US firms hit out over software licensing law

Companies in the US have slammed a software licensing law that would allow vendors to electronically disable a user's system for...

Companies in the US have slammed a software licensing law that would allow vendors to electronically disable a user's system for breach-of-contract software violation.

Although backers of the Uniform Computer Information Transactions Act (UCITA) have signalled a willingness to delete the shut-off provision - called "self-help" - critics say that this alone is not enough.

UCITA is a model act sponsored by the National Conference of Commissioners on Uniform State Laws (NCCUSL), which has urged all US states to adopt the proposal.

However, even if that body agrees to alterations in the law, the impact of the changes remains in question. US states Maryland and Virginia have adopted UCITA, and companies say vendors are beginning to cite those states' laws in their software licensing contracts.

"We were doing business with one software company that fought more than usual to have Maryland law in the contract," said Dave Weidenfeld, senior counsel at fast-food giant McDonald's. "We would not do the deal if Maryland law was used, and eventually they caved in."

Weidenfeld said McDonald's is adding warranties to its software contracts to ensure that it is covered against financial damages that may result from downtime should a vendor invoke the self-help measure.

Michael Gratz, an intellectual property lawyer, said the law made it difficult for all but the largest companies to push back against unfavorable contract terms.

"Some things will be revised or tweaked," Gratz said. "UCITA ties the customer's hands and adds extra hoops that you must go through to negotiate around the law."

The NCCUSL drafting committee will meet next week to discuss the proposed legislation. Opponents are hopeful that electronic self-help, the most contentious part of the proposal, will be dropped. The self-help provision allows vendors to electronically disable software for a breach-of-contract violation. Users say the provision would increase litigation and create undue risk.

Roland Salvato, manager of contract and vendor relationships at Blue Shield, said: "If a vendor has the power to automatically disable the software code, then that gives them an unfair power over us."

UCITA's proponents, including Microsoft, AOL Time Warner and trade groups representing software companies, have asked the UCITA drafting committee to remove the self-help provision in an amendment proposal.

But opponents want UCITA to prohibit any kind of disabling capability, in case vendors try to apply self-help under existing commercial law.

As long as vendors believe self-help is possible, they will find ways to gain access to software and put systems at risk, said Gordon Pence, an intellectual property lawyer.

Another issue for opponents of UCITA is click-wrap licensing, in which users "click" to accept licensing terms that could inadvertently cause a contract breach, said Kevin Hudson, executive director of the Caucus Association of High Tech Procurement.

UCITA's opponents, who have formed a broad coalition representing manufacturing, financial services and library groups, believe they have enough clout to seek changes. They have submitted 80 pages of amendments, almost as long as the law itself.

The forthcoming meeting follows the blocking or stalling of UCITA in at least eight US states this year, including Texas, a key technology state. "I would hope that sends a message to the people who are trying to get it [UCITA] passed," said Miriam Nisbet, legislative counsel for the American Library Association.

If UCITA fails to win adoption, pressure will be put on the US Congress to set a uniform law. That is a process that no side will like, said Carlyle Ring, chairman of the NCCUSL's drafting committee.

"Ours is an open process where we at least try to maintain rational dialogue," said Ring, adding that he hoped the meeting could "enlarge the base of support" for the law.

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