Consumer Project on Technology
P.O. Box 19367, Washington, DC 20036
(202) 387-8030; http://www.cptech.org
_____________________________________________________________________________
Uniform Commercial Code Article 2B
--
Sales of Software and Information
Article 2B is a new section of the UCC that was separated
out from Article 2 (goods and services) to address sales of
software, information, and other intangibles. The drafting
committee has expansively defined 2B's coverage to include
software and data bases as well as movies, books, and sales
conducted via electronic transactions. A law controlling
information sales in the Information Age is extremely important,
particularly when it is likely to be adopted in the majority, if
not all, the states. The drafting process has been dominated by
industry and the current draft of UCC Article 2B is extremely
unbalanced against consumer interests. Among a few of the most
glaring problems are the following:
- Shrinkwrap licenses are validated despite the lack of case law
allowing these anti-consumer devices to be wholly binding in a consumer
software transaction. Shrinkwrap licenses are contracts of adhesion,
meaning that the terms are dictated by a cadre of corporate lawyers and
consumers have no choice but to accept them. The law is being
altered for the benefit of the software and other industries. 2B-308
- Most contries considering shrinkwrap have either invalidated them or
restricted their use, according to Mark Lemley, the author of an
article on shrinkwrap licenses and an Assistant Professor at the
University of Texas School of Law. Professor Lemley's article states
that in 31 countries shrinkwrap licenses
are restricted or void, while only 5 countries validate them, at least in
part. See Mark A.
Lemley, Intellectual property and Shrinkwrap Licenses,
68 S. Cal. L. Rev. 1239, 1252-53 (1995).
- Manifest Assent is a concept relied upon by 2B-308 which
allows a purchaser to "assent" to an "agreement" in several
ways. So when does one manifest assent, i.e., enter into a
binding contract? Consider the following:
-- Assent is manifested by clicking on an icon
that says "I Agree" while loading software or making a
purchase on a web page.
-- You may manifest assent even if you don't have the
terms you "assented" to until a reasonable time after
you begin using the service or product.
- Shrinkwrap licenses and manifest assent apply to analog as
well as digital information. This has serious consequences
that may infringe upon copyright law's First Sale doctrine
and Fair Use.
- Books are covered so information such as telephone
directories may be controlled by the telephone companies
despite the fact that the US Supreme Court found in Feist
that "the sweat of the brow" theory of copyright was invalid
("By taking off the plastic covering on this book you
manifest assent to the license contained in the last 20
pages.").
- Publishers may start offering books and CDs with different
prices based upon whether the purchaser buys a personal- or
multi-use license. Thus, libraries would be required to pay
far more for books as well as anyone who wants to legally
lend the book out.
- Used book and CD stores will be impacted by downstream
control provisions written into the licenses on CDs and
books. A publisher may include "no resale" provisions in the
license.
- Matters of privacy or any other consumer concern may be
contracted away in the shrinkwrap licenses by a mouse click
or the tearing open of a product's packaging.
In sum, Article 2B is really about the triumph of contract
(and that term is used loosely here because these are far from
bargained for transactions) over federal and state law.
Publishers of software and other information products will be
creating private legislation in shrinkwrap contracts that
modify, if not completely undermine, copyright and other laws.
Here are a couple examples of typical transactions and the
consequences for the consumer due to a shrinkwrap license:
1. Typical WWW Information Transaction
While surfing the web you find a software package that you
want to purchase. You do so and prior to downloading it you
click on the "I Agree" icon assenting to the terms of a 12 page
license. You may also be able to view the license prior to download but
almost no one does -- it is generally quite lengthy and thick, chock full of
legalese. Even many of the lawyers attending the UCC 2B drafting conference
admit that they don't read these licenses. In
the process you also answer various queries about your operating
system, intended business or personal uses, home and business
address and phone numbers, yearly income,
etc. What have you agreed to? The publisher may impose terms
in that license such
as:
- Software is "as is" with no warranties - this is considered "conspicuous" even if it is in the shrinkwrap license,
- Publisher is not liable for defects in the program even if they are known by the publisher,
- Publisher is not liable for viruses even if no measures have been taken to eliminate them,
- Publisher is not liable for any damages including incidental and consequential damages - which includes calls made to customer support lines which may be more costly than the software,
- Consumer remedy is limited to replacement of the software or partial refund,
- Publisher may dictate the forum for any action against it, meaning
you have to go to them,
- All personal information provided may be used for any purpose.
Some of these terms are explicitly allowed and others are simply
not prohibited. It is highly likely that consumers will have
almost no choice in license terms. Some of the largest
publishers may go beyond the basement level protection provided
by Article 2B, but most will not. Further, trade associations
such as the Software Publishers Association and Business Software Alliance
actually provide
thousands of members with model shrinkwrap contract forms that
disclaim practically everything. Consumers are going to see uniformly
almost oppressive license terms.
2. AOL's Recent Debacle
America On Line recently claimed that its license agreement
with customers immunized it from suit. The license apparently
contains provisions stating that the customer agrees that AOL
shall not be liable for service interruptions. These provisions
would have been included here but they are available for
inspection only after you provide your home and work phone,
address, and a credit card number. Whether a court would deem
the entire license as valid is very questionable and in consumer
transactions the weight of the case law would be against such an
outcome. Upon enacting UCC 2B, the AOL license would be
effective and the possibility of consumers having any remedy
would be diminished, if not eliminated.
3. Dilbert
The author of Dilbert, Scott Adams, recently produced a
comic strip addressing the shrinkwrap issue (See Jan. 14, 1997).
In the comic, Dilbert did not read the shrinkwrap license in a software
package and as a result he unwittingly becomes an indentured servant to
Microsoft founder Bill Gates. Some of the
shrinkwrap licenses include just about every industry-favorable provision
short of indentured servitude. Disclaimers are made for all possible
defects, viruses, or malfunctions, and software is often claimed to be
sold "as is." While consumers might expect a used car to come "as is,"
and understand what it means when a sign on the car indicates this, it is
a different situation entirely when a shrinkwrap license contains, inside
the package which cannot be read until after the purchase, an "as is"
term for a brand new software program.
The Dilbert web page also presents a good example of how information may
be controlled despite federal copyright laws. Under UCC 2B, the Dilbert
web page could require users to click on an icon indicating that they
"agree," i.e., manifest their assent, to a license agreement. The license
agreement could attempt to restrict what were previously considered fair
uses such as making a photocopy of this particular comic and giving it to
a colleague. Mr. Adams would probably not impose such a restriction, but
the policy implications are obviously of great importance.
Resources and Actions
We are
interested in working with interested groups on this issue. It
is a particularly difficult process to effect from the inside
(CPT has been and will continue attending the drafting
conferences) because it is so dominated by industry. In
addition, the Reporter of Article 2B has been resistant to
passing on comments he receives to the full drafting committee. We
suggest that you write directly to Ray
Nimmer, The Reporter of UCC
2B. Please copy Todd Paglia (tpaglia@essential.org) on
your emails and letters. CPT is
considering focusing on several leverage points
such as press coverage and participation by additional groups and/or
formation of a broader coalition of opposition groups. We would welcome
any suggestions you might have.
Contact Information
Todd Paglia
Staff Attorney
Consumer Project on Technology
PO Box 19367
Washington, DC 20036
(202) 387-8030