Uniform Commercial Code 2b the

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A new law will probably be introduced into state legislatures which will govern all contracts for the development, sale, licensing, and support of computer software. This law, which has been in development for about ten years, will be an amendment to the Uniform Commercial Code. The amendment is called Article 2B (Law of Licensing) and is loosely based on UCC Article 2 (Law of Sales), which governs sales of goods in all 50 states. A joint committee of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute is drafting the changes to the UCC. The UCC was drafted in the 1950’s and currently governs the sales of goods but not products like software, which are licensed, not sold. Basically, when you purchase software, you are purchasing the information and rights to use the software. Article 2B creates standards for licensing these information products, including rules for interpreting warranties, legal remedies, liability and risk. This project began to give consideration to instituting a separate article of the UCC for software and related contracts. Article 2B is designed to bring uniformity across states and across the goods vs. services issue. It is intended to make software contract laws more consistent and clear among states. If laws are consistent from state to state it makes it easier for buyers and sellers to understand how to do business with each other. There is a great benefit in creating a uniform system for software products and services, however, this proposal for Article 2B does have major flaws. Article 2B employs a contracting model that excludes negotiation and that doesn’t reveal terms of the contract to the customer until after the sale is complete. It also adopts a licensing model that says when you buy software, you are really only buying the right to use it. Consumers also have little or no opportunity to read warranties and disclaimers before purchasing the product. The draft of Article 2B eliminates some of the legal protections that software buyers currently take benefit from. For example, it reduces vendor liability for software defects and viruses and allows vendors to charge separately for software licenses, maintenance and support. Critics say that Article 2B is biased in favor of software vendors. While this is the dominant issue for this paper, there are some positive ideas proposed in the amendment. It creates balance and structure, reduces uncertainty and non-uniformity of licensing law, sets performance standards, and innovates the concept of mass-market transactions. The Mass-Market License is a standard-form, non-negotiable, license. Companies use standard-form contracts instead of trying to negotiate a separate contract for each buyer, or licensee. The lengthy legal forms that most don’t read when installing software are shrink-wrap licenses. These mass-market licenses restrict rights of users. Licenses involve restrictions on the use of intellectual property. They can have nondisclosure provisions, restrictions on how the product is used and who can use it, and restrictions on transfer of the licensed product. Software companies solely benefit from this where they can not only dictate the terms of the agreement, but they can also avoid consumer defect and privacy protections laws that apply to a sale of goods. An example of a typical shrink-wrap license on-line is as follows:

Attention, Please Read: Installing this software constitutes your acceptance of the terms and conditions of the license agreement. Other rules and regulations of installing this software are: 1. The product cannot be rented, loaned or leased.

2. The customer shall not disclose the results of any benchmark test to any third party without Network Associates’ prior written approval. 3. The customer will not publish reviews of the product without prior written consent from Network Associates.

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