The Cost of Doing Business Under UCITA

More than 50% of the software purchased by businesses is standard "over-the-counter" software that is acquired with non-negotiated "shrink-wrap" or "click-on" licenses. UCITA validates all sorts of unreasonable terms in these non-negotiated licenses and makes them fully enforceable against the users. Businesses will be forced to spend substantially more money and time to review and deal with unconscionable license terms on EVERY piece of software. Moreover, small businesses rely almost exclusively on over-the-counter software and will have extraordinarily limited protections against bad software and bad software licenses under UCITA. Therefore, small businesses will bear a substantially larger risk than consumers or big businesses purchasing the same software.

The ability to fully disclaim warranties and ship defective software affects every business and consumer. For example, the Supreme Court of the State of Washington ruled that "not our fault" language contained in a shrink-wrap license for software was valid, even if the customer never read the disclaimer and the software company knew about the defect before the product was sold. In the Washington case, a construction company made a $1.95 million error in a bid it submitted to build a medical center because of a defect in the bid software that it purchased. The construction firm discovered the error after the bid had been accepted. The construction company sued the software developer and distributor to recover the $1.95 million, and the court ruled that the liability waiver in the shrink-wrap license provided complete protection to the software company. UCITA would validate license terms supporting these types of business practices.

The niche and sole-source nature of much of the software market makes negotiating contracts difficult enough. With UCITA, the default contracting rules favor the software vendor. Vendors are less likely to negotiate on contract terms that are already part of the law. The tendency to avoid negotiations is especially difficult for small businesses and consumers that lack the financial resources and standing to pursue their interests. Libraries and higher education will also suffer as their ability to negotiate terms and conditions will be significantly constrained.

Very often, upgrades come with new license agreements. Were a company to come to an impasse about the terms of an operating system upgrade with the vendor, the company would have little or no ability to decline the new terms. To shift to a competing product, if one is available, would require sacrificing the company's human investment in training, all pieces of software that run on the original operating platform and much of the data created by the software. Therefore, the costs of change are in many cases greater than dealing with the imposition of the unsatisfactory licensing terms -- costing corporations millions of dollars in software they may not want but must have to operate.

Libraries and higher education will spend millions more on training their staffs to read, understand, and administer shrink-wrap/click-on licenses. Many libraries will have to spend their limited resources on additional license compliance at the expense of materials and educational programming.

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