ARCHIVED: Update on The Uniform Computer Information Transactions Act (UCITA)

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 The Uniform Computer Information Transactions Act: An Update1

by Robert L. Oakley2
Prepared for the Annual Meeting of the Association of Research Libraries
Washington, D.C., October 13, 1999

Good afternoon. I am delighted to be with you, as always.

A few years ago, I came to this luncheon and introduced many of you to what was then a relatively new proposal to amend the commercial laws of the 50 states with a new section 2B to the Uniform Commercial Code. That proposal was drafted largely by the industry and dealt with transactions for the licensing of information, something with which we have all become increasingly familiar. In scope, however, it was broad enough to turn sales of books into licenses, and that, among other things, caused an uproar. Since that time, UCC 2B has turned into UCITA, and the scope appears to have been narrowed. Nonetheless, there remain a number of concerns, and Prue asked me to come again to give you an update and to tell you at least some of what is in the current proposal and why people are concerned.

Although I didn't have a lot of time to prepare this talk, I did agree to speak to you again, both because I like this group, and because, whereas two years ago the bill was still in the drafting stage and we knew it would take a while to mature, now it is very much a live proposal on its way to the state legislatures. In fact, it is already beginning to be discussed in the various state houses around the country. If it hasn't already come up in your state, it will be a major topic when the legislature reconvenes next year, and as the Director of a Research Library in the state, your opinion could be important to the outcome.

I don't have a lot of time here today, so I want to do three things pretty quickly. First I want to tell you what happened to the proposal since we last talked. Then I want to highlight a few of the issues that have been raised about the proposal. Third and finally, I want to talk a little about what the library community and others are doing about the proposal. However, when I do that, it is important to realize that this is not a Washington proposal. This issue, this debate, will take place in the states - your state, among others.

Okay - What has been going on since we last talked?

You may recall that when I was here before, I mentioned that a proposal to amend the Uniform Commercial Code would be sent to the states jointly from two separate groups: the National Conference of Commissioners on Uniform State Laws, which is a group representing the different states, and the American Law Institute which is a group of mostly law professors and scholars. As the debate over UCC2B unfolded, it turned out that the National Conference, or NCCUSL, was generally satisfied with the approach taken by the drafting committee while the American Law Institute, or ALI, was concerned that consumer interests had not been sufficiently considered. At their respective meetings last year, NCCUSL generally approved the draft with a few changes, while the ALI did not approve it and asked for a fair number of revisions to be made. Earlier this year, prior to its annual meeting, the American Law Institute decided that the draft had not come far enough, and it was pulled from the agenda of their annual meeting.

In response to that action, NCCUSL decided that it would simply rename the proposal, take it out of the UCC context, and send it forward to the states on its own initiative as a proposal for a new Uniform State Law, without the endorsement of ALI. As a consequence of that decision, the proposal has now been renamed the Uniform Computer Information Transactions Act - or UCITA - and although some changes have been made to it over the last couple of years, it is still essentially the same piece of legislation which is intended to provide a uniform contractual framework for the licensing of information in all 50 states.

Generally, speaking, that sounds like a good thing - so what is the problem?

Intuitively, it does sound like a good thing to unify the licensing laws of the 50 states, so we don't have to deal with 50 different contractual regimes. But, of course, it's all in how you do it. What's wrong with this proposal? Why has it attracted the attention of so many interest groups ranging from Consumers Union and the Library Community to the Federal Trade Commission and the Attorneys General from 25 states? I don't have enough time here to go into a great deal of statutory analysis, but I want to suggest that there are at least four sets of concerns (and probably more). These concerns include the validation of shrink-wrap and click-on licensing, the potential impact of the proposal on user rights under the Copyright Act, Consumer Protection Issues, and, for us, more than most consumers, transaction costs.

Central to this proposal is the validation of shrink wrap and clickable licenses, both in the mass-market context for individual consumers and in the standard form context that applies to libraries. As you undoubtedly know, although such licenses are in widespread use, the courts are split as to their validity, because the consumer may not know the terms of the license before paying for the software and installing it, and because very few consumers actually read the terms of such licenses. Often, when I'm in a room like this, I ask the question how many people actually always read the license terms before they click on the button. Rarely do I get more than one or two who say they always read the license. I admit it: I don't. Because of concerns like this, the proposal builds in some protections for the mass-market consumer who does read the license and finds the terms unacceptable. Such protections, however, would not apply to the typical library transaction or to the consumer who doesn't read the license.

Some groups, then, are concerned about just this issue: the validation of shrink-wrap and clickable licenses which have been so controversial in the past. Many of us in the library community, however, have not been so much concerned about click-agreements per se, because that or something like it seems necessary to facilitate the development of commerce on the web. Rather, we have been concerned instead about the content of the licenses and how they might affect our users.

In particular, we have been concerned that for the unwitting consumer, this kind of license could easily be used to limit or eliminate rights granted to users of information under the Copyright Act. For example, a provision in the license could put restrictions on the use of information that effectively eliminates the user's fair use rights, whether it is for educational purposes or even to quote for purposes of a review. Moreover, with regard to copying, the proposed statute says explicitly that "title to copy is determined by the license.3" Now, I am not exactly sure what those words mean. If it means title to copy the entire database or software package, then I understand it. If it means the kind of copying done by our users, then I would have hoped for some greater protection of fair use, for example by saying "title to copy beyond the provisions of the Federal Copyright Act is determined by the license."

