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What Is UCITA?


MYTH: UCITA will bring high-technology businesses to states that pass the legislation.

FACT: On the contrary, UCITA allows a company in any state to take advantage of any other state's version of UCITA. According to high-technology corporate relocators and academics, the availability of an educated work force, telecommunications infrastructure and quality of life are the vital determinants in an advanced technology company's decision to relocate. Regulation is seldom, if at all, a determining factor. UCITA dissuades companies from moving rather than encouraging them to move.

MYTH: UCITA addresses a market failure.

FACT: According to a U.S. government report entitled the "Emerging Digital Economy" the software and information industry's value has more than doubled between 1990 -- 1998 without the benefit of UCITA.

MYTH: UCITA helps stop piracy.

FACT: The Digital Millennium Copyright Act and the No Electronic Theft Act are federal laws that have already established severe penalties for those that would pirate software or digital information. UCITA adds nothing to this protection.

MYTH: UCITA protects consumers.

FACT: Consumer laws protect consumers, not UCITA. UCITA adopts the software industry desire to call transactions "licenses" of information rather than "sales" of goods and services, thereby avoiding traditional protections for consumers that govern warranties and disclosure of terms. Under UCITA vendors are allowed to hide their terms from consumers until AFTER the consumer has paid for the product, brought it home and begun installing it. UCITA's sponsors talk of a "right of return," but it only applies if the consumer does not agree to the contract shown seconds before loading the product on the computer. It does not protect consumers from defects that show up on first use of the product. Companies that knowingly distribute software with defects can charge consumers who call for support or fixes. Vendors can impose nondisclosure terms that prevent consumers from publishing articles or letters critical of the product. These are just a few of the anti-consumer practices allowed under UCITA.

MYTH: UCITA will have no negative impacts on libraries, archives and higher education.

FACT: Through the use of non-negotiated licenses, UCITA allows software vendors to limit how a library may make use of information and to prevent people from donating materials to libraries. For 200 hundred years American copyright law has balanced the interests of creators with the needs of the society to use and create new information. UCITA upsets this balance.

MYTH: Copyright law prevents UCITA from granting unfair power to software vendors.

FACT: As a general matter, the Copyright Act does not specifically forbid contracts from limiting its exceptions. Moreover, courts typically have held that the Copyright Act does not preempt negotiated agreements that conflict with these provisions. There are, however, very few cases that have considered whether the Copyright Act or the U.S. Constitution pre-empt non-negotiated, mass-market agreements which conflict with the provisions of the Copyright Act. Given this absence of authority, states need to protect their consumers, librarians, and educational institutions by explicitly preserving their federal copyright privileges via state contract law.

MYTH: Common law allows self-help, UCITA controls it.

FACT: Except for real estate mortgages and personal property security interests (both of which are highly regulated), the law rarely allows sellers to use self-help. Self-help is the equivalent of repossessing or denying access to an information product. Currently, a company using self-help can be held liable for any damage caused by the use of the procedure. Further, the many different laws against computer trespass and computer tampering make the use of self-help involving computers legally risky at best. UCITA enables a software company to use self-help without incurring the legal risks associated with current law by following its "safe-harbor" provisions.

MYTH: Other states are scrambling to pass UCITA.

FACT: UCITA has passed in only two states, Maryland and Virginia. Virginia appointed a sub-committee to evaluate the need for amendments and received 74 amendment proposals. Maryland has a committee to examine the need for further legislation regarding UCITA. Many states have tabled the bill for further review. The New Jersey Law Revision Commission did an extensive review of the law and recommended extensive changes. Iowa passed "bomb shelter" legislation to specifically protect Iowa residents from being subject to UCITA licensing terms. A Blue Ribbon Technology Commission in Maine did not endorse UCITA. As legislators are examining UCITA more closely, they are reluctant to pursue a bill that is surrounded by so much controversy and is opposed by so many significant groups in the business community. As more states consider amendments, the "uniform" character of the bill is likely to be more compromised.

MYTH: UCITA protects customers with the right of return.

FACT: First, the "right to return" applies only to consumers purchasing "mass-marketed" software, and not to businesses or software used for any type of commercial purpose. Second, this right instantly evaporates when the "I Agree" button is clicked, which occurs before a consumer can even load the program to see if it is even a program he/she wants, regardless of the license terms.

MYTH: UCITA outlaws bad license terms when they are "unconscionable."

FACT: Under UCITA a judge may only void a license term if it is unconscionable or violates a fundamental public policy. This is an extremely high legal standard. To be unconscionable, a term has to "shock the conscience" of the court. Under current law, judges can void unconscionable terms in contracts but they almost never exercise this power. Instead, they look to the statutes for specific terms that the legislature has declared unfair or unreasonable. But in UCITA, the kinds of practices most likely to be weighed into an unconscionable decision, such as hidden contract terms, nondisclosure terms, non-transfer terms, no warranties, and no remedies (not even a refund) for losses caused by defects, are explicitly approved in UCITA. Further, the term fundamental public policy is not defined as adding to the difficulty of interpreting whether or not a license term violates a public policy.

MYTH: Everyone was at the table when UCITA was drafted.

FACT: Some were at the table, but the concerns of many were not addressed by those with the power to decide. Moreover, the prestigious American Law Institute, a partner in the development of UCITA, withdrew from the drafting process citing grave concerns over the unbalanced nature of the legislation. UCITA was introduced over the concerns of 25 Attorneys General, the Federal Trade Commission, 11 different software and computer organizations, six different consumer groups, more than 12 different industry associations, five separate library organizations, 3 independent information and content developers, four different organizations within the entertainment and newspaper industries, 50 intellectual property professors, 43 contract law professors and the two leading intellectual property law bar associations in the United States.

MYTH: UCITA preserves the freedom to contract.

FACT: Software and information companies currently have the freedom to contract with any organization wishing to purchase their product. However, a viable free market system requires institutions that promote the integrity of the process. The freedom to contract has always been limited by courts and legislatures where unfair terms and unfair bargaining power are involved.

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