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UCITA redux by jigordon
June 3, 2009, 9:32 am
Filed under: law

Ever wonder why you spend the bulk of your time inserting contract language for this warranty or that limitation of liability… only to get to the end of the agreement and then disclaim a few large bodies of law, such as the UCC or UCITA?  If you’ve not had the pleasure of attending law school, do you know what the UCC really is – how it came to be the guiding force behind commercial transactions?  Would you be shocked to learn that UCITA is deemed by some states to be so awful that they’ve enacted so-called “bomb shelter” legislation so as to prevent its application within its borders?

I won’t bore you on the whole history of the UCC, or UCITA for that matter.  What you need to know is the basics.  These two bodies of law are “models” – written by extremely gifted legal professionals and designed to “harmonize” behavior between the states.  This is important because where Federal law doesn’t tread, each state can act independently.  When commercial transactions are involved, Federal law perks up and starts to notice, as the Commerce Clause of the US Constitution tries to keep commerce flowing between and among states.  The Commerce Clause is the reason why UPS or FedEx can ship from one end of the country to the other… and why you don’t have UPS-Indiana competing with a UPS-Illinois.  But states don’t like the Federal government leveraging the Commerce Clause on them – so they try to work out basic rules that can apply to transactions uniformily.  Hence the “U” in each of the above two models.  It stands for “Uniform” – with the intent that each state (perhaps with slight modification) will enact a form of the model laws so as to create a smooth playing field when dealing with issues that involve more than one state.

Commerce isn’t the only playing field of course (criminal law, for example, is another area where folks attempt harmonization).  But it’s a biggie.  And commercial transactions involving software have somehow seemed to be confounding for quite some time.  As better explained here, the UCC was modified in the 90’s to try to include software (the UCC was originally written for hard goods).  That really didn’t work out so well, and they tried again with UCITA.  For a variety of reasons (most notably, the feeling by buyers that UCITA was severly biased towards software publishers), lobbying efforts were successful in blocking the passage of UCITA in almost every state – and, as noted previously, several states even passed laws which prohibited UCITA’s application in their state.  It was seen as one of the largest failures of its kind.

But the American Law Institute doesn’t seem to know how to call it quits.  They’re trying again with the release of the Principles of the Law of Software Contracts.  As I understand it, Principles are less than models (ie: no “U”).  However, I’m just not sure that they’re even needed now.  Software licensee’s and licensor’s have been chomping at the contractual issues now for almost 40 years.  I don’t believe that the Principles are necessary – and by the time they’d even gain traction, some new software licensing model will invariably come out and introduce some wrinkle not previously covered by the existing Principles.

So while I applaud the ALI for working on this effort, I just don’t know that it’s worth their time.  Because remember, even if these Principles are followed by someone, they don’t have to be (they’re not designed to be enacted into law, merely serve as guideposts).  But even if they WERE law, they can be completely disclaimed.  Which means that panicky articles like this are also not really true.

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