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January 4, 2002

CONTACT:
Carol Ashworth 202-628-8410

AFFECT Statement on Proposed New Amendments to UCITA

The Standby Committee of the National Conference of Commissioners on Uniform State Laws (NCCUSL) released 19 proposed amendments to UCITA in late December. These amendments were drafted in response to more than 70 amendments presented to the Standby Committee by concerned individuals and organizations during its November 16-18 meetings that were attended by members of the American Bar Association's (ABA) UCITA Working Group. This was the 17th meeting of the UCITA drafting committee since 1996. While the November meeting permitted open debate between UCITA proponents and opponents on a number of key issues, the proposed amendments fall far short of what is necessary to resolve the many issues of controversy.

"The proposed amendments give the appearance of compromise, without the substance of compromise. When scrutinized, the proposed amendments simply make a fundamentally flawed piece of legislation only slightly less flawed," remarked AFFECT board member, David McMahon. Americans for Fair Electronic Commerce Transactions (AFFECT) is a broad-based coalition of consumers, retail and manufacturing businesses, insurers, technology professionals and librarians opposed to the Uniform Computer Information Transactions Act (UCITA).

Four relatively minor amendments submitted by AFFECT are included among the 19 amendments recommended for adoption by the Standby Committee. The substantial equivalents of these four amendments were already written into the Maryland and Virginia versions of UCITA in 2000. They do not represent significant progress beyond what is currently in the versions of UCITA that have actually passed in the state legislatures.

The amendments recommended by the Standby Committee provide no relief on some critical issues. For example, UCITA grants vendors broad opportunities to disclaim warranties and limit changes — much broader than current sales law. Part of the rationale provided by the UCITA committee for this is that it is impossible to discover all defects in any non-trivial computer program. While this may be true, AFFECT urged the UCITA committee to adopt a rule that either required vendors to reveal the defects that they actually have found and do know about, or to make them liable for damages caused by defects that were known but not revealed. The drafting committee adopted an amendment that addressed this issue, but a careful reader will discover that it provides customers with nothing more than they would have under the current version of UCITA.

At first glance, the recommended amendments to electronic self-help also appear to provide some degree of relief. "Electronic self-help" in UCITA means the remote disabling of a licensee's use of software or computer information. Controversy about this issue has persistently plagued UCITA. Although the proposed amendment is an improvement over existing language, the complexity of the model statute makes it uncertain that the equivalent of electronic self-help would not be permitted through other sections of the law. Further, the proposed amendment does not prohibit a licensor from relying on a contractual exclusion or limitation of damages to limit its liability for an improper exercise of electronic self-help. As a result, a licensor could ignore UCITA's prohibition of electronic self-help with little fear of the consequences.

Proposals which appear to address concerns of the open source community similarly fail to withstand scrutiny. For example, the drafting committee's proposal on reverse engineering actually makes things worse for open source developers, not better. In addition, open source developers had sought a clear statement in UCITA recognizing their special needs on implied warranties. The drafting committee instead included a proposal that not only fails to address these needs, but actually lets closed-source vendors like Microsoft off the warranty hook.

Libraries also received a small concession to their concerns in an amendment that would permit the transfer or donation of computer software to public libraries, and public elementary and secondary schools, even if the terms in a shrink-wrap contract indicate otherwise. However, the proposed amendment would apply only to computer software that is transferred in a computer. Moreover, the drafting committee rejected library proposals that would have affirmed the primacy of federal copyright law in determining the enforceability of terms in shrink-wrap and click-on contracts. "The committee's report showed either a complete misunderstanding or a misinterpretation of the library arguments regarding UCITA," said AFFECT board president Miriam Nisbet, Legislative Counsel with the American Library Association.

It is important to recognize that these proposed amendments are only recommendations. NCCUSL as a whole, may or may not adopt them. Likewise, any state considering UCITA would have the option of adopting them or not as they consider the legislation. Overall, the 19 proposed amendments fail to address adequately the broad range of concerns uniting the AFFECT membership of consumers, businesses, libraries, software and technology professionals, manufacturers and insurers.

AFFECT continues to believe that UCITA proponents have failed to justify the need for such a sweeping and complex law that still clearly favors the software and information industries. Existing law has proven sufficient in addressing legal issues regarding computer information transactions.

The proposed amendments appear to be a last-ditch effort of the Standby Committee to salvage UCITA. Despite early passage in Maryland and Virginia, the legislation has been rejected in every other state that has considered it and three states have passed "bombshelter" legislation to protect their citizens from the effects of UCITA as passed in other states. In August, the American Bar Association appointed a working group on UCITA which was instrumental in convening the November meeting with the UCITA drafting committee. Additionally, the Attorneys General of 32 states and two territories published a letter in November calling UCITA "fundamentally flawed" and recommending that it be abandoned, rather than amended.

The ABA UCITA Working Group is expected to meet to consider its action in light of the proposed amendments in the next few weeks. For further information, please contact an AFFECT Board Member:

Lynn Johnson, Industry Affairs Manager, Boeing (425) 865-3842

Riva Kinstlick, Vice President, External Affairs, Prudential Insurance Company of America (973) 802-4040

David McMahon, Consumer Representative (304) 415-4288

Miriam Nisbet, Legislative Counsel, American Library Association (202) 628-8410

Randy Roth, Director, Strategic Sourcing, Principal Financial Group (515) 247-7229

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