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[RRE]Letter on UCITA from the Federal Trade Commission
``` [Here is another analysis of the UCITA proposal, this time by the Federal Trade Commission (FTC). Being oriented primarily to legal rather than technical issues, the FTC's letter adds astounding detail to the ACM letter that I sent out earlier. As Cem Kaner indicates, it is easy to write your state's members of the National Conference of Commissioners on Uniform State Laws in care of the hotel where they will be meeting to vote on this abusive proposal on July 30th.]
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Date: Wed, 14 Jul 1999 23:20:23 -0700
From: Cem Kaner
The Uniform Computer Information Transactions Act (formerly draft UCC Article 2B) will be voted up or down by NCCUSL on July 30. I'm writing this note to:
(a) alert you to an analysis of UCITA by the United States government's Federal Trade Commission. As you can see, they express many of the same concerns that have been expressed by consumer advocates and software developers.
(b) encourage you to write to the NCCUSL Commissioners from your state. The Commissioners will be at the Annual Meeting in Denver from July 23-30. My recommendation is that you write the commissioners care of the hotel.
The hotel contact information is
Hyatt Regency Tech Center 7800 East Tufts Avenue Denver, CO 80237
Telephone: +1 303 779 1234
I have appended a list of the commissioners, grouped by state, at the end of this message.
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UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20850
Bureau of Consumer Protection Bureau of Competition Policy Planning July 9, 1999
Mr. John L. McClaugherty Chair, Executive Committee National Conference of Commissioners on Uniform State Laws 211 E. Ontario Street, Suite 1300 Chicago, Illinois 60611
Dear Mr. McClaugherty:
As the National Conference of Commissioners on Uniform State Laws (NCCUSL) prepares to consider adoption of the Uniform Computer Information Transactions Act (UCITA), the staff of the Bureaus of Consumer Protection and Competition and of the Policy Planning office of the Federal Trade Commission (FTC) wishes to express the same consumer welfare concerns that it raised in its October 30, 1998 letter to Carlyle C. Ring and Professor Geoffrey Hazard, Jr. about UCITA's predecessor, Uniform Commercial Code Article 2B (August 1, 1998 draft). Those concerns, with one exception, have not been addressed in any significant respect in UCITA. We briefly summarize the October 30, 1998 letter and have attached a copy for your convenience.
UCITA endorses a license model for "computer information transactions". For example, under UCITA a license to use software (rather than the sale of the software itself) would allow the licensor to limit or control how the licensee uses the software, even where the software has been mass-marketed to consumers. Examples of these limits or controls include restrictions on a consumer's right to sue for a product defect, to use the product, or even to publicly discuss or criticize the product.
Unlike the law governing sales of goods, UCITA departs from an important principle of consumer protection that material terms must be disclosed prior to the consummation of the transaction. UCITA does not require that licensees be informed of licensing restrictions in a clear and conspicuous manner prior to the consummation of the transaction. For example, UCITA allows licensors of software to disclose these restrictions after the transaction has been completed, such as when the licensee opens the software box and discovers the terms of the license. Thus, in effect there may be no "meeting of the minds" prior to the consummation of the transaction. Moreover, UCITA adopts a definition of the term "conspicuous" that has the effect of allowing material license terms not to be disclosed clearly and conspicuously at any point before or after the transaction is completed. In addition, in its effort to establish a legal framework to facilitate electronic commerce, UCITA allocates significant risks to consumers in the event of unauthorized transactions. This, in turn, might deter, rather than advance, development of electronic commerce.
Further, UCITA expands the scope and power of contracts, particularly contracts designed by software vendors and intellectual property owners. The effect of such a change is potentially to provide state contract law with primacy over federal intellectual property laws in those cases where the licensor seeks to acquire or restrict rights beyond what federal or state law permits. For example, if a state were to adopt UCITA, state law could permit licensors to include anticompetitive grantback terms in a license that reduce the licensee's incentive to engage in research and development, unless the licensee took on the uncertain task of challenging the term subject to UCITA Section 105. By doing so, this could upset the delicate balance between intellectual property and competition policy, which has been carefully calibrated to recognize certain limits on intellectual property so as not to stifle competition or innovation. By allowing licensors of computer information to expand their rights, there is a possibility that these state-enforced contracts could restrain trade in violation of the antitrust laws, constitute misuse of intellectual property, and/or violate state trade secret statutes. As a result, UCITA may not have a neutral effect on competition policy.
In sum, we question whether it is appropriate to depart from these consumer protection and competition policy principles in a state commercial law statute, especially since many of these same principles are now being included as core elements in international e-commerce discussions. UCITA proposes these changes based on the implicit assumption that there is something unique about the technology involved (software and information access) that necessitates this departure from the traditional law of sales. If this is the case, we believe it would be more appropriate to seek a change to the underlying laws that are deemed to be inappropriate to software and other UCITA products. If a license model is deemed most appropriate nonetheless, the FTC staff in its October 30, 1998 letter recommended a number of changes to an earlier draft of UCITA which would help alleviate the staff's concerns.
It is our hope that the NCCUSL membership will consider the issues raised in the attached letter during deliberations over whether to adopt UCITA.
