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Uniform Commercial Code Article 2B

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Index for CPT's Article 2B Protest Page

• General Background on UCC 2B
• Consumer Action Section
• CPT's Comments on UCC 2B
• Other Comments on UCC 2B
• The Better Business Bureau Logged More Consumer Complaints About Computers Than Used Cars.
• A Partial Listing of Press Coverage on UCC 2B.

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Article 2B -- The Information Law for the Information Age

Proposed Article 2B of the Uniform Commercial Code is an effort to set forth rules for the sale and lease of software, databases, and information. In the digital age, this Article will be of particular importance. Ray Nimmer, the Reporter of UCC Article 2B, has stated that this undertaking "could be one of the most important law reform projects [of] this generation." It has been estimated that if Article 2B is passed in all 50 states or even most of them, it will be the controlling law for transactions constituting 30% or more of the US economy. Clearly, the law to control information in the Information Society is of paramount importance.

CPT's Staff Attorney, Todd J. Paglia, became involved in the drafting process of UCC 2B as an Official Observer in November of 1996. We were concerned that the draft law was terribly unbalanced toward industry interests and that consumers -- purchasers for home and family use, small businesses, etc. -- were underrepresented. Our fears were confirmed by both the content of the draft and the industry dominated atmosphere of the drafting meeting. CPT has been working since that time to influence the substance of the draft to provide some basic protections for consumers.

Background on the UCC

The National Conference of Commissioners on Uniform State Laws and the American Law Institute jointly support drafting uniform state laws organized into Articles under the Uniform Commercial Code. These Articles address various subjects including the sale of goods and services (Article 2), secured transactions (Article 9), and negotiable instuments (Article 3), to name a few. Drafting an article take several years and after it is voted on and approved by NCCUSL and ALI, it is offered in all 50 states for passage by the state legislatures. Not all Articles are passed by every state, but many gain significant support.

The goal of these efforts is to promote uniformity in our state laws so the participants in a transaction in Tallulah, Louisiana are provided similar rights and responsibilities as participants to an identical transaction in Seattle, Washington. However, this need to facilitate commerce with a uniform act must be accomplished without trampling the rights of consumers. UCC 2B is a long way from reaching this goal.

Status of the Draft

The draft has come under criticism for being unbalanced toward the interests of the software and information industries and against the purchasers of these products or services. Recent drafts contain a few provisions that attempt to counteract this impression of unfairness, but these modifications have been largely on fringe issues. On the issues of real importance, the draft has not gone far enough in protecting consumers.

Through its financial and political power, as well as its usually implicit and sometimes explicit threat to oppose Article 2B unless it gets a sweetheart deal, the software industry has been able to exert disproportionate influence in molding the draft in accordance with its agenda. This is bad for consumers, and in the long run, it may have a negative impact on the domestic software industry.

Analysis of Article 2B

CPT's Comments and Other Information

• A November 10, 1998 sign-on letter calling for the tabling of 2B from Consumer Federation of America, Consumer Project on Technology, National Consumer League and U.S. Public Interest Research Group to the American Law Institute and the National Conference of Commissioners on Uniform State Law.

• A March 10, 1998 analysis from Todd Paglia to the American Law Institute on the problems with the draft law including comments on the political difficulties of getting a balanced draft from the UCC 2B drafting committee.

• A December 1997 letter from Cem Kaner and Todd Paglia to Geoffrey Hazard, President of the American Law Institute, addressing an abbreviated list of issues in Article 2B that harm purchasers of software and information products.

• A July 18, 1997 letter from Ralph Nader to the Uniform Law Commissioners sent prior to the annual meeting of the National Conference of Commissioners on Uniform State Laws held at the end of July in Sacramento, CA.

• May 30, 1997 Comments on the May 1997 Article 2B Draft by Todd J. Paglia, submitted to the UCC Article 2B Drafting Committee and Reporter. The comments deal with the requirement in some states that statements in advertising and documentation become express warranties only if they are part of the "basis of the bargain."

• May 8, 1997 response by Todd Paglia, CPT Staff Attorney, to the April 7, 1997 Software Publishers Association's letter. The SPA's letter was in reponse to a letter from Ralph Nader to Bill Gates. The letter by Todd Paglia corrects several mischaracterizations in the SPA letter.

• April 9, 1997 Comments on the March 1997 Article 2B Draft by Todd J. Paglia, submitted to the UCC Article 2B Drafting Committee and Reporter.

• March 31, 1997 Letter from Ralph Nader to Bill Gates on the problems with UCC 2B's validation of shrinkwrap licenses as an unfair mechanism and further that the permissible content of those licenses under the current draft is unbalanced in favor of industry interests.

• A modified and expanded version of CPT's handout to the Telecommunications Policy Roundtable in Washington, DC on February 5, 1997 is now available. This short document provides an overview of just a few of Article 2B's likely impacts with a focus on shrinkwrap licenses. It provides some perspective on the consumer impact by supplying examples of transactions that will be affected by Article 2B. The document also raises some of the larger policy concerns with 2B.

• CPT's November 1996 Comments on the November Draft of Article 2B outline many of the problems of the draft. This is in no way a comprehensive document but it will provide some of the Article 2B sections where consumers are not adequately protected. Because this was prepared for the Drafting Committee it assumes a general knowledge of Article 2B.

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Other Commentors

• Cem Kaner's comments for the November 1998 drafting committee meeting thoroughly and comprehensively analyze many of the problems in UCC 2B.

• A letter from the American Law Library Association's Robert L. Oakley, Washington Affairs Representative, and Jim Heller, Chair, Copyright Committee, to Ray Nimmer, the 2B Reporter.

