THE NEED FOR UNIFORM RULES FOR THE INFORMATION HIGHWAY
AN OVERVIEW OF UCITA
by
Carlyle C. Ring, Jr.
Commissioner on Uniform State Laws
Chair, UCITA Drafting Committee
Of Counsel, Ober/Kaler
1401 H Street, NW, Washington, DC 20005
ccring@ober.com

Information technology is the fastest growing sector of our economy and by 2006 will account for over half of the national employment. The average pay for IT industries is almost double the national average. An important factor in Information technology companies choosing a location is a jurisdiction that provides a clear, consistent legal framework for this new information age.

The Uniform Computer Information Transaction Act (UCITA) has been considered and drafted over a ten-year period. An American Bar Association Study Committee strongly recommended to NCCUSL that a new Uniform law was need. Drafting Committee. The UCITA Drafting Committee had 18 drafting committee meetings held each time from Friday morning to Sunday noon. All were invited to attend and participate in the discussion. As many as 125 attended, with average attendance of 80. All interested groups came to participate, including software developers, computer manufacturers, entertainment industries (movies, sound recording, cable TV, broadcasting), newspapers and magazines, stock and commodity exchanges, large and small companies using information services, consumers, libraries, insurance companies, bar associations and others. Our efforts spanned eight years of drafting, discussing and redrafting. The National Conference of Commissioners on Uniform State Laws (NCCUSL), after readings at four consecutive meetings (1996-1999), approved UCITA and recommended it for adoption by the various states. NCCUSL, which is 110 years old, is composed of Commissioners from all 50 states and D.C., the U.S. Virgin Islands, and Puerto Rico. Uniform Laws have been widely adopted by the states. UCITA became available for consideration in December 1999 and has been enacted in Virginia and Maryland earlier this year, and is under consideration in five other states.

> Snapshot of UCITA

Like the Uniform Commercial Code (UCC), enacted in all states, the principal theme of UCITA is that innovation and competition is best fostered in a free market, where the parties may choose the technology and business models that best suit their transaction. The outline of UCITA parallels UCC Article 2 for sale of goods:

Gap-filler rules. Two/thirds of UCC Article 2 and of UCITA's 106 sections are default rules that come into play only if the express terms of the agreement of the parties are silent on a matter and a term cannot be supplied by trade usage, course of dealing, or past performance of the parties (see definition of "Agreement" in both UCC Article 1 and UCITA, and also Section 113). Only when the Agreement is silent, and trade usage, etc., does not fill the gap do the default rules of UCITA fill the gap. In the event the default rules (based upon general business practice) are not appropriate for the particular transaction, the parties may include an express term that is appropriate. With the exception of only a few default rule sections, there is no controversy over the approximately 70 UCITA gap-filler sections.

Formation Rules. UCITA expands the contract formation rules to encompass electronic contracting for information. These rules comprise about 20% of UCITA's sections. They follow the wording and provisions of the new E-Signature federal act and UETA, which, if enacted by a state, lifts the federal preemption. In addition, UCITA provides further substantive rules needed for on-line transactions that provide safeguards and safe harbors against inadvertent assent and attribution.

Non-variable Rules. UCITA contains a limited number of non-variable provisions listed in Section 113 to provide against abuses.

All interested groups participated in the drafting process. Most support UCITA as a reasonable accommodation and consensus (see the attached listing of both large and small licensees and licensors.) The concerns of some are based on their view that there should be more mandatory rules + that government should intervene to establish the terms of the contract rather than the marketplace. In short, they would go further than Section 113 and impose for every transaction rules that in the view of many would hamper innovation and new technologies that cannot be fully envisioned at this time.

> Current Law

Our current statutory and common law is based on transactions in tangible products. Current law is not designed to be applicable to intangibles and information. Licensors and licensees of software and information products both are looking for clear, consistent rules for the information highway. UCITA provides uniform rules essential for the global economy evolving in the Information Age.

The business practice has been to license intellectual property from the beginning of our Republic. Patents have been licensed since the Constitution was written; trade secrets licensed since the beginning of the Industrial Revolution; movies licensed to theaters since the beginning of the last century; and software licensed since it was invented. UCITA accepts this established business practice of licensing of intellectual property.

