrap license terms.[170] The Vendor objected to the commercial use of
their compilation without the consumer getting authorization.[171] The District Court held that the terms of
the contract were set when the vendor delivered the product.[172] The District Court said “a purchaser does not agree to--and cannot be
bound by--terms that were secret at the time of purchase.”[173]
Therefore, subsequent terms contained in the shrink-wrap license
were not part of the agreement.[174]
In this case, unlike Step-Saver,
the appellate court enforced the terms contained in the shrink-wrap agreement.[175] The court determined that “[t]ransactions in
which the exchange of money precedes the communication of detailed terms are
common.”[176] The court equated the transaction at issue
in ProCD with purchasing insurance, an airline ticket, a concert ticket or a
radio.[177] In each case, a consumer buys a product or
service and is presented with detailed terms after the purchase.[178] Furthermore, in each case, courts have
enforced those agreements.[179]
In ProCD, rather than a “battle
of the forms” analysis conducted by the District Court, the court relied on UCC
§ 2-204(1).[180] That section of the UCC states: “A contract
for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a
contract."[181] In this case the Vendor, as “master of the
offer,” offered to license its product to the customer.[182] The offer could only be accepted by the
customer’s conduct, using the software, “after having an opportunity to read
the license at leisure.”[183] In this case, the customer manifested assent
to the license by using the software.[184] Therefore the customer was bound by the
terms of that license.[185]
b.
Hill v. Gateway 2000
One year later, the Seventh
Circuit advanced the concept of enforcing shrink-wrap agreements.[186] In Hill v. Gateway 2000 a consumer
ordered a computer from the Vendor by telephone.[187] The Vendor shipped the computer with a
license agreement inside the box; the license agreement included an arbitration
clause.[188] The agreement provided that in order to
assent to the terms of the license, the consumer need only keep the computer for
more than 30 days.[189]
The consumer, more than 30 days
after purchase, complained about the computer and its components and filed suit
in district court.[190] The Vendor asked the court to enforce the
shrink-wrap agreement and submit the dispute to arbitration.[191] The District Court held that the arbitration
clause contained in shrink-wrap license was not enforceable because the
consumer was not “given adequate notice of the arbitration clause.”[192]
The Seven Circuit reversed. Applying the standards elucidated in ProCD,
the court held that a vendor "may invite acceptance by conduct," and
that "by keeping the computer beyond 30 days, the [consumer] accepted [the
Vendor’s] offer, including the arbitration clause."[193]
iii.
Shrink-Wrap Enforceability Expanded to Click-Wrap
Shrink-wrap concepts have also
been applied to click-wrap agreements.[194] For example, in Lieschke V. Realnetworks
a federal court in Illinois considered whether a mandatory arbitration clause
and a choice of forum clause in a click-wrap (“web-wrap”) license agreement
between a software company (the “Company”) and its Users were enforceable.[195]
The Users downloaded a free
version of the Company’s software, and later alleged that the Company was
monitoring the Users’ Internet usage patterns through that software.[196] Before the Users were allowed to download
the software, a pop-up window displaying a web-wrap agreement appeared.[197] In order to proceed to download the software
the Users had to accept the terms of the license agreement.[198] Otherwise, they were not allowed to
download.[199]
The agreement included the
following clause:
This License
Agreement shall be governed by the laws of the State of Washington, without
regard to conflicts of law provisions, and you hereby consent to the exclusive
jurisdiction of the state and federal courts sitting in the State of
Washington. Any and all unresolved disputes arising under this License
Agreement shall be submitted to arbitration in the State of Washington.[200]
Based on the above clause, the
court found that the Users had to submit their claims to arbitration.[201] Because the Users clicked on the “I accept”
icon, they accepted “the Agreement and consent[ed] to its terms.”[202]
iv.
Court Draws the Line at Browse-Wrap
Recently, a New York court,
applying California law, refused to expand the shrink-wrap/click-wrap
enforceability to browse-wrap licenses.[203] In Specht v. Netscape, a case very
similar to RealNetworks, a software company (“Netscape”) provided free
software to Users.[204] Later, the Users alleged that the free
software “transmit[ed] private information about [the Users'] online activities
to [Netscape].”[205] Netscape moved to compel arbitration, as per
the arbitration clause in the license agreement.[206]
In Netscape, however, the
terms of the agreement were never presented to the Users in web-wrap form.[207] Instead, the Users were presented a
browse-wrap version, which allowed the Users “to download and use the software
without taking any action that plainly manifest[ed] assent to the terms” of an
agreement.”[208]
[a]ssent may be
registered by a signature, a handshake, or a click of a computer mouse
transmitted across the invisible ether of the Internet. Formality is not a
requisite; any sign, symbol or action, or even willful inaction, as long as it
is unequivocally referable to the promise, may create a contract.[209]
In this case, however, the mere invitation, "please
review ... [the] license agreement," "read as a mere invitation, not
as a condition."[210]
The court said, “[t]he case law
on software licensing has not eroded the importance of assent in contract
formation. Mutual assent is the bedrock
of any agreement to which the law will give force.”[211] Furthermore, if the court were to accept
browse-wrap licenses it “would so expand the definition of assent as to render
it meaningless.”[212]
Therefore, the court denied
Netscape’s motion to compel arbitration pursuant to the agreement, and the
judge ordered the parties to appear at a status conference to discuss a motion
for class certification.[213]
3.
Enforcing Mass-market Licenses Under UCITA
UCITA validates most shrink-wrap,
click-wrap and browse-wrap licensing agreements through its two-tiered system
of forming consumer contracts in retail and Internet transactions.[214] The first tier requires that the consumer
have an “opportunity to review” the
license terms. The second tier requires
that the consumer “manifest assent” to those license terms.[215]
The Act specifies how to satisfy each tier.
i.