Respectfully submitted,
Joan Z. Bernstein, Director Adam G. Cohn, Attorney Division of Marketing Practices Bureau of Consumer Protection
William J. Baer, Director David A. Balto, Assistant Director for Policy and Evaluation Bureau of Competition
Susan S. DeSanti, Director Michael S. Wroblewski, Advocacy Coordinator Policy Planning
FEDERAL TRADE COMMISSION 6th & Pennsylvania Ave., NW Washington, DC 20580
cc: NCCUSL Members
Attachment
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(added by Cem Kaner) LIST OF NCCUSL MEMBERS
ALASKA Arthur H. Peterson Tamara B. Cook Deborah E. Behr Jay A. Rabinowitz W. Grant Callow L. S. Jerry Kurtz, Jr.
ALABAMA Ted Little Champ Lyons, Jr. Mark L. Gaines Robert L. McCurley, Jr. Thomas L. Jones Gorman Houston Jerry L. Bassett Charles M. Crook
ARKANSAS David G. Nixon Larry D. Holifield John C. Deacon Phillip Carroll LeRoy Autrey James R. Pender
ARIZONA Roger C. Henderson Edward F. Lowry, Jr. James M. Bush Timothy Berg L. Gene Lemon
CALIFORNIA Byron D. Sher Robert H. Cornell Nathaniel Sterling Pamela G. Chin Robert G. Beverly Howard Wayne Robert Williams W. Jackson Willoughby Bion M. Gregory Matthew S. Rae, Jr. Elihu M. Harris George R. Richter, Jr. Ronald F. Phillips William M. Burke
COLORADO Russell L. George Thomas T. Grimshaw Dwight A. Hamilton George C. Keely Charles W. Pike Richard F. Mutzebaugh Bill Kaufman Laurence W. DeMuth, Jr. Doug Lamborn
CONNECTICUT Francis J. Pavetti Robert Whitman Roger P. Morgan David D. Biklen Neal Ossen William R. Breetz, Jr. John H. Langbein
DISTRICT OF COLUMBIA Joan Zeldon Benny L. Kass Carlyle C. Ring, Jr. Charlotte M. Brookins-Hudson James C. McKay, Jr.
DELAWARE Battle R. Robinson Maurice A. Hartnett, III Thomas A. Shiels Ann Conaway Anker Michael Houghton
FLORIDA C. Lawrence Stagg Eugene A. Burdick Charles W. Ehrhardt Charles W. Joiner Linda S. Jessen Joshua M. Morse, III Henry M. Kittleson Edward I. Cutler
GEORGIA Sewell R. Brumby Roger G. Martin Morris W. Macey Richard V. Wellman C. Ronald Ellington
HAWAII Elizabeth Kent Maurice S. Kato Ken H. Takayama Hiroshi Sakai John A. Chanin Robert S. Toyofuku Lani Liu Ewart
IOWA David S. Walker Kathryn L. Hove Arthur E. Bonfield Michael McConnell
IDAHO Peter C.K. Marshall Rex Blackburn Willis E. Sullivan, III
ILLINOIS Richard C. Edwards Jeremiah Marsh Howard J. Swibel Charles Jordan Tabb J. William Roberts Harry D. Leinenweber Alicia V. Pond Thomas J. McCracken, Jr. Randal C. Picker Michael B. Getty Robert A. Stein
INDIANA Merrill Moores H. Kathleen Patchel C. Ben Dutton Frederick F. Eichhorn, Jr. Gerald L. Bepko Cleon H. Foust Vi S. Simpson Donald Densborn Martha T. Starkey E. Spencer Walton, Jr. John J. Stieff
KANSAS Richard C. Hite Michael R. Oneal Timothy R. Emert Glee S. Smith John F. Hayes Elwaine F. Pomeroy Timothy J. Carmody James M. Concannon
KENTUCKY John S. Gillig Norman W. Lawson, Jr. Norvie L. Lay Stephen C. Cawood John M. Spangler W. Stephen Wilborn
LOUISIANA Henry Deeb Gabriel, Jr. Jerry J. Guillot William D. Hawkland William E. Crawford Robert G. Pugh
MASSACHUSSETTS Edward L. Schwartz Elaine M. Farrell David E. Sullivan William C. Hillman Edwin E. Smith Stephen Y. Chow Randall L. Kennedy
MARYLAND K. King Burnett M. Michael Cramer M. King Hill, Jr. Frank F. Jestrab William G. Somerville
MAINE Margaret E. Matheson Robert C. Robinson Bruce A. Coggeshall Lewis V. Vafiades
MICHIGAN Andrew Richner Willis Bullard, Jr. Robert B. Webster James J. White Christopher D. Dingell Laura Baird Tom Downs William J. Pierce Gary B. Gulliver
MINNESOTA Jack Davies Michele L. Timmons Harry M. Walsh Robert J. Tennessen Harry J. Haynsworth, IV Harriet Lansing Michael P. Sullivan
MISSOURI Timothy J. Heinsz William H. Henning John Fox Arnold Ralph C. Kidd Harry Wiggins Lewis C. Green Floyd R. Gibson
MISSISSIPPI David Calvert Dunbar Teresa Ann Beck William A. Neely, Jr. Robert N. Davis William Hooper, Jr. Michael P. Mills
MONTANA James E. Vidal James C. Nelson Joseph P. Mazurek Alex Blewett Robert E. Sullivan Gregory J. Petesch E. Edwin Eck, II
NORTH CAROLINA Rhoda B. Billings Sidney S. Eagles, Jr. Elmer R. Oettinger Robinson O. Everett James A. Wynn, Jr. Russell G. Walker, Jr. Floyd M. Lewis Carlton E. Fellers Susan Kelly Nichols
NORTH DAKOTA Gail H. Hagerty Wayne K. Stenehjem David J. Hogue William E. Kretschmar Patricia Brumfield Fry Michael B. Unhjem Jay E. Buringrud
NEBRASKA Harvey S. Perlman Larry L. Ruth Joanne M. Pepperl Norman Krivosha C. Arlen Beam
NEW HAMPSHIRE Jeffrey R. Howard Michael D. Ruedig W. Michael Dunn
NEW JERSEY Wanda Williams Finnie Joseph M. Donegan Howard T. Rosen Barry H. Evenchick
NEW MEXICO John P. Burton Robert J. Desiderio Philip P. Larragoite Paula Tackett Cisco McSorley Thomas P. Foy, Sr.