Intellectual property rights are largely established by federal patent and copyright laws. States also establish IP rights under trade secrets and other laws. UCITA does not change or modify in any way these IP rights of federal and state laws. Both patent and copyright cases routinely hold that contract law issues related to their subject matter are largely matters of state contract law.

Under current common law, there are no implied warranties. Such warranties are established only by statutory law. UCITA establishes for the first time implied warranties of merchantability and fitness, as well as for integration and informational content, for computer information.

Court decision since 1993 have enforced shrinkwrap and clickwrap licenses. UCITA places substantial limits on such licenses that protect the other party to the agreement.

Under current law software and information can be recovered by electronic means if there is no trespass or breach of the peace. Thus electronic self-help in the event of a material default by the licensee is unrestrained under current common law. UCITA does not permit electronic self-help unless the licensee separately negotiates and assents to it and imposes very substantial due process and other limitations on its use.

Under current common law and case decisions, it is possible to enter into inadvertent contracts electronically. UCITA imposes substantial safeguards to avoid inadvertent assent.

UCITA provides that consumer protection statutes and rules trump UCITA and any terms in a contract under UCITA. In addition, UCITA includes new statutory protections for consumers.

UCITA provides certainty and consistency in the law that fosters the opportunity for this new information age to reach its full potential.

> The Need for Uniformity

Information technology accounts for more than one-third of the nation's economic growth and is the most rapidly expanding component of the U.S. economy. According to the U.S. Department of Commerce, 1 by 2006, almost half of the U.S. Workforce will be employed by industries that are either major producers or intensive users of information technology products and services. These employees average $53,000 annual compensation compared to $30,000 for all employees of private employers. Until now, however, there has been no law providing clear, consistent and uniform rules governing the intangibles of transactions involving computer information.

Few question the need for uniform rules. Everyone who has actively studied the issue concludes that uniform rules are required. Those uniform rules can either be achieved by Uniform State Laws where contract law has traditionally resided or by federal preemption. Congress has a number of bills now before it that would preempt parts of state contract law. Most states also are seeing more ad hoc bills on e-commerce.

In the early 90's a federal task force on Intellectual Property in the National Information Infrastructure (NII) concluded:

"[the] challenge for commercial lawBis to adapt to the reality of the NII by providing clear guidance as to the rights and responsibilities of those using the NII. Without certainty in electronic contracting, the NII will not fulfill its commercial potential."

The White House issued a paper on July 1, 1997 that found: "Many businesses and consumers are still wary of conducting extensive business over the Internet because of a lack of a predictable legal environment governing transactions." 2

The report notes the work of the Conference and states:

"The administration supports the prompt consideration of these [uniform state law] proposals, and the adoption of uniform legislation by all states." 3

The Conference Communiqué for Global Business Dialogue on Electronic Commerce (GBDe) 4 states:

"We came together today for this inaugural conference of the GBDe in order to express our collective sense of urgency with respect to addressing electronic commerce issues by businesses and public authorities worldwideB It is the consensus position of the GBDe that inconsistent local, national and international patchwork regulation and inflexible regulatory constraints will deprive consumers of the economic benefits of an innovative electronic marketplace and would lead to significant uncertainty to consumers. Governments, administrations, parliaments and international organizations around the world are beginning to question the applicability of traditional, national legislative approaches to this new medium, which is uniquely swift and borderless. They are challenging us to develop effective self-regulatory and market-driven mechanisms that are not limited to national border, to address critical policy issuesB We have drawn up proposals and criteria that will create a practical and flexible + where needed + legal and effective market-driven framework that promotes an open and frictionless global marketplace. Existing barriers must be overcome. In that process, we give precedence to effective self-regulation and technological solutions, where possible. In special cases, where regulation may be considered essential, any intervention of public authorities should be narrowly tailored, internationally-oriented, transparent and aiming a level playing field." 5

Hal Burman, Office of Legal Adviser, Department of State, at an American Law Institute meeting, emphasized the great importance of a consistent U.S. legal framework in order to succeed in international negotiations:

"Our ability to extend and protect United States interests in a globalized economy + and electronic commerce is the epitome of that globalized economy + depends entirely on our ability to proceed from a basis of some commonality in state law. If there is any substantial delay [in completing UCITA] that will impair our effortB, other countriesBare going to take the lead." (transcript, pp.145-6)

The need for uniformity is illustrated by the following common event: a business person is flying somewhere over the United States using his or her laptop computer, connecting with a database. The exact location of the airplane is unknown, as is the location of the servers, or the holder of the database. A license is proposed. The business person accesses the database which may be copyrighted. Among the many questions are: Is the holder of the database the owner or authorized by the owner to transfer the database? Has a valid license been agree to? What are the terms of the license? What warranties arise? What are the applicable standards of performance? Who are the parties to the contract (license)? Have the identities of the parties been adequately established? What law applies? What states have jurisdiction in the event of a dispute? If the database holder is without authority, is the business person an infringer of the copyright?

