If companies decide not to decide "it's akin to saying they don't have a Y2K policy," he says. "It's at that level."

But many of the questions businesses must address will cost them money. Michael Disabato, a former strategic planner for McDonald's Corp., says 2B means businesses will need to review their quantity shrink-wrap purchases from a legal perspective. He estimates that review/negotiation of a single license may actually exceed $10,000.

Disabato says MIS operations already are forwarding shrink-wrap licenses for legal review as a result of 2B. They also are being told that if terms can't be changed, the software can't be used.

Gordon Pence, senior intellectual property attorney for Caterpillar, is particularly concerned that computer information and software acquired by employees without authorization will end up binding a corporation. "I like the status quo, where I don't have to negotiate shrink- and Web-wrap agreements," he says. "If I have to negotiate back and forth on a license, our business units will probably be looking at $1,000 or more per license review."

Pence also has major problems with mass-market licenses that restrict software transfer because businesses undergoing a merger or acquisition can be held liable for millions of dollars in damages if the publisher claims that trade secrets were compromised during the transfer.

The Invisible Contract
Supporters of 2B have a different perspective. Ray Nimmer, reporter for the 2B drafting committee, says that 2B's value lies in establishing a framework and legal certainty in the new and unsettled arena of information contracts--something users and publishers alike desire. He says he doesn't think publishers should be forced to warn customers of warranty disclaimers prior to selling software, even when a publisher intentionally conceals software defects. That's because "in appropriate cases" the law of fraud will let customers recover damages.

But Jean Braucher, an ALI member who was instrumental in that organization's criticism of 2B's post-transaction terms, says it's complicated to prove fraud when a product is unfit but a false statement is never made. The business must also prove that the publisher was intentionally deceptive, which isn't likely to be the case if the publisher simply failed to do any testing. Finally, the very existence of a warranty disclaimer makes proving fraud difficult.

Nimmer helped defeat a proposal suggesting that damages be allowed but capped at $500 in situations where defects are concealed because it would inhibit the ability of the parties to contract terms freely. He also thinks it would encourage class-action suits and raise software prices.

Many businesses, however, think it unfair that under 2B, merchants may not discover that there's no warranty until after they open and install the software. Big deal? Yes, because even if the publisher knew the software was so buggy it was unfit for sale, a quantity business purchaser can't recover damages under 2B.

Consumers and businesses are entitled to a refund if they see license terms and disagree, though 2B opponents say this isn't likely to happen. Once the license is agreed to, however, 2B puts the costs of diagnosing, repairing, removing and otherwise dealing with faulty software--even software that massively corrupts business systems--on the business' shoulders.

If software were considered "tangible"--like a radio or a shovel--it would be a different case entirely. Under the Magnuson-Moss Warranty Act (1975), tangible goods must either be fit for ordinary use or the vendor must "conspicuously" note that this isn't the case. A popular way of doing this is labeling a product "sold as is." If the goods fall short of this standard, the seller is liable for damages, unless a contract explicitly excludes those damages.

Software publishers, on the other hand, urge that because perfect software doesn't exist, stricter rules saddle their industry, especially smaller players, with too much risk. Why not let the market rule--let buggy software die as the result of user purchasing patterns?

But Caterpillar's Pence is disturbed by the notion that the risk of bad software should be borne by customers rather than the companies responsible for the defects. Software publishers don't seem to be hurting and some literally dominate their markets, he says. Even those who argue that quantity buyers can negotiate terms have to acknowledge that companies such as Microsoft Corp. and Oracle Corp. rarely negotiate shrink-wrap terms.

Attorney Cem Kaner, co-author of Bad Software: What To Do When Software Fails (John Wiley and Sons, 1998) and one of the sharpest thorns in the side of 2B publisher interests, says most states require that material terms, like warranty disclaimers, be revealed prior to a product's sale. He also believes that by withholding important terms until after a sale, publishers interfere with the kind of informed assent required today in contract law. Several organizations share this concern, including ALI and the Federal Trade Commission, which concludes in formal comments that a warranty disclaimer in a shrink-wrap license would be unenforceable under existing UCC articles.