NEVADA Ernest E. Adler Brenda J. Erdoes Scott Scherer Barbara E. Buckley Robert R. Barengo Mark A. James David E. Humke Scott G. Wasserman Frank W. Daykin
NEW YORK Lewis Bart Stone Richard B. Smith Paul L. Weafer Justin L. Vigdor Keith C. St. John Sandra S. Stern Henry S. Fraser Richard B. Long
OHIO Leon M. McCorkle, Jr. Nancy Rogers William L. Evans Boris Auerbach Stanley M. Fisher Michael Burns
OKLAHOMA Duchess Bartmess Loyd Benson Owen L. Anderson Brent W. Wright Leo H. Whinery Bryce A. Baggett Kenneth W. Elliott Fred H. Miller R. Stratton Taylor Robert H. Henry Mark H. Ramsey Marian P. Opala
OREGON Martha Lee Walters Gregory Chaimov Oglesby H. Young D. Joe Willis
PENNSYLVANIA Thomas A. Hutton Robert W. Zech Curtis R. Reitz Paul A. Tufano David L. Hostetter Ann Bowen Poulin Raymond P. Pepe
PUERTO RICO Alberto Ferrer Francisco L. Acevedo
RHODE ISLAND Ronald W. Del Sesto Anthony J. Santoro Thomas H. Needham George C. Berk John F. McDonough Cay C. Massouda Raymond A. Pacia
SOUTH CAROLINA Thomas S. Linton Peden B. McLeod John W. Thomas
SOUTH DAKOTA Scott N. Heidepriem Michael DeMersseman Richard O. Gregerson Gene N. Lebrun Barbara Everist
TENNESSEE George H. Buxton, III James A. Clodfelter Charles A. Trost Ross B. Clark, II
TEXAS Peter K. Munson Marion W. Benfield, Jr. Stanley Plettman Rodney W. Satterwhite Marilyn E. Phelan Harry L. Tindall Leonard Reese David Peeples Patrick C. Guillot
UTAH Reed L. Martineau John L. Valentine M. Gay Taylor Henry M. Grether, Jr. Lyle W. Hillyard
VIRGINIA J. Rodney Johnson Ellen F. Dyke Brockenbrough Lamb, Jr. Esson McKenzie Miller, Jr.
VIRGIN ISLANDS Amos W. Carty, Jr. Tom Bolt Elmo A. Adams, Jr. Miguel Camacho
VERMONT Clarke A. Gravel Carl H. Lisman Peter F. Langrock David A. Gibson William P. Russell Richard T. Cassidy Linda O. Smiddy
WASHINGTON Dennis W. Cooper Marlin J. Appelwick Robert H. Aronson Cynthia Imbrogno
WISCONSIN Orlan L. Prestegard William G. Callow David Cullen Bruce Munson Shaun P. Haas Lawrence J. Bugge Peter J. Dykman Gary R. George Joanne B. Huelsman
WEST VIRGINIA Frederick P. Stamp, Jr. John L. McClaugherty Richard E. Ford
WYOMING Charles G. Kepler Harold E. Meier Richard J. Macy
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Cem Kaner, J.D., Ph.D. P.O. Box 1200, Santa Clara, CA 95052
http://www.kaner.com http://www.badsoftware.com
Author (with Falk & Nguyen) of TESTING COMPUTER SOFTWARE (2nd Ed, VNR) Author (with David Pels) of BAD SOFTWARE (Wiley, 1998)
This e-mail communication should not be interpreted as legal advice or a legal opinion. The transmission of this e-mail communication does not create an attorney-client relationship between me and you. Do not act or rely upon law-related information in this communication without seeking the advice of an attorney. Finally, nothing in this message should be interpreted as a "digital signature" or "electronic signature" that can create binding commercial transactions. ```
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