Under current laws, these and many other questions are not answered clearly, consistently and uniformly. Thus, there might be a valid and enforceable contract (license) or terms of a contract in one state but not another. The chaos in a national and international Internet is self-evident and wholly unacceptable.

The void can be filled either by Uniform State Laws with its integration into existing state contract law or Congress can impose uniform rules but likely without adequate provision to coordinate with, and integrate into, existing state contract law.

A. UCITA

The Uniform Computer Information Transactions Act (UCITA) was promulgated by NCCUSL in July 1999, but not fully styled for introduction until December 1999. UCITA covers:

• Software contracts and licenses
  
• On-line access to databases
  
• Contracts to distribute information over the Internet
  
• Contracts to create computer programs

UCITA was introduced in seven states in 2000: Delaware, Hawaii, Illinois, Maryland, New Jersey, Oklahoma and Virginia. UCITA was adopted in Virginia (House: 92-5; Senate: 39 + 0) and signed by the Governor. In Maryland, the Governor signed UCITA into law. The Speaker and President of the Senate were principal Patrons of the UCITA Bills. It was passed in the Senate 37-8 and in the House 96-39. It is anticipated that bills will be introduced in additional states in 2001.

The Bar Associations of Delaware and the Chamber of Commerce have endorsed UCITA. The Law of Commerce in Cyberspace Committee of the Washington State Bar Association has written a comprehensive Report on UCITA which was approved by the Executive Committee of the Business Law Section as representing the views of the Section (http://www.wsba.org/sections/biz/lcc/report/2000Ucita.htm). The WSBA Legislative Committee has recommended support in principle but with further study.

B. UCITA Themes

• Freedom of Contract. UCITA, like the UCC, is premised on the parties having freedom of choice. The terms and effect of a contract are determined by agreement rather than by legislative fiat. The exercise of contract choice opens up full opportunities for innovation and growth. With certain limited exceptions the terms expressed by the parties in their agreement control. If their agreement is silent, then trade usage and the parties' course of dealing and performance are looked to, and only if the contract is both silent and trade usage and course of performance is unhelpful, do the "gap-filler" provisions of UCITA apply.
  
  
• Information and First Amendment. Rights in intellectual property are established by other law such as patent and copyright law. UCITA specifically provides that federal preemption applies (Section 105(a). State intellectual property law supplements UCITA and is not displaced by UCITA (Section 114(a)). UCITA adopts a neutral position with respect to what, ultimately, are issues of federal and international information rights policy. However, UCITA provides a basis for case by case resolution of the myriad issues in Section 105(b).
  
  
• Fundamental Public Policy Issues. A principal concern of consumers and other users and developers of computer information has been that the contracts which provide for its use not contain provisions which violate fundamental public policies. The Drafting Committee did not want to depart from the longstanding policy that a statute premised on freedom of contract should not be a regulatory statute, and thus was reluctant to include in the statute a laundry list of impermissible terms. Instead, members of the Drafting Committee worked with members of the academic community for several months to craft a solution which would recognize the legal principle that certain terms of certain contracts may be unenforceable because they violate a fundamental public policy. That solution is now embodied in Section 105(b) and accompanying comments.

C. Scope

• Limited to "Computer Information Transactions" (Section 103 (a)). UCITA covers "computer information transactions", i.e. "an agreementBto create, modify, transfer, or license computer information or informational rights in computer information (102(11)). UCITA applies to contracts to license or buy software, contracts to create computer programs, contracts for on-line access to databases and contracts to distribute information over the Internet. UCITA does not apply to goods such as television sets, stereo equipment, airplanes or traditional books and publications. Goods generally remain subject to UCC Article 2 or Article 2A.
  