Opportunity to Review
Under the Act, a customer must
have an “opportunity to review” a mass-market license before he or she can
assent to its terms.[216] The terms do not have to be presented before
the customer is obligated to pay for the product.[217] “Parties may agree that terms may be
specified later.”[218] However, the customer need not have actually
been presented the additional terms, he or she need only have had an opportunity to review the terms.[219] The notice of additional terms must be “made available in a manner that ought to call it
to the attention of a reasonable person and permit review.”[220]
In a retail transaction, using a
shrink-wrap or click-wrap license, the Vendor may place a notice on the outside
of the box that there are additional terms inside.[221] Even if the customer knows that the terms
will be presented later, UCITA specifies that “the terms must be made available no later than the initial use of the
information and the person has a statutory right to a return if it refuses the
license.”[222] The Vendor must also pay “any reasonable and
foreseeable costs of restoring the [customer’s] information processing system
to reverse changes in the system caused by the installation.”[223]
In an Internet environment, UCITA makes
“browse-wrap” license agreements enforceable.[224] A Vendor who makes its digital product
available over the Internet provides an “opportunity to review” a standard form
license if the Vendor “makes the standard terms of the license readily
available for review by the [customer] before the information is delivered or
the [customer] becomes obligated to pay, whichever occurs first.” [225]
The Vendor can meet this requirement by
“disclosing the availability of the standard terms in a prominent place on the
site from which the computer information is offered and promptly furnishing a
copy of the standard terms on request before the transfer of the computer
information.”[226] In addition, the Vendor cannot prevent the
customer from printing or storing “the standard terms for archival or review
purposes.”[227]
ii.
Manifesting Assent
UCITA adopts the notion of
“manifesting assent” outlined in the Restatement (Second) of Contracts and
applies it to computer information transactions.[228] Under the Act, a consumer may agree to the
terms of a contract by his or her conduct or inaction.[229] In a consumer transaction, a valid
opportunity to review together with a right to return is enough to make the
license terms binding, as long as the customer does something or fails to do
something.[230] For example, the customer can assent by
clicking an “I agree” icon, keeping and using prepackaged software, or merely
accessing online information.[231]
IV.
Provisions of the UCITA
In addition to the provisions
dealing with mass-market licenses, UCITA has other provisions important to
consumer contracts. In this section I
will analyze the most troubling, from a consumer’s perspective, provisions of
the Act. These provisions are troubling
because, on their face, they appear to be innocuous, even beneficial, to
consumers. However, when these
provisions are considered in conjunction with UCITA’s mass-market license provisions,
their apparent impotence or benefits are exposed as merely illusory.
Because many of the provisions
require language that is “conspicuous,” I begin by revealing how the Act
defines that term. Then I will examine
the choice of law and forum provisions.
Next, I discuss warranties.
Finally, I will inspect the Remedy provisions.
A.
Conspicuous
A vendor can contract around many
consumer-friendly provisions in the Act if the language is “conspicuous.”[232] However, a look at the Act’s definition of
“conspicuous,” which expressly preempts any state law definition of the term,
makes a disclaimer valid as long as a “reasonable” consumer “ought to have
noticed it.”[233]
Conspicuous terms in an
electronic format are measured “by the condition of the message as it would be
received or first viewed by” the consumer.[234] The definition allows “conspicuous” terms
to be displayed on a different page than the license agreement as long as the
conspicuous term is “prominently
referenced in an electronic record or display which is readily accessible or
reviewable from the record or display.”[235]
For example, a conspicuous term
may be represented by an image or hyperlink displayed on a computer screen
that, when “clicked,” transfers the consumer to a different display or page
“wherein the contract term is available.”[236] In order to be conspicuous, the image or
hyperlink “must be prominent” and it must “enable review of the actual term.”[237] Whether terms are truly conspicuous, is a
question left to the courts.[238]
When combined with the
mass-market license provisions of the Act, the definition of conspicuous would
allow vendors of online products to bury disclaimers deep within a web
site. Under the Act, a license
agreement need not be presented to a consumer for review. The consumer need only have an opportunity
to review the license agreement. The
license agreement may be viewable through a hyperlink, for example. Furthermore, the conspicuous term need not
be displayed on the same screen as the license agreement. In order to view the “conspicuous” term, a
consumer may have to find and click on another hyperlink. The deeper the conspicuous terms, the more
unlikely it is that consumers can find them.
Therefore, the more likely a consumer will “agree” to onerous, one-sided
terms.
B.
Choice of Law & Forum
On its face, the choice of law
provision of the UCITA appears to benefit consumers. By default, “[a]n access
contract or a contract providing for electronic delivery of a copy is governed
by the law of the jurisdiction in which the licensor was located when the
agreement was entered into.”[239] If the agreement is “[a] consumer contract that requires delivery of a
copy on a tangible medium is governed by the law of the jurisdiction in which
the copy is or should have been delivered to the consumer.”[240]
However, the Act also allows a
Vendor to alter the default rule by selecting another jurisdiction’s law, as
long as the choice is included in the license agreement. Unlike UCC
§ 1‑105, which requires that, the selected state have a “reasonable
relationship” to the transaction,[241]
the parties may choose any jurisdiction’s law (even a foreign country’s
jurisdiction)[242] as long as
the jurisdiction that would apply by default does not disallow that choice,[243]
it is not unconscionable and does not
override a fundamental public policy of the forum State.[244] The
practical implications of these provisions are staggering. UCITA would allow a Vendor to survey the laws of every state and choose the
law that most favors the Vendor.
In addition to choosing the law,
parties may also choose “an exclusive
judicial forum unless the choice is unreasonable and unjust.”[245] The “choice of forum term is non-exclusive
unless the agreement expressly provides otherwise.”[246] The Comment explains that under
UCITA, "a contractual choice of forum based on a valid commercial purpose
is not invalid simply because it adversely effects one party, even in cases
where bargaining power is unequal."[247]
Therefore, UCITA permits a Vendor to choose a forum that
makes it difficult and expensive for consumers to bring an action. For all practical purposes, these provisions
bar many claims from ever being brought.[248] Will a consumer with a minimal claim ($500)
fly across the country (or the world) in order to bring an action?
C.
