UCC 2B: The New Law of Shrink-Wrap
April 19, 1999
By Christy Hudgins-Bonafield
What if the law enforced almost any term a software publisher specified in a shrink-wrap license?
The very real prospect of this happening in less than 12 months has some of the nation's largest corporations running scared.
Pending draft legislation--Article 2B of the Uniform Commercial Code (UCC)--stands to turn the rules of digital information contracting end-over-end. The draft's mere existence, even without states' enactment as uniform law, is already credited with influencing court decisions. It also is causing a few well-informed large enterprises to reject shrink-wrap products strictly because of their licensing terms.
What does 2B mean for business? For one, it lets publishers shut down user software remotely without a court order. It also can be used to take publishers off the hook for damages their shrink-wrap software inflicts on business--even if the business wasn't made aware of the potential for damage prior to purchase, and even if vendor code was thrown together without even rudimentary testing.
Consider, too, the cost if corporate legal departments have to review every release of every shrink-wrap utility, program or browser add-on before installation--at $1,000 or even $10,000 per license. Multiply this by the dozens, or perhaps hundreds, of authorized and unauthorized applications on individual corporate PCs. Then calculate the budget for policing for unauthorized software, and the productivity losses that will inevitably follow delayed shrink-wrap rollouts. Finally, add in the cost of developing software in-house, resorting to inferior software or simply refraining from buying software tools with untenable license terms.
Although few businesses know about the laws of shrink-wrap, some astute companies are convinced that the financial, competitive, legal, interoperability and free-speech implications of UCC 2B rival even the budget-crunching mandibles of the Y2K debacle.
The National Conference of Commissioners on Uniform State Laws (NCCUSL) appears likely to amend and bless the federal UCC 2B revision by July and send it to state legislatures for approval early next year. Barring a well-funded and organized backlash, many predict 2B's enactment in the states, especially since it stands to be part of the Uniform Commercial Code. The UCC serves as the bible of commercial law in all 50 states. With the promise of promotion by both the software industry and state-appointed NCCUSL commissioners, even detractors say 2B could be adopted throughout the United States in less than a decade. And what happens domestically may be reflected globally, since U.S. companies generate much of the world's shrink-wrap software.
In March a handful of state legislatures were already primed to introduce UCC 2B legislation--a law so complex that many law professors say it may be too difficult to teach.
What 2B probably won't have is the blessing of NCCUSL's partner, the American Law Institute--a self-selected brain trust of law scholars and practitioners who call the draft unbalanced. The ALI chose not to vote on 2B until spring of next year, but ALI director Geoffrey Hazard says it's unclear whether the group will vote at all if NCCUSL takes the permissible, but unusual, step of state introduction without ALI approval.
The few user organizations involved with 2B see it as a parade of horrors, a shift away from policies protecting software transfer, competition and innovation, and an embrace of all but the most outrageous terms software publishers write up in their licenses (see "UCC 2B: What's Wrong and What's Right," starting on page 58). What kind of terms do they see as enforceable under 2B?
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