  
• Opting in and Opting Out (Section 104). Under common law, the right of parties to choose generally permits them to adopt the law they may wish to apply to their transaction. However, UCITA places some specific restrictions on opting in or out in order to safeguard the parties (Section 104).
  
  
• Exclusions from UCITA. UCITA does not affect transactions in the core businesses of other information industries (e.g. print, motion picture, broadcast, sound recordings) whose commercial practices in their traditional businesses differ from those in the computer software industry. UCITA expressly excludes:
  1. Financial services transactions;
  2. Motion pictures, broadcast and cable TV, other than mass-market transactions in computer information;
  3. Sound recordings, musical works, phonorecord or enhanced sound recording;
  4. Compulsory licenses (103(d)(3));
  5. Contracts of employment of an individual, other than as an independent contractor, and newsgathering persons (103(d)(4);
  6. A contract which does not require that the information be furnished as computer information or in which the form of the information as computer information is otherwise de minimis with respect to the primary subject matter of the transaction (103(d)(5));
  7. Newspapers, magazines, books, and other print forms by the definition of "computer information" except when transferred in electronic form (e.g. over Internet by license), and (Section 102(11));
  8. E-mail communications merely about the agreement

D. Assent: UCITA's Safeguards Against Inadvertent Assent and Safe Harbors for Contract Formation

There are a number of concepts in UCITA that need to be read together to fully appreciate the safeguards incorporated to protect the parties from inadvertent contracts, and place substantial limitations on clickwrap licenses, particularly in e-commerce. Some of these protections do not exist in common law. These concepts include:

1. "Authenticate" (Section 102(6)) includes "signature" but also are "with the intent to sign a record, otherwise to execute or adopt an electronic symbol, sound or process referring to, attached to, included in, or logically associated or linked with, a record or term." There is no authentication without an intent for the authentication to be a signing. The other alternative in common law and UCITA is manifesting assent by contract.
   
   
2. Agreement by conduct: "intentionally engages in conduct or makes 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 record or term"; (see also Restatement, Contracts(Second))
   
   - there must be "intent" and also "reason to know" to be proven from all the circumstances
   - if a party denies assent, "intent" or "reason to know" must be proven with the "burden of persuasion on the party assenting the contract.
   - the circumstances may include a "reconfirmation" as a safe harbor, i.e. an initial click on "I agree" followed by a second display asking whether the person really intends to agree to the agreement displayed and a second click in response thereto (Section 112(d)). The "reconfirmation" is not ordinarily employed or required today. UCITA adds this safeguard which will change existing business practice.
   
   
3. Opportunity to Review Before conduct can be assent above, there must be an opportunity to review the terms (Section 112(e)),
   
   
4. Later terms, after beginning performance or use, are adopted only "Bif the parties had reason to know that their agreement would be representedBby a later record to be agreed on." (Section 210)
   
   
5. In a Mass-market License, the licensee is entitled to reject the contract with later terms for any reason and obtain not only a refund but incidental costs of return or destruction and reasonable and foreseeable costs of restoring the licensee's system (Section 210(b));
   
   
6. Pretransaction Disclosure (Section 211) provides a strong incentive for disclosure of all terms before the licensee must pay or gets delivery, and lastly
   
   
7. "Attribution" to the party to be bound is required. The efficacy of an attribution procedure is determined by the circumstances including any agreement of the parties (Section 213(c)). Commercial reasonableness of an attribution procedure is a factor in making that determination (Section 212).

In short, a party to be bound must have an opportunity to review the terms, then assent with an intent to authenticate (sign) or intent by conduct to agree and with reason to know that the other party will infer assent; (or if the opportunity to assent is after performance or use, the party to be bound must have reason to know there are later terms and assent, and in a mass-market transaction the party can return the item with a cost-free refund), and lastly, the claimant has the burden of establishing attribution (Section 213(a)).

E. Electronic Contract (Sections 212-215)

• A record or authentication may not be denied legal effect, validity or enforceability solely on the ground that it is electronic (Section 107). A group of sections then set forth particular rules to be used when an electronic record or authentication is at issue.