Warranties
UCITA provides default warranties
to consumers purchasing digital products.[249] The Act makes available several new
warranties and “adopts existing warranties of Article 2” by default.[250] The new warranties include an implied
warranty of quiet enjoyment,[251]
an implied warranty of system integration,[252]
and an implied warranty of data accuracy.[253] The warranties that are carried over from
Article 2 include: an implied warranty of non-infringement,[254]
implied warranty of merchantability,[255]
and an implied warranty of fitness for a purpose.[256] Furthermore, UCITA explicitly indicates that
advertising and other published information can create an express warranty.[257]
These are important consumer
protections. However, UCITA allows
Vendors to disclaim all express and implied warranties, as long as the
disclaimers are conspicuous.[258]
A survey of “hundreds of
click-wrap, Web site, shrink-wrap, and other mass-market transactions” has not
uncovered a “single example of a software licensor willing to provide any
warranty for its software, software products or services.”[259] In every case, the licensor disclaimed all
express and implied warranties.[260] UCITA expressly validates the ability of
Vendors to disclaim all warranties.
Furthermore, under the Act’s definition of conspicuous and the mass-market
license provisions, the disclaimers may be buried deep within a web site and
still qualify as “conspicuous.”[261]
D.
Remedies
UCITA Part 8 §807 deals with
damages due a consumer in the event of a breach by a vendor.[262] By default, an aggrieved consumer chooses
the method of computation of direct damages.
Direct damages, however “are capped
by the market or contract value of the performance plus restitution of fees
paid for which performance was not received.”[263] In addition, a consumer may recover incidental and consequential
damages. For example, a consumer may
recover for costs of repair and/or value of lost information.
Again, the default rules appear
to benefit consumers. However, UCITA
also permits parties to set their own remedies and measure of damages through a
license agreement.[264] Therefore, a Vendor may set the damage award
at the purchase price (say $50.00) and, using the other “consumer friendly”
provisions, disclaim all warranties and require the consumer to travel across
the country to collect. All this is
possible, as long as the terms are “conspicuous” (meaning buried somewhere on
the web site), the consumer had an opportunity to review the terms (if he or
she can find them) and the consumer manifests consent by using the product he or
she purchased.
V.
Conclusion
This analysis of UCITA has
demonstrated that the Act is a long, complicated statutory scheme. Consumers, in particular, will not benefit
from its enactment. In this section I
will summarize my objections to UCITA.
First I will address the provisions of the Act that allow vendors to
bind consumers to one-sided terms.
Then, I will discuss the difficulty of obtaining uniformity with this
Act.
Contracting around the Act begins
with UCITA explicitly making “browse-wrap” licenses enforceable. Proponents point to ProCD and Gateway
as evidence that UCITA is harmless, because shrink-wrap agreements are already
enforceable.[265] And, while shrink-wrap licenses are not
consumer friendly, there is a big difference between “shrink-wrap” licenses and
“browse-wrap” licenses from a consumer perspective. At least a shrink-wrap license requires the consumer to commit
some act (break the seal to assess the disks) that confirms that he or she saw
a notice of where to find the license agreement should he or she wish to read
it. The only overt action required by a
browse-wrap license is that the consumer actually uses the software, or read
the information, he or she purchased.
By enforcing these license forms,
the Act abuses the fiction that consumers read and understand these complicated
agreements. While consumers may elect
not to read any agreement, hiding the agreement and “conspicuous” terms behind
layers of hyperlinks ensures that even the most astute consumer will be unaware
of that which he or she has “agreed.”
Proponents also use the Act’s
default rules as proof that UCITA is not anti-consumer.[266] However, the proponents fail to mention that
these default rules rarely, if ever, apply to mass-market licenses. In almost every instance, each and every
beneficial default provision will be over-ridden by language within the license
agreement, allowing the Vendor to contract around provisions that purportedly
protect consumers.
In 1995, when the drafters started writing UCITA (Article 2B) and
less than 2% of software sales were made over the Internet,[267]
“pay-now terms-later” shrink-wrap licenses appeared to be a necessary
evil. How else were software companies
to bind consumers to license terms?
Soon, Internet software sales
will reach 50% of the total market.[268] Technology makes it possible to present a
license agreement to potential customers in such a way as to ensure that all
the important terms of an agreement are displayed before a consumer is
obligated to pay, simply by presenting the terms in a web-wrap agreement
first. Even if the consumer elected not
to read the license agreement, at least he or she would have an opportunity to
read the terms before the transaction proceeded. As it is, UCITA would saddle consumers with rules written for a
different time.
UCITA faces strong
opposition. The Act has been criticized
or opposed by 26 Attorneys General,[269]
software developers,[270]
numerous consumer groups,[271]
50 intellectual property professors,[272]
American Intellectual Property Law Association and the American Law Institute.[273]
The ALI’s objection is especially
noteworthy. The organization was
involved in drafting Article 2B from the very beginning. It is important to note the difference in
the makeup of the two organizations involved in drafting UCITA. First, the National Conference of
Commissioners on Uniform State Laws is basically a political organization. And, as such, had a vested interest in
demonstrating results from the long process, regardless of the overall quality
of the work.
The American Law Institute, on
the other hand, is a scholarly group.
Their interest was not political, but rather intellectual. ALI’s opposition to their own work speaks
volumes about, what they saw as, “less than a first-class product.”[274]
Only Virginia and Maryland have
enacted UCITA, each in a modified version.[275] UCITA is having trouble passing everywhere
else it was introduced.[276] More importantly, Iowa and West Virginia
have already passed “bomb shelter” laws.[277] A bomb-shelter law is a law designed
specifically to protect a jurisdiction’s consumers from UCITA’s “consumer
friendly” provisions. Bomb shelter laws
nullify license agreement terms that invoke UCITA.[278] New York, Oregon and Ohio are also
considering protecting their consumers with a bomb-shelter law.[279] These bomb shelter laws have “generally met
with better reception than has UCITA itself.” [280]
With this strong opposition,
reaching the Conference’s goal of “a coherent, uniform body of law” will be
difficult if not impossible.
