Introduction       . . . . . 2

Background and History     . . . . . 2

UCITA: An Overview      . . . . . 5

 Part 1 - General Provisions   . . . . . 5

 Part 2 - Formation and Terms   . . . . . 6

 Part 3 - Construction    . . . . . 6

 Part 4 - Warranties     . . . . . 7

 Part 5 - Transfer of Interest and Rights. . . . . 7

 Part 6 - Performance    . . . . . 8

 Part 7 - Breach of Contract   . . . . . 8

 Part 8 - Remedies     . . . . . 8

 Part 9 - Miscellaneous    . . . . . 9

 Advantages of UCITA     . . . . . 10

 Disadvantages of UCITA    . . . . . 11

UCITA: Impact on Libraries    . . . . . 11

 Library objections     . . . . . 12

 Analysis of Objections    . . . . . 14

Conclusion       . . . . . 15

 E-commerce is an increasing part of the global economy.  The Uniform Computer Information act is an attempt to create the type of legal structure needed to allow this new form of trade to flourish and give legal protection to the parties involved.  The act assumes that contracting parties are equals negotiating freely and the resulting contract expresses their desires.

 Several library associations have challenged the notion of freely contracted among equals when the contract is a mass-market, shrink-wrapped, click-on agreement.  The library associations suggest that that many among us are ill prepared to understand the terms and consequences of these contracts.  As a result, the library associations would have limits placed on what types of terms are enforceable in mass-market computer information licensing agreements. 

 The Uniform Computer Information Transactions Act (UCITA) is a commercial code applied "to computer information transitions."1 The types of transactions covered include agreements regarding access to online databases, computer programs, and data processing.2

 Information technology is a major force in the American economy.3 With this revolution in business information comes a unique set of industry norms.4  The Uniform Commercial Code (UCC) in general, and article 2 in particular, was a good fit for the industrial revolution, when physical goods were bought and sold.  However, it is a less then perfect fit for digital transactions, in which information is bought and sold.5  Continued growth of e-commerce will depend on new laws tailored to these new realities.6

 Other uniform acts have sections that address e-commerce such as the Uniform Electronic Transactions Act (UETA) which covers non-UCC and non-UCITA transactions, UCC Article 8 (Revised 1994), covering electronic holding of securities and UCC Article 5 (revised 1995), covering electronic Letters of Credit.7 These laws, while important, approach e-commerce in a piecemeal fashion.8  As a result, some of the more central issues to e-commerce, such as online information tractions, are missing.9

 A subcommittee of the American Bar Association proposed that the National Conference of Commissioners on Uniform State Laws (NCCUSL) draft a uniform act covering computer information transactions.10  The NCCUSL has drafted a number of uniform acts, such as the Uniform Victims of Crime Act, Uniform Trade Secrets Act and the Uniform Arbitration Act.11  The NCCUSL began drafting the computer information act in conjunction with the American Law Institute.12

The drafters intended to supplement the UCC with a new Article 2B, to cover computer information transactions.13  But as drafting progressed, disputes emerged.14  Resulting in the NCCUSL proceeding alone, and what would have been UCC Article 2B, became the free standing UCITA.15  In light of its history, it is not surprising that the UCITA is consistent with the UCC and borrows many concepts from it.16  The UCITA was accepted by the NCCUSL in July of 1999, revised in 2000 and has proposed amendments pending.17  It has been enacted in Virginia and Maryland and is under consideration in several other states.18

 The UCITA (revised 2000) has nine parts.19  It reflects the view "that the purpose of commercial contract law is to facilitate and support commerce.  This is the goal of the UCC and the goal endorsed in UCITA."20 The underlying theme is that contracts are freely negotiated among equals who act in their own best interest.21 The purpose of the UCITA is, therefore, to fill in the gaps somehow omitted by the parties contracting.22

Part 1 - General Provisions

 This first part of the act provides the general format, scope of the act, guidance on choice of law, forum selection and definitions (some of which seem to vary from traditional legal convention).23 The UCITA

