"Software Makers Aim to Dilute Consumer Rights" from the Los Angeles Times, February 4, 2000. © 2000 Los Angeles Times. Reprinted with permission.

Software Makers Aim to Dilute Consumer Rights
Feb 4, 2000

* Technology: Companies push legislation at state level that would dramatically alter contract law in their favor.

Home Edition, Page A-1

By JOSEPH MENN, TIMES STAFF WRITER

Microsoft Corp. and other powerful software companies are quietly pushing state legislation across the nation that would dramatically reduce consumer rights for individuals and businesses who buy or lease software and database information.

The push comes as software companies are beefing up their lobbying effort to pass favorable laws while their industry is at peak popularity among politicians who want to keep their local economies booming, consumer groups say.

"[This] is an example of newly powerful software giants using the promise of high-tech jobs to push through legislation that restricts consumer and business-customer rights," said James Tierney, former Maine attorney general, who opposes the effort.

The tech bills spring from a proposal with an arcane name, the Uniform Computer Information Transactions Act (UCITA). Should states pass this legislation, the impact on consumers would be dramatic:

* If customers fall behind on fees or software lease payments, sellers would have the right to reach into customers' computers and remotely shut off programs.

* The UCITA bills include a provision that e-mail could serve as formal legal notice of everything from a change in terms of the contract to a warning that service will be cut off, all without any evidence that the e-mail ever reached an individual.

* The fine print of nondisclosure clauses in software packages could be used by software makers to block the publishing of reviews of their product.

"'We already see software licenses that purport to ban publication of critical articles," said University of Arizona law professor Jean Braucher. "UCITA would increase this sort of chill."

* Most software sales would be redefined as licensing agreements, giving software makers the power to set terms forbidding the future sale or even donation of the material.

"It might even mean I can't donate my old computer to my kid's school without taking off all the software,"' said Gail Hillebrand, senior attorney of Consumers Union. Hillebrand said the tech legislation would drastically weaken the most basic consumer protection laws.

One of the tech bills is expected to be introduced soon in California. Other UCITA bills are already before state legislatures in Maryland, Virginia and Illinois.

The software industry is aggressively lobbying for the tech legislation, which it touts as an overdue modernization of contract law to keep up with the pace of electronic commerce. The software lobbyists expect the tech bills will pass in at least several states in the next few months.

The model UCITA bill was hammered out by a century-old organization called the National Conference of Commissioners on Uniform State Laws. The bipartisan group consists of appointees from various states, who devise legislative proposals for state legislatures in order to smooth out interstate commerce.

The conference group began looking at consumer laws because software is fundamentally different from other goods; among other things, it can be copied in an instant. And with the popularity of the World Wide Web, software and other digital information can be distributed worldwide, irretrievably. And so new laws are needed to prevent theft, the group argues.

"You can quickly drain the value out of the information" by distributing it, said John McCabe, legislative director of the Chicago-based National Conference of Commissioners.

But in dozens of ways, large and small, the bills tip the balance of power toward software companies, according to law professors, consumer groups, more than 20 state attorneys general and some corporate software buyers that are beginning to organize an opposition to the UCITA campaign.

If these UCITA-sponsored bills pass, "it will dramatically change the law," said Herschel Elkins, head of the California attorney general's consumer department. He said the legislation would put buyers into a legal corner with little way out. "It's pay first, find out what you bought later," he said. "The refund right disappears when you click twice on 'I agree.' "

The legislation would modify contract law, copyright law and other legal territory in ways complex enough that the effort has attracted little attention even in legislatures, let alone among the press and public.

In Maryland, the proposed tech bill is backed by the governor, the lieutenant governor and the heads of both houses of the Legislature.

"We must act now to strengthen Maryland's position as a leader in the digital economy," Maryland Gov. Parris Glendening said in January, when he introduced the bill and other measures.

Both sides believe that if a few states pass the measure, other states will feel compelled to follow in order to compete for high-technology company headquarters. Companies might move to states that pass UCITA, because they could then choose to litigate contract disputes under its more favorable terms.

"Where we are in trouble is Maryland," said Skip Lockwood, coordinator of the Digital Future Coalition, a Washington-based nonprofit group that opposes the legislation and is backed by library, consumer and other groups.

Like many other states that are being targeted, Maryland has a shortened legislative session in which to consider the bill, which is more than 100 pages long and extremely complicated.

In Maryland, the tech bill may become law "before the end of April," said Keith Kupferschmid, intellectual property counsel at the Software & Information Industry Assn., which backs the bill.

Lockwood, who is scrambling to coordinate opposition to UCITA bills in various states, compares the campaign to pass the legislation to the muscle once flexed by the textile industry as it moved south for friendlier labor laws.

Thus far, courts have disagreed on several issues about how existing contract laws apply to software. And different states have a variety of statutes that could apply to software customers seeking refunds.

"There's a consensus that something needs to be changed," said Rick Miller, a Microsoft spokesman. "There is a desire, as we work across the country, to have some uniformity" in software laws.

The tech bill has also been endorsed by Intuit, the Mountain View, Calif.-based financial software concern, as well as Novell, the networking software giant, and IBM's Lotus Development division, among others.

Yet even some major technology companies have problems with UCITA's proposals.

Sun Microsystems, which sells $12 billion annually of both computer hardware and software, objects to the tech bills. Sun argues that any change of such complexity would cost untold hours and dollars to sort out and could overhaul a legal system that has been working fine.

"Any attempt to alter some of the established copyright rules . . . that the [computer] network economy has been operating under, and operating under so well, we would have a concern about," said Sun lobbyist Lowell Sachs. "There is a tight group that is supporting [UCITA] and a lot of companies that are concerned with it, opposed to it or confused by it."

For some, an indication that UCITA is a flawed idea stems from the way the proposed bills were written.

The National Conference of Commissioners for half a century has worked with a sister body called the American Law Institute (ALI), which consists of judges, lawyers and academics. Typically, the two groups develop model changes to the century-old Uniform Commercial Code, which are then suggested as legislation to every state.

In this case, after years of debate, the ALI panelists walked out, refusing to support the proposed tech bill.

One ALI panelist, Temple University law professor Amy Boss, said she was surprised that the conference proposed the tech bill to the states anyway.

"It's very difficult to understand," Boss said of the bill. Under the legislation, customers who install software in their computers have already lost some of their basic rights, she said. The tech bill "gives the consumer no way to disagree with the terms," she said.

Microsoft's Miller declined to discuss some of the complex bill's provisions. Other supporters of the legislation said its critics misunderstand the effect of the measure.

But opponents say that the very disagreements over interpretations of the bill should be taken as a warning sign against passage.

"It tries to restate the law we already have, and it does it very poorly," said Stanford University law professor Margaret Radin.

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