[1] See, Micalyn S. Harris, UCITA: Helping David Face Goliath, 18 J.
Marshall J. Computer & Info. L. 365 (1999).
[2] See, e.g., Micalyn S. Harris, Is UCITA Worthy of Active Support?
(visited Aug 1, 2001) <http://www.2bguide.com/docs/mh1099.html>. Ms.
Harris cites a U.S. Department of Commerce report (U. S. Industrial Trade
Outlook ’98) that maintains that the 1996 packaged software market in the U.S
was $ 50.4 billion. “Note that these figures reflect only packaged software.
The scope of UCITA is not limited to packaged software, and therefore, UCITA
would impact an even larger market.”
[3] See, NCCUSL, Prefatory Note to Uniform
Computer Information Transactions Act (Sept. 29, 2000)
<http://www.law.upenn.edu/bll/ulc/ucita/ucitaFinal00.htm> [hereinafter
Prefatory Note]. The final version of
UCITA is available in full online. See NCCUSL, UCITA (Sept. 29, 2000)
<http://www.law.upenn.edu/bll/ulc/ucita/ucita<uscore>99.htm>
[hereinafter U.C.I.T.A.].
[4] See, Opposing Adoption Of The Uniform Computer Information
Transactions Act (Ucita) By the States (Aug 28, 2000), available at
<http://www.ieeeusa.org/forum/grassroots/ucita/ucitakit.pdf>.
[5] Jean
Braucher, Why Ucita, Like Ucc Article 2b, Is Premature And Unsound,
(visited Aug. 8, 2001)
<http://www.2bguide.com/docs/0499jb.html>. See also,
Cem Kaner, Software Engineering And
UCITA, 18 J. Marshall J. Computer & Info. L. 435, 436 (1999).
[6] home ALI, Uniform Commercial Code (visited Dec. 3, 2001),
<http://www.ali.org/ali/com_ucc.htm>.
[7] See,
Garry L. Founds, Shrinkwrap and Clickwrap Agreements: 2B or Not 2B, 52
Fed. Comm. L.J. 99, n. 10 (1999).
[8] See,
Uniform Commercial Code §1-102. (available in full online at <
http://www2.law.cornell.edu/cgi-bin/foliocgi.exe/UCC1?>).
[9] See, Study Group, Permanent Editorial
Bd. of the Unif. Commercial Code, PEB
Study Group: Uniform Commercial Code, Article 2 Executive Summary, 46 Bus.
Law. 1869 (1991).
[10] See Id.
at II. Criteria For Evaluation
[11] The
comments “range[d] from comprehensive, extensive analyses to short letters
dealing with one or two issues.” See
Id. at I. Background Of Executive
Summary
[14] Id.
at III.
Summary of Areas of Mandating Revision
[16] Pratik A.
Shah, The Uniform Computer Information
Transactions Act, 15 Berkeley Tech. L.J. 85, 86 (2000).
[17] home ALI, About, Institute Project
(visited Aug. 2, 2001), <http://www.ali.org/ali/thisali.htm>.
[18] See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, About Us, Organization
(visited Aug. 2, 2001).
[19] See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, About Us, Organization
(visited Aug. 2, 2001) <http://www.nccusl.org/nccusl/default.asp>.
[20] See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State Laws
(visited Aug. 2, 2001) <http://www.nccusl.org/nccusl/default.asp>.
[21] See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, About Us, Organization
(visited Aug. 2, 2001) <http://www.nccusl.org/nccusl/default.asp>. See
also, Carlyle C. Ring, Jr., Overview
of Uniform Computer Information Transactions Act (UCITA), (Nov. 1, 1999)
<http://www.ober.com/divisions/innews/press_list_m.cfm?linkid=37>.
[23] Uniform
Anatomical Gift Act (1987), (available in full online at
<http://www.law.upenn.edu/bll/ulc/fnact99/uaga87.htm>). Originally promulgated in 1968, by 1972 the
Act had been adopted in every state.
The 1987 Revision has been adopted by 23 jurisdictions (Arizona,
Arkansas, California, Connecticut, Hawaii, Idaho, Indiana, Iowa, Minnesota,
Montana, Nevada, New Hampshire, New Mexico, North Dakota, Oregon, Pennsylvania,
Rhode Island, US Virgin Islands, Utah, Vermont, Virginia, Washington, &
Wisconsin), and has recently been introduced in Alabama. See, Uniform Law Commissioners, The National Conference of Commissioners on
Uniform State Laws, A Few Facts About..., The Uniform
Anatomical Gift Act (1987) (visited Dec. 3, 2001).
<http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-aga87.asp>
[24] Uniform
Child-Custody Jurisdiction and Enforcement Act (1997), (available in full online at
<http://www.law.upenn.edu/bll/ulc/uccjea/chldcus2.htm>). This Act “revises the 1968 Uniform Child
Custody Jurisdiction Act, which was adopted in every state.” It has been adopted in 26 jurisdictions
(Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut,
District of Columbia, Georgia, Idaho, Iowa, Kansas, Maine, Minnesota, Montana,
New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Tennessee, Texas,
Utah, Virginia, Washington & West Virginia) and, in 2001, was introduced in
10 (Florida, Hawaii, Illinois, Indiana, Maryland, Mississippi, Missouri, New
Jersey, New York & Rhode Island).
See, Uniform Law Commissioners,
The National Conference of Commissioners on Uniform State Laws, A Few Facts
About..., The Uniform Child-Custody Jurisdiction and Enforcement Act
(visited Dec. 3, 2001).
<http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-uccjea.asp>.
[25] Uniform
Electronic Transactions Act (1999),
(available in full online at
<http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta99.htm>). Adopted in 38 jurisdictions (Alabama,
Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Hawaii,
Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan,
Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire , New Mexico,
North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South
Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, & Wyoming) and
introduced in 10 in 2001(California, Colorado, Connecticut, Illinois,
Massachusetts, Missouri, New Jersey, Oregon, Vermont, & Wisconsin). See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, A Few Facts About..., The Uniform Electronic Transactions Act (visited
Dec. 3, 2001).