F. Warranties (Part 4)

UCITA provides the following basic warranties which will be familiar to practitioners not found in common law but provided statutorily by UCITA: quiet enjoyment and non-infringement, merchantability of a computer program, information content and fitness for licensee's purpose and system integration. It also clarifies what is an express warranty. It sets forth the manner in which implied warranties may be disclaimed. Implied warranties are not generally recognized and/or clear under common law. UCITA thus significantly extends warranties over those imposed under current law.

• Implied Warranty, Informational Content (Section 404)
  
  UCITA establishes a new implied warranty which focuses on the accuracy of data provided under a contract. The basic warranty states: "Ba merchant that, in a special relationship of reliance with a licensee, collects, compiles, processes provides or transmits informational content warrants to its licensee that there is no inaccuracy in the informational content caused by the merchant's failure to perform with reasonable care." Note that this warranty does not guarantee that there will be no inaccuracies; rather it gives some protection by assuring that there will be no inaccuracies caused by a failure to use reasonable care.
  
  
• Implied Warranty, Licensee's Purpose; System Integration (Section 405)
  
  If licensor has reason to know of any particular purpose for which the information is required and that the licensee is relying on the licensor for expertise, there is an implied warranty that the information will be fit for that purpose unless, from all the circumstances, it appears that licensor was to be paid for the amount of its time or effort regardless of the suitability of the information, in which case, the implied warranty is that there is no failure to achieve the licensee's particular purpose caused by the licensor's lack of reasonable care and workmanlike effort to achieve that purpose.

G. Transfer of Interests and Rights (Part 5)

• UCITA generally presumes that transfer can be made of a contractual interest under a license. However, transfer may be prohibited under other law (e.g. copyright law), or may not be allowed if such a transfer would materially change the duty of the other party, materially increase the burden or risk imposed on the other party, or materially impair the other party's property or its likelihood or expectation of obtaining return performance.
  
  
• However, if the parties agree to a term prohibiting transfer, that term is enforceable. In a mass-market license it must also be conspicuous.

H. Financing Arrangements (Sections 507-511)

• UCITA establishes bridge rules for license financing transactions that are not governed by UCC Article 9. The rules are similar to those for "Finance Lease" under Article 2A.

I. Remedies: Limitations on Electronic Self-Help (Section 816)

The default rule under UCITA is that electronic self-help is prohibited.

• Under current law, without UCITA, self-help is permitted if there is no trespass or breach of peace. Some cases do require some notice of the provision in the contract.
  
  
• Under UCITA, parties, can agree to a provision for self-help but even a provision for self-help, it is prohibited if its exercise will result in substantial harm to the public health and safety or grave harm to the public interest. A term to permit self-help is not valid unless the license has a separately-assented-to term that allows a limited exercise of electronic self-help. If authorized, before exercise, 15-day notice must be given to the person, place and in the manner designated by the licensee. Wrongful exercise results in consequential damages. Expedited injunctive relief is mandated.
  
  
• These UCITA provisions, when taken together with the provisions of Section 815, are so restrictive that it is unlikely that any licensor will be able to effectively use electronic self-help except in the most egregious cases; e.g. where a licensee is improperly disclosing the licensor's confidential and proprietary information. Most licensors would not agree to negotiate such provisions into their standard form contracts; thus it is a major benefit for licensees that UCITA effectively excludes electronic self-help from standard form contracts.

J. Consumer Protections are Preserved and Mandated

While many of the transactions to be covered by UCITA are commercial between merchants, UCITA also extends consumer protections to UCITA transactions.

Section 105© explicitly provides:

"(c) Except as provided in Subsection (d), if this [Act] or a term of a contract under this [Act] conflicts with a consumer protection statute [or administrative rule], the consumer protection statute [or rule] governs."

Subsection (d) sets forth rules that enable e-commerce by allowing an electronic record, authentication, and conspicuousness. The Official Comments clearly state that "timing, manner and content" of disclosures are unmodified by those e-commerce rules. However, to the extent a state provides for a "writing" and does not wish an electronic message to be authorized, a legislative note instructs the state to except such statutory provisions.

UCITA's objective is to have all consumer protections extend to computer information transactions. If amendments to existing state laws are needed, the drafters encourage them to be made to accomplish application of such consumer protections regardless of whether paper or electronic, or the subject of the transaction.

UCITA: (1) retains existing consumer protection laws, (2) adopts consumer rules in Article 2, and (3) adds limited additional protections appropriate for issues associated with computer information transactions.