Another section of the proposal could effectively eliminate the first sale doctrine which allows libraries to lend works from their collection. Section 503 of the Act indicates that a term in the contract prohibiting transfers is enforceable. In the case of a mass market license, such a provision must be "conspicuous," but there is no such requirement for the standard form contracts to be used by libraries. With such a provision in the contract, neither a library nor an individual purchaser could give away or sell a piece of software or information product with which it was finished.

Several other provisions might also be of concern. Section 605 permits a licensor to build into their software electronic restraints designed to enforce a limitation on the use of the product, provided the inclusion of such a restraint is noted in the contract. Section 816 will be of concern to those who have been concerned about the preservation of information in the electronic environment. It permits a licensor to use techniques of electronic self-help to recover their data or to prevent the use of their product when a license has been canceled. Such a system might be an electronic time bomb that makes the product unuseable after a specified period of time. Libraries should be aware of this possibility and ask that any such provisions be removed from their license agreement and their copy of the software or database.

With provisions such as these, many who have looked at the statute have concluded that UCITA goes a long way to substitute the private law of contract for the public law of copyright. Moreover, it should be observed that the contracts in question will almost always be drafted by the licensor, with little or no bargaining power on the side of the licensee.

The proponents say that they have dealt with these issues by saying that if a court finds a particular provision of the Act is preempted by the Copyright Act then that provision is unenforceable to the extent of the preemption. That might help with some of these provisions but it will not help with a limit on fair use rights, because that would be in the contract, not in the statute. The proponents will also say that a court may refuse to enforce any provision that it finds "unconscionable." But "unconscionable" is usually defined as "shocks the conscience." That's a pretty high threshold, and I think it's unlikely that any of these issues would rise to that level.

For myself, I have generally felt that it was lawful for individuals and libraries to contract away rights they have under Copyright. However, I do not believe that it is appropriate to put into law a new policy that allows them to do so with language buried in the middle of a license that is unlikely to be read. I think that, at a minimum, there needs to be conspicuous language at the point of the click button that provides a warning about these implications.

In addition to these kinds of Copyright issues, many other groups have raised a number of general consumer protection issues. Both the Federal Trade Commission and the Attorneys General from 25 states have written to express their concern. The letter from the Attorneys General reads in part as follows:

We believe the current draft puts forward legal rules that thwart the common sense expectations of buyers and sellers in the real world. We are concerned that the policy choices embodied in these new rules seem to almost invariably favor a relatively small number of vendors to the detriment of millions of businesses and consumers who purchase computer software and subscribe to Internet services.

They go on to raise issues of disclosure of terms, conspicuousness, and issues related to the formation and modification of the contract. They conclude by saying:

The overriding purpose of any commercial code is to facilitate commerce by reducing uncertainty and increasing confidence in commercial transactions. We believe that UCITA fails in this purpose. Its rules deviate substantially from long established norms of consumer expectations. We are concerned that these deviations will invite overreaching that will ultimately interfere with the full realization of the potential of e-commerce in our states.

And so, whether from the perspective of an information user, or from the perspective of a general consumer, many groups are concerned about this proposal.

A final thought for us, though, is the increase in transaction costs for libraries. As I noted earlier, libraries are not considered mass-market consumers in the terms of the statute. We are held to a higher standard of knowledge, and we do not, therefore, have some of the protections that the Act accords to individual consumers. Probably, many of you have already begun moving in this direction, but it seems clear that we are going to need to be more careful and more focused in the future about who, how, and when a library employee can click on a license agreement. Surely, we all take such care already with the acquisition of large scale databases. But do we take similar care with every piece of software installed on a library computer? Do we instruct all library employees that they may not download anything from the web that contains such a license? And what level of training have we given to the people who are doing the downloading? Have they been taught to read the contracts carefully? Have they been taught what provisions to look for? Have they been told when to refer an agreement to a higher authority or to University Counsel? All of these things are ones that really need to be considered even now, but will be even more critical with the passage of UCITA. All of these things will increase the cost of acquisition by increasing the cost of completing the transaction.

If those are the concerns, what is being done about it?

I must tell you that the proponents of this legislation are already in the statehouses selling the bill. And they are effective, because they say that the future of electronic commerce in this state hinges on the passage of this bill.

The Library community, along with some of their DFC colleagues, are calling a conference for early November to map out the criticisms more fully than I could do here and to begin to think about how to approach the issue in the state legislatures. But that, of course, is key. This is not a Washington proposal. There is a limited amount that your Washington representatives can do, because this issue will not be fought in Washington; rather, it will be fought in 50 different state capitols. For that reason, it will be necessary to mobilize the interests and concerns in each state, and you should begin to think now about what role you might be able to play in influencing the outcome.

Thank you for your attention.

  1. Copyright 1999 by Robert L. Oakley.
  2. Robert Oakley is the Director of the Law Library and Professor of Law at the Georgetown University Law Center.
  3. Uniform Computer Information Transactions Act (hereinafter UCITA), Sec. 502 (Draft dated August 4, 1999).