<http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-ueta.asp>.
[26] The Uniform
Probate Code (1991). The Act has been
adopted by 19 Jurisdictions (Alaska, Arizona, Colorado, Hawaii, Idaho, Maine,
Michigan, Minnesota, Montana, Nebraska, New Jersey, New Mexico, North Dakota,
Pennsylvania, South Carolina, South Dakota, Utah, & Wisconsin) and been introduced in Massachusetts. See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, A Few Facts About..., The Uniform Probate Code (visited
Dec. 3, 2001).
<http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-ulpa.asp>.
[27] Uniform
Partnership Act (2001), (available in
full online at <
http://www.law.upenn.edu/bll/ulc/fnact99/1990s/upa97fa.htm>). The 1992, 1994, or the 1994 version with
Amendments has been adopted in 32 jurisdictions (Alabama, Alaska, Arizona,
Arkansas, California, Colorado, Delaware, District of Columbia, Florida,
Hawaii, Idaho, Iowa, Kansas, Maryland, Minnesota, Montana, Nebraska, New
Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Puerto Rico, South Dakota,
Texas, US Virgin Islands, Vermont, Virginia, & Washington) and has been
introduced in 3 (Indiana, Rhode Island, & Tennessee). See, Uniform
Law Commissioners, The National Conference of Commissioners on Uniform State
Laws, A Few Facts About..., The Uniform Partnership Act (visited
Dec. 3, 2001).
<http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-upa9497.asp>.
[28] Uniform
Limited Partnership Act (2001),
(available in full online at
<http://www.law.upenn.edu/bll/ulc/ulpa/final2001.htm>). Either the 1976 version or the 1976 version
with 1985 Amendments has been adopted in 49 states (except Louisiana) the
District of Columbia and the U.S. Virgin Islands. See, Uniform Law
Commissioners, The National Conference of Commissioners on Uniform State Laws,
A Few Facts About..., The Uniform Limited Partnership Act (visited
Dec. 3, 2001). <http://www.nccusl.org/nccusl/uniformact_factsheets/uniformacts-fs-upc.asp>.
[29] See Id.
at Procedures,
[36] ALI, supra note 14 at Creation
of the Institute.
[41] See Id.
at Membership.
[43] See Id.
at Institute Projects.
[47] See Id.
at How the Institute Works.
[58] Raymond T.
Nimmer, Intangibles Contracts: Thoughts
Of Hubs, Spokes, And Reinvigorating Article 2, 35 Wm and Mary L. Rev. 1337,
1340 (1994). See also, Michael L. Rustad,
Article Making UCITA More Consumer-Friendly, 18 J. Marshall J. Computer
& Info. L. 547, n. 34 (1999).
[59] See,
Nimmer, supra note 58 at 1340.
[61] See Id.
at 1341 & n.76.
[64] Linda J.
Rusch, A History and Perspective of
Revised Article 2: The Never Ending Saga of a Search for Balance, 52 SMU L.
Rev. 1683, 1686 (1999).
[65] See Id. See also, Michael L. Rustad, Article
Making UCITA More Consumer-Friendly, 18 J. Marshall J. Computer & Info.
L. 547, 553-54 (1999).
[67] See, Kaner, supra note 5 (Mr. Kaner
attended every meeting but the first of the Drafting Committee of Proposed
Article 2B).
[76] The vote
was 46-3, some jurisdictions did not vote.
See, Ring, supra note 21 at I. Introduction: A. Promulgation.
[77] In 2001,
UCITA was introduced in Arizona, Illinois, Texas, Maine, New Hampshire, Oregon,
New Jersey, and the District of Columbia.
As of this writing, it has not passed in any of these states, and at
this late date seems unlikely this year.
See, Patrick Thibodeau, UCITA opponents slow software licensing
law's progress, InfoWorld (May 17, 2001)
<http://iwsun4.infoworld.com/articles/hn/xml/01/05/17/010517hnucita.xml>. See
also, Anne Chen, One law? Sure, but
this one isn't it; Uniform Computer Information Transactions Act; Government
Activity, eWeek (July 10, 2001) <http://www.zdnet.com/eweek/stories/general/0,11011,2783718,00.html>.
[78] See, Kenneth M. Dreifach, The Uniform Computer Information
Transactions Act, N.Y.L.J. (May 10, 2001).
[79] See, David A. P. Neboyskey, A Leap Forward: Why States Should Ratify the
Uniform Computer Information Transactions Act, 52 Fed. Comm. L.J. 793
(2000).
[80] U.C.I.T.A.,
supra note 3, Prefatory Note.
[81] U.C.I.T.A.,
supra note 3, §106 cmt. 2 (discussing construing the Act in light of its stated
purposes).
[82] See, U.C.I.T.A., supra note 3, Table
of Contents.
[86] See, U.C.I.T.A., supra note 3.
[87] U.C.I.T.A.,
supra note 3, §106(a)(1).
[88] See, U.C.I.T.A., supra note 3,
§106(a)(2).
[89] U.C.I.T.A.,
supra note 3, §106(a)(3).
[90] U.C.I.T.A.,
supra note 3, §106(a)(4).
[91] Prefatory
Note, supra note 3.
[92] U.C.I.T.A.,
supra note 3, §102(a)(11).
[93] U.C.I.T.A.,
supra note 3, §103 cmt. 3.
[94] U.C.I.T.A.,
supra note 3, §102(10). The term includes transfers of computer programs or
multimedia products, software and multimedia development contracts, access
contracts, and contracts to obtain information for use in a program, access
contract, or multimedia product. U.C.I.T.A., supra note 3, §102 cmt. 9.
[95] U.C.I.T.A.,
supra note 3, §102(35).
[96] “License” means a contract that authorizes
access to, or use, distribution, performance, modification, or reproduction of,
information or informational rights, but expressly limits the access or uses
authorized or expressly grants fewer than all rights in the information,
whether or not the transferee has title to a licensed copy. The term includes an access contract, a
lease of a computer program, and a consignment of a copy. The term does not include a reservation or
creation of a security interest to the extent the interest is governed by
[Article 9 of the Uniform Commercial Code]. U.C.I.T.A., supra note 3,
§102(a)(41).