"provides rules to establish norms and to provide guidance when the parties do not deal with a matter in their contracts for computer information transactions...UCITA, however, generally treats software embedded in goods (like a computerized braking system) as goods...leaving the current common law and statutes, which are deemed adequate, to govern their core business."24

Part 2 - Formation and Terms

 Most of part two reflects conventional contract law. There is some acknowledgement of the differences in e-commerce and the sale of goods but in this part, the UCITA primarily stresses familiar contract law.  Special note, however, should be taken of two things in this part of the UCITA.  First, the UCITA version of the mailbox rule provides that " an electronic message is effective when received even if no individual is aware of its receipt."25 But given that computer failures do occur, " a licensee [might] require that notice, at least in certain circumstances, be given by more traditional means in addition to an email."26 Second, assent in online transactions comes with far less prior negotiating than in conventional contracts for goods and services,27 and the UCITA fails to take note of that point.  Therefore, in general this part fails to distinguish the online environment sufficiently to meet the online needs of the parties involved.

Part 3 - Construction

 Overall, part three more directly addresses information transactions.  It explains the number of information users can be limited either explicitly by contract or to " a number of users which is reasonable in light of the informational rights involved and the commercial circumstances existing at the time".28 This appears to be an effort to re-affirm laws against software pirating.  However, many library associations have opposed this, among the UCITA sections, in light of the multiple users and fair use copying that takes place in their settings.29

Part 4 - Warranties

 A merchant may warrant information provided to the licensee.30  When the licensee is in a "special relationship with the merchant" and the merchant "collects, complies processes, provides or transmits informational content" a warranty runs as to the accuracy of the information.31  This type of relationship might arise between a bank and an online service that provides the online banking transactions of that bank's customers.  This is a good example of the special needs created by the online commercial environment.

Part 5 - Transfer of Interest and Rights

 Part five defines the rights of information users as distinguished from those of information creators.  This part provides that ownership rights in a copy are distinguishable from rights in the underlying intellectual property.32 Rights transfer in accordance with state law,33 and title to a copy depends upon the license agreement.34 This part "provides much needed clarification as to ownership rights and as to the ability to transfer rights (and duties) under license."35

Part 6 - Performance

 Part six permits software manufactures to market products with known defects, without informing the consumer and without penalty.36  The UCITA eliminates the perfect tender rule in most business tractions.37  Therefore, unless the defects rise to the level of a material breach, the business user has diminished ability to get the manufacture to address his needs.38

Part 7 - Breach of Contract

 Part seven follows UCC Article 2 very closely.39 The "conforming tender" rule is found in this part.40 "Copies that are delivered pursuant to a negotiated license, a licensee may only refuse tender of delivery of a copy if tender of the copy is a material breach of the contract."41

Part 8 - Remedies

 In this part the "UCITA provides a remedy structure somewhat modeled on that of Article 2 but adapted in significant respects to the different context of a computer information transaction."42 Part eight allows a licensor to engage in "self-help" under appropriate circumstances, such as cancellation or material breach.43 This might involve the use of an electronic means, such as an e-mail message, to disable software in a user's possession.44  This can only be done where the licensor has sufficient cause and if it is allowed by contract.45  The criticism has been that this seems to place a lot of power and control in the hands of licensors at the expense of the licensee.46 For example, this access to a licensee's system might create a weakness in the licensee's computer security system.47  Computer hackers might exploit this weakness to their advantage.48

Part 9 - Miscellaneous Provisions

 Part nine recognizes electronic signatures.49 But primarily part nine is to facilitate administration of the act.50 

 The UCITA has become a very controversial act, criticized not only by library associations but also a number of states Attorneys General, and intellectual property law experts.51  The criticism all seems to involve consumer protections52 such as failing to take into consideration uneven bargaining power of the parties involved in online transactions.  Alternatively, a number of legal scholars have noted several benefits of the act.53  These advantages include: standardizations, uniformity, and modernization of our laws.54

Advantages of UCITA

 The national nature of e-commerce requires some degree of uniformity if this new form of commerce is to reach its potential.55 Because contract law is created by each state, the UCITA promotes uniformity of laws.