• April 9, 1997 Comments of Consumers Union entitled "Provisions of Article 2B Which Fail to Protect Consumers of Software"

• Cem Kaner, a computer programmer and attorney, has a UCC 2B Home Page with a wealth of information on UCC 2B's impacts on consumers and the software industry. For a very understandable review of the basic issues where industry is favored over the interests of customers, see Cem's article Proposed Article 2B: Problems from the Customer's View. Article 2B and it raises some of the broader policy concerns as well.
• Professor David Rice wrote a short piece protesting Article 2B's handling of intellectual property issues entitled CRITICAL SOURCE OF ISSUES -- AND, PERHAPS, THE PERCEPTION OF IMBALANCE.

• See a brief email posting by Jonathan Band, a partner with the D.C branch of Morrison & Foerster. Jonathan discusses the possible ramifications of current draft's section 2B-308 which validates shrinkwrap licenses -- a controversial provision and an extension of current law.

Additional Perspectives on Shrinkwrap Licenses and Other Customer Issues

Better Business Bureau Report -- Computers Worse Than Used Cars!

In the Better Business Bureau Report on 1995 complaint data, computer sales/services hit the top ten for the first time ever. Complaints over computer problems even outnumbered complaints relating to notorious used car sales. That the high-tech sector has outdone the used car salesman in generating consumer complaints raises important questions about Article 2B. With consumer complaints on computer issues rising so sharply (from #20 in the last BBB report to #8), is additional consumer protection appropriate in Article 2B or do software companies have access to the U.S. market with almost no responsibility? Should the law allow software publishers to insulate themselves from almost all damages (other than a refund) for putting defective software on the market? Shouldn't software publishers at the very least have some additional responsibility beyond a refund if they knowingly put defective products on the market that cause serious damage to some consumers? If you have opinions on these or other issues see the Consumer Action section below.

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Press on Article 2B

• An article in Law Journal Extra by Wendy Leibowitz, "In New UCC Software Contracts, Is the Customer Always Wrong?" Feb. 23, 1998.

• April 23, 1997 article by Margie Wylie of CNet entitled "Shrink-wrapping the Social Contract."

• Web Week covered 2B in a March 17, 1997 article by Kathleen Murphy entitled "Law Group Formulates Uniform Rules for Online Transactions"

• The Washington Post ran an article on Article 2B's potential impact on consumers. The piece appeared on the Front Page of the Business Section on March 6, 1997, and was written by the Post's Rajiv Chandrasekaran.

• PC World Online's article discusses the pros (are there any for consumers?) and cons of Article 2B. It was written by Brian McWilliams and appeared on PC World Online's site March 7, 1997.

  
  

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Consumer Action

Consumers are not treated fairly by Article 2B. And in this discussion we use consumers to mean individuals, small businesses, and non-profit organizations, because all these groups purchase software, support the industry, but have been short changed in the current draft. Taking on the significant expense of attending the drafting meetings is difficult to justify for a single person or small business -- unlike the software and other industries that are able to send trade association representatives as well as their own corporate lawyers -- and for that reason other avenues of protest must be used.

CPT recommends that you write directly to your state representatives.

We encourage you to write to your state representatives, but keep in mind that many of them are somewhat removed from this process. Consider the opportunity to write them as your best chance of persuading them to improve the draft law. The members of NCCUSL will be voting on this draft at the end of July and we hope you will be critical of the law, but courteous to the NCCUSL members and anyone else involved in this process. This is an extremely complex undertaking and the more sound input you provide, the better. A well reasoned letter to your representative may have a strong impact on how they vote. Write to your state NCCUSL representatives.

We also recommend that you write directly to the Reporter of Aricle 2B, Ray Nimmer, to express your concerns. The Reporter is the primary person responsible for drafting Article 2B. Please copy Todd Paglia (tpaglia@essential.org) on your emails and letters. The Reporter has heard from relatively few consumer/purchasers of software and information and your input will be helpful.

These are the best opportunities to affect the draft and your letters and email will be conveying a side of the issue that has been neglected.

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Example Consumer Letters of Protest

The following are letters written by concerned consumers regarding the impact of Article 2B. These emails provide a perspective that is underrepresented in the drafting process and point out important aspects of the draft law that favor software publishers over consumers. All letters are provided here as examples of consumers taking the initiative to comment. We encourage you to do the same and get involved with the process. Your current understanding of the law may be wrong, the UCC may provide you with more or less protection than you think, but the best way to find out is to get involved. Note that CPT selects the the consumer comments here based upon the interesting issues they raise or perspective they provide and CPT does not edit them for style or content.

• Software engineer Travis Jenson writes in to offer his views on 2B.

• A letter from Jim Glidewell, a programer with some interesting perspectives on 2B.

• Brent Clothier sent an email to the Reporter of Article 2B which raises, among many other important matters, the cost of faulty software to the purchasers due to the product's poor quality. At this point, testing and finalizing the product actually occurs in the market place.

• Barry Press wrote to Ray Nimmer to express his dismay that the draft allows the software publishers to take advantage of the domestic market without requiring an appropriate level of responsibility to consumers.

• Wilkes Walker also wrote an informative letter on the consumer perils of Article 2B.

• Marc Rassbach writes in with a few real life examples of what he sees as current problems with software licenses.

  
  

Links

• Recent Drafts of UCC article 2B

• The Reporter of UCC 2B is:

  Raymond T. Nimmer (RNimmer@UH.edu)
  Leonard Childs Professor of Law
  University of Houston Law Center
  Houston, Texas 77204-6370
  

• For a broad array of information on Article 2B, including many comments from the industry side for perspective on their views, see A Guide to the Proposed Law on Software Transactions provided by Carol A. Kunze.