[97] See, U.C.C.
§2-102 (available in full online at
< http://www2.law.cornell.edu/cgi-bin/foliocgi.exe/UCC2?>).
[98] “’Goods’ means all things that are movable at the
time relevant to the computer information transaction. The term includes the unborn young of
animals, growing crops, and other identified things to be severed from realty
which are covered by [Section 2‑107 of the Uniform Commercial Code]. The term does not include computer
information, money, the subject matter of foreign exchange transactions,
documents, letters of credit, letter-of-credit rights, instruments, investment
property, accounts, chattel paper, deposit accounts, or general
intangibles.” U.C.I.T.A., supra
note 3, §102(a)(33).
[99] See, U.C.I.T.A., supra note 3,
§103(d)(8).
[100] See, U.C.I.T.A., supra note 3,
§103(d)(1).
[101] See, U.C.I.T.A., supra note 3,
§103(d)(2).
[102] See, U.C.I.T.A., supra note 3,
§103(d)(3).
[103] See, U.C.I.T.A., supra note 3,
§103(d)(4).
[104] See, U.C.I.T.A., supra note 3,
§103(d)(5).
[105] See, U.C.I.T.A., supra note 3,
§103(d)(6).
[106] See, U.C.I.T.A., supra note 3,
§103(d)(7).
[107] See, U.C.I.T.A., supra note 3,
§103(d)(8) (Non-voluntary contracts, like compulsory contracts pursuant to the Copyright Act).
[108]
U.C.I.T.A., supra note 3, §103(b)(1).
[109] See, U.C.I.T.A., supra note 3,
§103(b)(1)(A).
[110]
U.C.I.T.A., supra note 3, §103(b)(1)(B).
[111] See, U.C.I.T.A., supra note 3,
§103(b)(1) & §103 cmt. 4(a).
[112] See, U.C.I.T.A., supra note 3, §104
& official comments.
[113] The
ability to elect the scheme of an individual agreement is related to the UCITA
principle of freedom to contract. See, Rusch, supra note 64 at 1693.
[114]
U.C.I.T.A., supra note 3, §104 cmt. 1.
[115]
U.C.I.T.A., supra note 3, §104.
[116] See,
National Association Of Attorneys General, Letter to Carlyle C. Ring,
President National Conference of Commissioners on Uniform State Laws, Re: The
Uniform Computer Information Transactions Act (UCITA,) at UCITA Is
Overbroad (November 13, 2001)
<http://www.arl.org/info/letters/AGtoNCCUSL11.html>.
[117] See, U.C.I.T.A., supra note 3, §§208
& 209.
[118]
U.C.I.T.A., supra note 3, §102(a)(44).
[119] See, U.C.I.T.A., supra note 3,
§102(a)(45)(A).
[120] See, U.C.I.T.A., supra note 3,
§102(a)(45)(B).
[121]
U.C.I.T.A., supra note 3, §102 cmt. 39.
[124] See, Mark A. Lemley, Intellectual Property And Shrinkwrap
Licenses, 68 S. Cal. L. Rev. 1239, 1241 (1995).
[132]
A shrink-wrap license typically has a provision that includes language like:
[Vendor] is providing the enclosed
materials to you on the express condition that you assent to this software
license. By using any of the enclosed diskette(s), you agree to the following
provisions. If you do not agree with these license provisions, return these
materials to your dealer, in original packaging within three days from receipt,
for a refund.
Lemley supra note 114 at 1241. (Mr. Lemley uses “the actual language of the
shrinkwrap license provision at issue in Vault Corp. v. Quaid Software,
Ltd., 847 F.2d 255, 257 n.2 (5th Cir. 1988)).
[133] See, Specht V. Netscrape, 2001
U.S. Dist. LEXIS 9073 (2001).
[134] I use the
term icon, but a license my use a link, button or icon. Hereinafter, I use the term “icon”
interchangeably with button or link.
Additionally, I use the term “I agree.”
A vendor may use other terms, like “I accept” or any other term that
indicates that the consumer agrees to the terms of the agreement.
[135] See,
Netscape, supra note 133.
[136] Skip
Sigel, Theo Ling, and Joshua Izenberg, The Validity and Enforceability of
Web-Wrap Agreements and Assessing the Need for Legislation, (visited Aug.
9, 2001) <http://www.law.ualberta.ca/alri/ulc/current/ewebwrap.htm>
(concluding that web -wrap agreements are already legally enforceable, so there
is no need for legislation in Canada).
[139] See,
e.g., The New York Times, (visited Aug. 15,
2001)<http://www.nytimes.com>.
[141] See, Netscrape, supra note 12 at
24.
[146] Step-Saver
Data Systems, Inc. v. Wyse Technology , 939 F.2d 91 (3d Cir. 1991).
[153] U.C.C.
2-207, "the battle of the
forms," :
(1) A definite and seasonable expression of
acceptance or a written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly
made conditional on assent to the additional or different terms.
(2) The additional terms are
to be construed as proposals for addition to the contract. Between merchants
such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the
offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is
given within a reasonable time after notice of them is received.
(3) Conduct by both parties
which recognizes the existence of a contract is sufficient to establish a
contract for sale although the writings of the parties do not otherwise
establish a contract. In such case the terms of the particular contract consist
of those terms on which the writings of the parties agree, together with any
supplementary terms incorporated under any other provisions of this Act.
U.C.C. 2-207 (1987).
[154] Step-Saver,
supra note 146 at 97.
[158] See,
Carlyle C. Ring, Jr. & Raymond T. Nimmer, Series of Papers on UCITA
Issues, Shrinkwrap Licenses, (Aug. 26, 1999)
<http://www.2bguide.com/docs/q&apm.html>.