Online transactions have become so essential to commerce that legal expectations need to be established.  The parties to these transactions need to enter into negotiations with the same set of expectation.56 The UCITA provides a set of default rules, and in so doing create legal standards.

Last, the UCITA modernizes the law.  In that it takes note of the fundamental differences that exist between the sale of material goods and computer information transactions in cyberspace.57

Disadvantages of UCITA

On the other hand, UCITA's underlying assumption of equal parties freely negotiating over contract terms may be less true in cyber transactions than with other types of goods.58  The UCITA gives insufficient attention to the need for consumer protection created by the nature of doing business online.  Not all consumers have enough sophistication to understand the implications of some of the terms written into contracts,59 and most do not have access to lawyers to make up for what they do not know.  The law should protect those less well suited to protect themselves.  The UCITA needs to be slightly more regulatory and reflect an appreciation of the power imbalance in online bargaining.

 Library associations have expressed concerns about how this act will affect them.60 Their concerns center around the impact of enforcing terms of shrink wrap, mass-market, licenses, on libraries when they do not have the staff or the training to understand the terms of, or the consequences resulting from, the agreements they are entering into.61  In addition, because §816 allows "electronic self-help,"62 library services could be disrupted because of terms in the licensing agreement that were never understood by those agreeing to them.  The concern voiced by the library association mirrors the concern of a number of groups and warrants attention.63

Library Objections

 The library associations note, "a negotiated contract is not preempted by federal copyright law."64 However, the issue at hand revolves around non-negotiated contract.  The mass-market, shrink-wrap, "click-on licenses to which a user has agreed by opening and using the product or clicking OK to the terms."65 Does contract law preempt copyright law under these circumstances?66 The Courts have been divided on this issue.67 But the library associations, noting how accepting the courts are becoming of shrink wrap agreements, are increasingly concerned about restraints found in the terms of these agreements.68 For example, libraries are concerned about copies made for "in class [usage] or making a preservation copy for the institution's library or archive."69 They hold that such fair use copying should be allowed in mass-market computer information agreements, regardless to any terms to the contrary in the license contract.70

 Contrary to the library associations' view, the UCITA accepts the perspective that contract terms do preempt copyright law when the terms of the agreement expressly state without regard to contract type.71 So given the UCITA, "libraries can anticipate that more staff time will be needed to negotiate and review contracts for access or lease of computer information products."72 Staff members will have to be trained to understand terms and what their consequences are.73 "Acquisitions and processing staff who receive or check-in software, cd-roms, and other shrink wrapped materials will have to look carefully for license terms that may be included in the packaging."74 Finally, because

"a vendor may disable the product remotely because of a perceived misuse of the product or because payment has not been received on time, or upon expiration of the stated duration of the contract.  Libraries will need to closely monitor whether vendors have included automatic restraints or electronic self-help."75

Analysis of Objections

There is a public policy interest in allowing and encouraging the free flow of ideas.  With the flow of ideas education is enriched, history can be more accurately written, and the society as a whole benefits from the diversity of ideas.  Certainly, libraries play a central role in allowing this market place of ideas to exist.  However, while the society as a whole benefits, the rights of the creators, inventors and original thinkers are sacrificed when they are not allowed to limit access their creations as they see fit.

 If the terms of an agreement expressly limit usage of computer information to certain users or to a certain number of users, that agreement should be enforced.  Both parties have the right to expect that an agreement made will be upheld under penalty of law.  The law should be written to encourage simple, clear, easily understood mass-market contracts.  It should not be written to encourage one party or the other to disregard the rights of the other.  If vendors are including terms in contracts that consumers object to, then open-market forces will either force them into a compromise or out of business as competitors who are willing to meet consumer desires acquire market share at the non-compromisers expense.  The law already forbids unconscionable contract terms; it need not also forbid terms, which are merely undesirable.  This is especially true when economic forces can be used to remedy the situation.

