UCITA: Click "I Agree" to Waive Rights

A new law would redefine ownership in the Information Age.

by / October 30, 2000
By John Marcotte | staff Writer

A new law would redefine ownership in the Information Age.

When you buy a piece of off-the-shelf software, you dont own it the way you own a new radio or a box of Cheerios. Software manufacturers have long maintained that you do not own the software at all. Rather, you are buying a license to use the software. You may have seen these licenses. They pop up on your screen when you install the software, or
sometimes they are printed on the outside of the envelope that the CD is packaged in. And, as with any license, the right to use the product comes with certain restrictions.

"People have tried these shrink-wrap licenses before, and sometimes theyre found as enforceable and sometimes not," said Rochelle Cooper Dreyfuss, professor at New York University School of Law.

Courts have viewed these shrink-wrap licensing agreements cautiously. In some cases, they have sided with software publishers when consumers have tried to do an end-run around the license. Owning the CD does not give you the right to make copies and sell them, for instance. But in other cases, the courts have held that shrink-wrap licenses are inherently unfair to consumers. A license is basically a contract. And shrink-wrap licenses force consumers to agree to a contract they cant even see until after they have already paid for the product. Further, virtually no retailer will accept open-software packages for return, which critics say makes shrink-wrap licensing appear even more unfair.

Thats where UCITA comes in (see the article "UCITA Rules Need a Closer Look" in the September issue of Government Technology). UCITA, or the Uniform Computer Information Transactions Act, is a piece of legislation designed by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Maryland and Vermont have already passed it, and the bill is wending its way through several other state legislatures. Meant as an addendum to the Uniform Commercial Code, UCITA was designed to remove the gray area from existing laws, granting consumers certain rights in exchange for a universal agreement that shrink-wrap licensing is legal. "The purpose is to articulate some basic rules of contract that apply to the kinds of contracts that people are creating for transactions in computer information," said John McCabe, legal counsel for the NCCUSL. But consumer advocates are crying foul, claiming that UCITA fundamentally shifts the balance of power to software publishers at the expense of the consumer.

If you can judge a bill by its opponents, UCITA is a mighty piece of legislation. Consumers Union, the Consumer Project on Technology, 25 state attorneys general and the Federal Trade Commission are a small part of a long list of organizations that have criticized the bill. They are joined by Prudential Life, Principal Financial Group and
Caterpillar Inc., who oppose UCITA not as representatives from the insurance, financial and manufacturing industries, but as large-scale software consumers. And few industries license more shrink-wrap software than the government.

UCITA does give users some basic rights, including the right of return. "[If you dont like the license], you can take the product back. You get an automatic right of return," McCabe said. "And you get your money back. And if it has cost you anything with respect to loading and
unloading the software, you get those costs. UCITA also has a public-policy defense, which allows a court to look at specific terms of a contract and determine whether they violate public policy or not."

UCITA Rights
But the rights it grants consumers are far outweighed by the powers it gives software publishers, critics say. "The entire act is fundamentally biased in favor of large software publishers and against the consumer," said Vergil Bushnell, e-commerce policy analyst for the Consumer Project on Technology. "Under UCITA, the software publisher is granting you, the consumer, a license to use the product. Its not a sale; its a license. By defining the sale as a license, the software publisher can include a number of restrictive terms on how you use the product, [whether] you can criticize the product or if you can transfer the product and a number of other restrictions."

Under UCITA, consumers are asked to enter into a contract they can read only after they have paid for the software. Often the license can only be read during the installation phase of the software. These contracts are often used to ask consumers to "voluntarily" limit their rights, and consumers rarely read them.

"The terms governing the end-user license agreement are very significant to the consumer," Bushnell said. "They might say something like, We the software publishers disclaim all implied warranties. It might say something like, If youre going to sue us, you have to submit to mandatory arbitration in the state of Washington even though I may be a consumer living in Maryland."

Of course, the potential abuses are limited only by the imagination.

"Why couldnt they say, Anything you write with this word-processing program also belongs to Microsoft?" asked Dreyfuss. "I dont think they would put that into a contract, but they could put in things that say, You cant look at the software. You cant look at the code. You cant try to reverse engineer it. You cant try to imitate it."

Reverse engineering is a standard practice in the world of software, in which engineers effectively disassemble a competitors product so they can figure out how to make their own software compatible. This is what allows Corel WordPerfect users to read Microsoft Word documents. Licensing restrictions that would limit consumers rights to do things such as reverse-engineer a product have been around forever. But until UCITA, theyve always been found unenforceable. The license agreement for the McAfee anti-virus utility even has a clause that says you cant review the software or publicize the results of benchmark performance tests without the express permission of the publishers -a clear violation of basic First Amendment rights under current law, but possibly enforceable under UCITA. Bushnell noted that McAfee had never enforced this clause, but said its presence was disturbing.

McCabe claims that competition between the software publishers will prevent them from inserting terms that are too onerous for the consumer. "Competition has its own way of mitigating what people do in light of contracts that they try to form," he said.

Consumer advocates dont buy it. "A proponent of UCITA might say the consumer can decide what piece of software he wants to buy based on the terms, but UCITA effectively prevents the consumer from doing any kind of comparison shopping because the terms are hidden within the box and only revealed to the consumer after the sales been consummated," Bushnell said.

And although there are many players in the software field, consumers may often find themselves in a situation where only one vendor has the product they need. And the UCITA model puts the burden on consumers to take the product back to get a refund if they dont like the terms of the license.

UCITA also contains provisions that would allow software companies to engage in "self help" if they feel that the consumer has violated the terms of the license. "[Self help] may allow the publisher, if they feel the consumer had breached the contract, to send a ping or an e-mail that could disable the software," Bushnell said.

"Once upon a time, the courts didnt like the idea of self-help - that was an Old West shoot-out. What you were supposed to do [was] go to court, and you [were] supposed to have judicial intervention, and that was how you protected your rights," said Dreyfuss. She also pointed out
that having such self-destructing software might cause other problems. "Thats kind of problematic because, while its destroying itself, it might also destroy other data. It might destroy the things that you did with the computer program, like the word-processing files or the spreadsheets."

McCabe is quick to point out that there is nothing preventing software publishers from enacting self-help measures today. "If youre not under UCITA and youre not under some specific statutory regime that limits self-help, what is to prevent self help?" he asked. And under UCITA,
self-help provisions must be separately agreed to and strict notification procedures must be followed.

That is not enough to stem the rising tide of criticism, though.

Defining the Gray Area
"UCITA takes computer information outside the scope of very important state and federal consumer protection laws," Bushnell said. "[Lobbyists have been] able to sell their pro-UCITA views to the legislators based on the illusionary promise, If youre the state that first passes UCITA, there will be some sort of connection with e-commerce firms like ours moving into your state." Bushnell said he doubted that such a connection exists.

Dreyfuss agreed that legislation is necessary to eliminate the gray area of shrink-wrap licensing, but she said she didnt think UCITA fits the bill. "I think legislation is absolutely necessary. The question is, what are the licensors going to be allowed to do? [Shrink-wrap licenses] might impose huge costs on the people who buy it, totally out of proportion to the benefit that theyre giving to the seller."

Tod Newcombe Features Editor