[160] ProCD,
Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)
[161] See,
Hill v. Gateway 2000, Inc., 105 F. 3d 1147 (7th Cir. 1997),
[162] ProCD,
Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)
[163] CD-ROM
means "compact disc--read only memory.”
[164] ProCD,
86 F.3d 1447 at 1449.
[181] See,
U.C.C. §2-204(1). See also, ProCD,
86 F.3d 1447 at 1452.
[182] ProCD,
86 F.3d 1447 at 1452.
[186] See,
Hill v. Gateway 2000, Inc., 105 F. 3d 1147 (7th Cir. 1997),
[193] See Id.
at 1149-50.
[194] See,
e.g., Lieschke V. Realnetworks, Inc., 2000 U.S. Dist. LEXIS 1683 (N.D.
Ill. February 10, 2000); In re RealNetworks, Inc. Privacy Litigation,
2000 U.S. Dist. LEXIS 6584, No. 00 C 1366, 2000 WL 631341 (N.D. Ill. May 8,
2000); Hotmail Corp. v. Van Money Pie, Inc., 1998 U.S. Dist. LEXIS 10729,
No. C98-20064, 1998 WL 388389 (N.D. Cal. April 16, 1998).
[195] See,
Realnetworks, 2000 U.S. Dist. LEXIS 1683 at 2.
[197] See,
In re RealNetworks, 2000 U.S. Dist. LEXIS 6584 at 8.
[198] See,
Realnetworks, 2000 U.S. Dist. LEXIS 1683 at 3.
[202] See,
In re RealNetworks, 2000 U.S. Dist. LEXIS 6584 at 4.
[203] See,
Specht v. Netscape Communications Corp, 2001 U.S. Dist. LEXIS 9073
(S.D.N.Y. July 3, 2001).
[214] See, U.C.I.T.A., supra note 3, §§209
& 211.
[215] “In this Act, having an opportunity to review a
record is a precondition to manifesting assent.” U.C.I.T.A., supra note 3, §112 cmt. 1.
[217] See, U.C.I.T.A., supra note 3,
§112(e)(3).
[218] See, U.C.I.T.A., supra note 3, §209 cmt.
2.
[220] See, U.C.I.T.A., supra note 3,
§112(e)(1).
[221] See, U.C.I.T.A., supra note 3, §112 cmt.
3(b).
[222] See,
U.C.I.T.A., supra note 3, §209 cmt. 2(a).
[223] See,
U.C.I.T.A., supra note 3, §209(b)(2).
[224] See
generally, U.C.I.T.A., supra note 3, §211.
[225] See, U.C.I.T.A., supra note 3, §211(a).
[226] See, U.C.I.T.A., supra note 3,
§211(1)(B).
[227] See, U.C.I.T.A., supra note 3, §211(2).
[228] See, Restatement (Second) of Contracts
19 (1981) ("(1) The manifestation of assent may be made wholly or partly
by written or spoken words or by other acts or by failure to act. (2) The
conduct of a party is not effective as a manifestation of his assent unless he
... has reason to know that the other party may infer from his conduct that he
assents. (3) The conduct of a party may manifest assent even though he does not
in fact assent. In such cases a resulting contract may be voidable because of
fraud, duress, mistake, or other invalidating cause."). See
also, Shah, supra note 16 at 89.
[229] See, Id. See
also, UCITA, supra note 3 at §208 cmt. 2.
[230] See generally, U.C.I.T.A., supra note 3,
§209
[232] See,
e.g., U.C.I.T.A., supra note 3, §104(3) requires that opt-in/opt-out license
terms must be conspicuous. See also,
U.C.I.T.A., supra note 3, §406(b)(1)(A) (To
disclaim or modify the implied warranty arising under Section 403, language
must mention “merchantability” or “quality” or use words of similar import and,
if in a record, must be conspicuous.)
[233] See, U.C.I.T.A., supra note 3,
§102(a)(14).
[234] See, U.C.I.T.A., supra note 3, §102 cmt.
12.
[235] See, U.C.I.T.A., supra note 3,
§102(a)(14)(A)(iii)
[236] See, U.C.I.T.A., supra note 3, §102 cmt.
12.
[238] See, U.C.I.T.A., supra note 3, §114(c).
[239] See, U.C.I.T.A., supra note 3,
§109(b)(1).
[240] See, U.C.I.T.A., supra note 3,
§109(b)(2).
[241] See,
Uniform Commercial Code (1998 Official
Text) § 1‑105
[242] See, U.C.I.T.A., supra note 3, §109(c).
[243] See, U.C.I.T.A., supra note 3, §109(a).
[244] U.C.I.T.A.,
supra note 3, §109 cmt. 2(b).
[245]
U.C.I.T.A., supra note 3, §110.
[246]
U.C.I.T.A., supra note 3, §110 cmt. 4.
[247]
U.C.I.T.A., supra note 3, §110 cmt. 3.
[248] See, Kaner, supra note 5 at 496.
[249] See, U.C.I.T.A., supra note 3, §401.
[250] See,
Ring supra 21 at Warranties.
[251] See, U.C.I.T.A., supra note 3, §401
(substitutes a warranty of quiet enjoyment for Article 2's warranty of title).
[252] See, U.C.I.T.A., supra note 3, §405
(provides an implied warranty of system integration if the licensor has “reason
to know” the licensee is relying on the licensor’s skill to select components
of a computer system).
[253] See, U.C.I.T.A., supra note 3, §404
(creates a new implied warranty for content accuracy if the information is
prepared by the licensor that is in a "special relationship of
reliance" with a licensee)
[254] Compare,
U.C.C. §2-312 (Warranty of Title and Against Infringement), with
U.C.I.T.A., supra note 3, §401.
[255] Compare,
§2-314 (Implied Warranty: Merchantability), with U.C.I.T.A., supra note
3, §403.
[256] Compare,
§2-315 (Implied Warranty: Fitness for a Particular Purpose), with
U.C.I.T.A., supra note 3, §405.
[257] See, U.C.I.T.A., supra note 3,
§402(a)(1).