 Second, while the idea of "electronic self-help" seems harsh, the notion of a vendor being allowed, under certain circumstances, to repossess property sold is both well established and accepted.  A car's repossession or a home's foreclosed upon non-payment are examples of when vendors are allowed to regain property sold.  A vendor of computer information should be no different, and § 816 gives merchants of computer information the same rights as other similarly situated vendors.  Libraries should hire the staff they need and provide them the training required to evaluate the agreements they are entering into.  If the contract specifies that self-help is allowed under certain specified circumstance, then the buyer is on notice of the possible lost via self-help.

 Overall, the UCITA is an important first step.  It is important that the UCITA continue past legal conventions. However, online transactions might have better served if this act had not been created as an extension of the UCC.  This act fails to acknowledge the unique bargaining environment created by the Internet and how that affects negotiations. Nonetheless, the UCITA is an important first step.

1 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 3.

1 UCITA § 103(a)

2 UCITA § 103

2That is, the UCITA governs "agreement[s] ... to create, modify, transfer or license... information in electronic form which is obtained from or through the use of a computer or which is in a form capable of being processed by a computer." (UCITA § 102, 103)

3 Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 115

4 Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 3.

5 Ibid. Pg 3-4.

6 Ibid pg.4

7 Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 Pg. 117.
7Other uniform acts: UCC Article 4A - Funds transfer; UCC Articles 3 and 4(revised 1990) - Electronics transactions; UCC Article 9 (revised 19998) - Electronic filings (Dively, Mary Jo Pg. 117)

8 Ibid

9 Ibid

10 Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 117-18.

11 http://www.law.upenn.edu/bll/ulc/ulc_frame.htm

12Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 3

13 Id Op. Cite.

14 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 20.

15 Ibid.

16 Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 4

17 Harrell, Alvin C. "UCITA: Opportunity or Obstruction?" Oklahoma City University Law Review Vol 25. Pg. 333

18 Id.

18Other states considering the UCITA: Oregon, Illinois, Maine, Texas, Arizona, New Jersey and Oklahoma,
(http://ucitaonline.com/whatsnu.html)

19http://www.law.upenn.edu/bll/ulc/ulc_frame.htm   UCITA

20 Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 4

21 Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 118-19

22  Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 5

23 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 4

23 Part one includes:
 I. Definitions
 II. Scope of the act
  A. Transactions included:
   1.Data processing
   2.Access and Internet contracts
   3.Computer programs
   4.Digital multimedia works
  B. Transactions not include (covered by other law)
   1.Sales contracts
   2.Personal services contracts
   3.Employment contracts
   4.Financial services transactions
   5.Telecommunications services and products
 III. Choice of law
  A. States with choice of law rules govern
B. State with the most the significant relationship to the      transaction laws govern
C. Selected by the parties
IV. Assent
 A. Knowledge of or an opportunity to review the contract
 B. Assent given after review is accomplished
V. Terms that may not be contracted around
 A. Good faith
 B. Diligence
 C. Reasonableness
 D. Care
(The parties to the contract can, however, determine what standard is to be used to judge the above listed terms)
VI. Fundamental public policy issues and unconscionable actions are non-waiverable

24  Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 120

25 UCITA § 215

25 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 8

26 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 8

27 Highlights of  part 2:
I. For a contract to be formed there must be an offer and acceptance
 II. Contracts can be formed via electronic agents
 III. The mirror image rule is not enforced
 IV. Mass-market contract have limitations
  A. Assent cannot occur without an opportunity to review
  B. The terms may not be unconscionable
C. The terms of the contract may not alter any expressly agreed to terms by the parties involved
V. Assent to a mass-market contract occurs after initial use of information
 

28 UCITA §307

28 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 5

29 http://www.arl.org/info/letters/FTC091100.html Joint letter from library association

30 UCITA§ 404
Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 9

31 Ibid

31Highlights of part 4:
I. Licensor warrants, no third party can claim infringements of intellectual property rights
II. Advertising by licensor may create an express warranty
III. Implied warranty of merchantability applies to computer information transactions
IV. The licensor may include an implied warranty of merchantability disclaimer

