July, 2001
Uniform Computer Information Transaction Act
With the surge of information and technology companies in the Washington DC metropolitan area, the Uniform Computer Information Transactions ACT (UCITA) has been enacted in both Virginia and Maryland to standardize the law for software licensing and all other forms of digital information. UCITA is a complex law that affects individual consumers, business, and industries-any person using computer software. UCITA originated as Article 2B of the Uniform Commercial Code (UCC), but due to ensuing controversy, UCITA developed into its own new uniform law. In year 2000, despite opposition by government agencies and legal/political groups, UCITA was passed by two states: Maryland and Virginia.1
"Shrinkwrap" or "Click-through" Terms
Concerns arise from UCITA due to the overwhelming power of the software vendor and lack of recourse for the consumer. UCITA allows software vendors and licensors to bind consumers by the licensing terms of the contracts provided in "shrinkwrap" products or "click-on" agreements. Concerns arise from UCITA due to the overwhelming power of the software vendor and lack of recourse for the consumer. Under UCITA protections, an individual manifests consent to a term if, "acting with knowledge of, or after having an opportunity to review the term or a copy of it" they authenticate the term with intent to adopt or accept it," or "intentionally engage in conduct or make statements with reason to know that the other party or its electronic agent may infer from the conduct or statement that the person assents to the term." Va. Code § 59.1-5.01.12(a). In essence, simply by installing or unwrapping a new package of software, consumers are bound by licensing terms that they did not negotiate for and which they did not know until after they paid for or received the software. Consumers also surrender the right for a refund.
UCITA Restrictions
UCITA places few substantive restraints on what may be included in shrinkwrap or other click-through terms, making it likely that consumers be obligated to license terms they have never seen prior since. UCITA does not require that all terms be shown to a buyer or licensee prior to an internet transaction. UCITA in fact permits vendors or licensors to reveal the restrictive terms of the licenses after the consumer purchases the software. Consumers may even find themselves obligated to additional terms if such terms are considered a "usage of trade" which the consumer learns upon receipt of the agreement.
An employee, although not a principal, may obligate a company to the terms of an internet transaction. As long the employee who clicks through such terms has apparent authority to bind the company, the company may be bound and obligated. Va. Code § 59.1-502.13(a).
Internet Access Contracts
UCITA provides special rules governing performance of contracts for internet access and related services. Generally, access must be available "at times and in a manner conforming to the express terms of the agreement" and "to the extent not expressly stated in the agreement, at times and in a manner reasonable for the particular type of contract in light of the ordinary standards of the business, trade, or industry." Va. Code 59.1-506.11 (a)(4). However, UCITA does allow failure for "reasonable periods" to provide access because of programming, communication, or system failures.
Automatic Restraints
UCITA authorizes software producers to encode programs, devices and other computer information with "automatic restraints" to prevent the use of information not in accord with the license terms. For example, a restraint may prevent use after the expiration of the stated duration of the contract. Va. Code §59.1-506.5(b). UCITA immunizes licensors from liability for any loss that may result by the use of this restraint. Va. Code §59.1-506.5(d). UCITA does not require that the licensees be notified that their programs or computer information is encoded with an automatic restraint.
Self Help Remedies
If automatic restraints do not assist the software and computer information vendors, UCITA authorizes them to use self-help remedies allowing them remotely to shut down an organization's mission critical software without court approval. Va. Code §59.1-508.14. Where a license has been cancelled, a licensor has the right to repossess copies of the information and prevent further use. Self help remedies are available, however, only if self-help is assented to and outlined in the license agreement; 45 days notice of the breach of the agreement is provided; the licensee has the right to seek expedited injunctive relief; and the self-help does not create a grave danger to the public health or safety. A licensee may recover direct and incidental damages caused by the "wrongful use of electronic self-help." Va. Code § 59.1-508.16(e).
Conclusion
UCITA plays an important role in the future of electronic commerce on the internet as it establishes specific contract formation rules for e-commerce. Although presently UCITA is enacted in both Maryland and Virginia, many consumers and vendors alike believe it is only a matter of time before UCITA is adopted and enacted throughout the United States.
1Maryland's law went into effect in October 2000.
Virginia is refining its law to go into effect July 2001. « archived newsletters