[258] See, e.g. U.C.I.T.A., supra note 3,
§406(b)(3)
Language in a
record is sufficient to disclaim all implied warranties if it individually
disclaims each implied warranty or, except for the warranty in Section 401, if
it is conspicuous and states “Except
for express warranties stated in this contract, if any, this ‘information’
‘computer program’ is provided with all faults, and the entire risk as to
satisfactory quality, performance, accuracy, and effort is with the user”, or
words of similar import.
[259] Michael L.
Rustad, Article Making UCITA More Consumer-Friendly, 18 J. Marshall J.
Computer & Info. L. 547, 579 (1999).
[261] See,
supra note 258.
[262] See, U.C.I.T.A., supra note 3, §809.
[263] See, U.C.I.T.A., supra note 3, §809 cmt.
2.
[264] See, U.C.I.T.A., supra note 3, §803.
[265] See, Ring
supra note 21.
[267] Robert
Scally, Getting The Lowdown On Downloads, Discount Store News, Dec. 13,
1999 (quoting a Forrester Research study).
[268] Id.
(Forrester Research predicts Internet software sales will reach 50% of the
market by 2004).
[269] The
Attorneys General represent Arizona, Arkansas, California, Connecticut,
Florida, Georgia (Administrator of the Georgia Fair Business Practices Act),
Idaho, Indiana, Iowa, Kansas, Maryland, Minnesota, Mississippi, Missouri,
Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oklahoma,
Pennsylvania, Tennessee, Vermont, Washington, Wet Virginia, and Wisconsin.
[270] The
software developer associations include: American Society for Quality,
Association for Computing Machinery, Free Software Foundation, Independent
Computer Consultants Association, Institute for Electrical & Electronics
Engineers (IEEE), Sacramento Area Quality Association, Software Engineering
Institute, Software-test-discuss (this is the Net's largest e-mail discussion
forum on software quality control), Watts Humphrey, American Committee for
Interoperable Systems, Digital Future Coalition
[271] Consumer
Advocates that have criticized or opposed UCITA include: Consumer Federation of
America, Consumer Project on Technology (Ralph Nader), Consumers Union,
National Consumer League, United States Public Interest Research Group
[272] Prof. John
Allison, School of Management Science, University of Texas at Austin; Prof.
Keith Aoki, University of Oregon School of Law; Prof. Stephen Barnett, Boalt
Hall School of Law, University of California at Berkeley; Prof. Ann Bartow,
University of Dayton School of Law; Prof. James Boyle, Washington College of
Law, American University; Prof. Dan Burk, Seton Hall University School of Law;
Prof. Art Campbell, Case Western Reserve University, School of Law; Prof.
Richard Chused, Georgetown University Law Center; Prof. Robert Clinton,
University of Iowa College of Law; Prof. Julie Cohen, University of Pittsburgh
School of Law; Prof. Thomas Cotter, University of Florida College of Law; Prof.
Kenneth D. Crews, Indiana University School of Law- Indianapolis; Prof. Robert
Denicola, University of Nebraska College of Law; Prof. Rochelle Cooper
Dreyfuss, New York University School of Law; Prof. Tom Field, Franklin Pierce
Law Center; Prof. William Fisher III, Harvard Law School; Prof. Michael
Froomkin, University of Miami School of Law; Prof. Laura N. Gasaway, University
of North Carolina School of Law; Prof. Llew Gibbons, University of Toledo
College of Law; Prof. Sheldon W. Halpern, Ohio State University College of Law;
Prof. Marci Hamilton, Benjamin Cardozo School of Law, Yeshiva University; Prof.
Paul Heald, Univ. of Georgia School of Law; Prof. Marcus Hurn, Franklin Pierce
Law Center; Prof. Mary Brandt Jensen, University of Mississippi School of Law;
Prof. Craig Jepson, Franklin Pierce Law Center; Prof. Dennis Karjala, Arizona State
College of Law; Prof. John Kidwell, University of Wisconsin School of Law;
Prof. Robert A. Kreiss, University of Dayton School of Law; Prof. David Lange,
Duke University Law School; Prof. Marshall Leaffer, University of Toledo School
of Law; Prof. Mark A. Lemley, University of Texas School of Law; Prof. Lawrence
Lessig, Harvard Law School; Prof. Jessica Litman, Wayne State University School
of Law; Prof. Glynn S. Lunney, Jr., Tulane Law School; Prof. Michael Madison,
University of Pittsburgh School of Law; Prof. Peter Menell, Boalt Hall School
of Law, University of California at Berkeley; Prof. Robert Merges, Boalt Hall
School of Law, University of California at Berkeley; Prof. Robert L. Oakley,
Georgetown University Law Center; Prof. Ruth Gana Okediji, University of
Oklahoma School of Law; Prof. David Post, Temple Law School; Prof. Susan
Poulter, University of Utah College of Law; Prof. Margaret Jane Radin, Stanford
Law School; Prof. J.H. Reichman, Vanderbilt Law School; Prof. Joel Reidenberg,
Fordham University School of Law; Prof. Pamela Samuelson, Boalt Hall School of
Law, University of California at Berkeley; Prof. Roger E. Schechter, National
Law Center, George Washington University; Prof. Peter P. Swire, Ohio State
University College of Law; Prof. Sarah K. Wiant, Washinton & Lee University
Law School; Prof. Jane Kaufman Winn, Southern Methodist University Law School;
Prof. Alfred Yen, Boston College Law School;
[273] See,
affect, Americans for Fair Electronic Commerce Transactions, What Others Say,
(visited Aug. 15, 2001) <http://www.4cite.org/say_list.html>.
[274] Ad Hoc
Committee on Article 2B, American Law Institute, Memorandum, (Feb 16,
1999) <http://www.2bguide.com/docs/1298ali.pdf>.
[275] See,
supra note 78.
[276] See,
supra note 77.
[277] Ed Foster,
UCITA, Running on Empty, InfoWorld, (July 2, 2001)
<http://iwsun4.infoworld.com/articles/op/xml/01/07/02/010702opfoster.xml>
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