32 UCITA§ 501, 502

33 UCITA § 503, 506

34 UCITA § 502

35  Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 121

36 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 23-25

37 UCITA § 601,605

38 Op. Cite.

38Part 6 Highlights:
 I. Parties have a duty to perform as contracted
 II. Licenses may only have to authorize use of information
 III. An inspection is limited to packaging
(This limit was created because often when information transactions occur, its value is bestowed upon viewing)
 IV. If performance involves delivery of a copy:
A. The receiving party must have an opportunity to inspect the copy
B. The contracting parties determine inspection standards
V. Continuous access contracts must have information available as contracted (system availability)
VI. Cure of breach
 A. Repair or replacement
 B. Maintenance services

Part 7 highlights:
 I. Breach occurs when a party fails to conform to the contract
 II. Contract terms can determine material breach
III. Waiver occurs by accepting non-conforming performance in silence beyond a reasonable time
IV. Refusal of a copy, when the contract calls for a copy to be furnished, may or may not cancel the contract

39 Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 121

40 Fendell, Charles H. and Kennedy, Dennis M. " UCITA Is Coming Part One: Practical Analysis for Licensee's Counsel" The Computer Lawyer Vol. 17, Num 7, July 2000. Pg. 8

41 Ibid

42   Dively, Mary Jo; Ring, Carlyle C. "Overview of Uniform Computer Information Transaction Act" eCommerce Strategies for Success in the Digital Economy September 2000 pg. 121

43 UCITA § 816

44 Ibid.

45 Ibid

46 Ibid

47 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 26

Part 8 Highlights:
 I. Parties are free to define remedies for breach
II. If the contract so permits, electronic measures can be taken by the licensor to prevent use of its computer information upon cancellation or martial breach. (That is, the software can be electronically and remotely turned off)
 A. A 15-day notice must be given first
 B. Damages are available for wrongful use
 C. Prohibited in mass-market transactions
III. Common remedies include
 Replace, repair, refund
 No Cancellation clause
IV. Liquidated damages as agreed to by the parties
(A cause of action must be bought within four years in most cases)
V. Injured parties must make an effort to mitigate damages
VI. The injured party selects the method for calculating damages

48 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 26

49 UCITA § 905

Part 9 highlights:
 I. Administrative procedures
  A. Provides for repeals
  B. Provides for an effective date
 II. This act fully accepts electronic signatures

50 UCITA § 902, 903

51  Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 20-21.

52 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 20-32

53 Brennan, Lorin "Through the telescope II: The Meaning of UCITA" Mississippi College Law Review Vol. 20:45 Pg. 49.

Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 3-19

54 Brennan, Lorin "Through the telescope II: The Meaning of UCITA" Mississippi College Law Review Vol. 20:45 Pg. 49

55 Op. Cite

56 Ibid

57 Ibid

58 Nimmer, Raymond T. "UCITA: A Commercial Contract Code" The Computer Lawyer Vol. 17, Num. 5 May 2000. Pg, 3-4

59 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 21.

60 http://www.arl.org/info/letters/ftc091100.html

61 http://www.ala.org/washoff/ucita/impact.html

62 UCITA §816

63 Kaner, Cem "Why You Should Oppose UCITA" The Computer Lawyer Vol. 17 Num. 5 May 2000. Pg. 20-21.

64 http://www.ala.org/wahoff/ucita/contracts.html  1

65 Ibid  2

66 Ibid

67 Ibid

68 Ibid  3-4

69 Ibid 5

70 http://www.ala.org/washoff/ucita/impact.html

71 http://www.ala.org/wahoff/ucita/contracts.html  5

72 http://www.ala.org/washoff/ucita/impact.html

73 Ibid

74 Ibid

75 Ibid

76 http://www.arl.org/info/letters/ftc091100.html

77 http://www.ala.org/washoff/ucita/impact.html