Many contract law rules in UCITA benefit consumers. The doctrines of unconscionability, good faith, and fundamental public policy provide important consumer protections. But these rules also affect more than consumer transactions and respond to commercial concerns as well. So do the rules in UCITA (like those in Article 2) that disclaimer of implied warranties in a record must be conspicuous, or the rule in UCITA that a contractual choice of forum is unenforceable if it is unreasonable and unjust, or the rule in UCITA that assent is not effective unless there was an opportunity to review terms prior to giving assent. All of these and other rules benefit consumers but are not typically denominated as "consumer protections" rules. They contribute to the fact that UCITA creates a world in which consumers are better off than under current law.

UCITA also includes rules focuses solely on consumer contracts and rules focused on mass-market contracts, which include all consumer contracts.

Section 105(c) provides that, except for stated rules regarding electronic commerce, if there is a conflict between UCITA and a consumer protection statute, the consumer protection law governs. Consistent with this theme, UCITA enacts rules preserving existing consumer law even if that result would not necessarily occur under other state law, such as:

• Section 104: an agreement to opt into or out of UCITA cannot change a mandatory consumer protection law that would otherwise apply
  
  
• Section 109(a): an agreed choice of law cannot alter an otherwise applicable consumer protection rule that cannot be varied by agreement

UCITA retains consumer protection rules contained in UCC Article 2 including:

• Section 303: a contract term requiring that modifications of contract be in writing is not enforceable in a consumer contract unless the consumer manifests assent to the term
  
  
• Section 704: licensee has a right to refuse tender of a copy that does not perfectly conform to the contract
  
  
• Section 803: consequential damages for personal injury cannot be disclaimed for a computer program contained in consumer goods

UCITA establishes various consumer protection rules focused on computer information transactions that do not exist under current law. These include:

• Section 104: a term changing the application of UCITA to the transaction must be conspicuous in a mass market
  
  
• Section 209: a license cannot alter terms expressly agreed between the parties and, if presented after deliver, licensee has cost-free right of return if it refuses terms
  
  
• Section 214: a consumer has a right to avoid an online contract if it acts promptly to avoid the effect of an electronic mistake
  
  
• Section 304: safe harbor rule for changing terms in a continuing contract requires that the licensee that is a consumer be given a right to terminate when change is made
  
  
• Section 409(b): a warranty to a consumer extends to all individual consumers in the family or household if use should have been expected by the licensor
  
  
• Section 503: a term that prohibits transfer of a contract right must be conspicuous for a mass market transaction
  
  
• Section 805: the statute of limitations for consumers cannot be reduced by agreement

K. Choice of Law and Forum

UCITA is an e-commerce statute in which transactions are:

• global
• borderless
• faceless

Absent authorization for Choice of Law and Forum, parties to a license (contract) would be subject to, and have to attempt to comply with the laws of every country in the world and that of each state. Knowing and applying laws of 190 countries would be impossible for small business and expensive to major enterprises. Particularly for small-business licensors that provide competition and innovation the cost would be prohibitive. E-commerce laws have allowed choice:

(1) UCC Articles 4A for e-commerce funds transfers and Revised Article 5 for electronic letters of credit likewise recognized the necessity in such a global environment, with comprehensive choice of law and forum provisions as follows:

4A-507 "Bthe law of a jurisdiction selected [by the parties]Bmay govern, whether or not that law bears a reasonable relation to the matter in issue."

5-116(a) "Bthe jurisdiction whose law is chosen [by the parties]Bneed not bear any relation to the transaction."

5-116(e) "The forum for settling disputesBmay be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a)."

(2) UCC Article 1 is currently under revision and the current draft changes provide:

1-301(a) "Ban agreement by parties to a transaction that any or all or their rights and obligations are to be determined by the law of this state or of another state or country is effective."

The Reporter's (Professor Neil Cohen of Brooklyn Law School) Notes state:

"This recognition of party autonomy with respect to governing law has already been established in several Articles of the Uniform Commercial Code (See UCC Section 4A-507, 5-116 and 8-110) and is consistent with international norms. See, e.g., Inter-American Convention on the Law Applicable to International Contracts, Article 7 (Mexico City, 1994); Convention on Law Applicable to Contracts for International Sale of Goods, Article 7(1) (The Hague 1986); E.C. Convention of Law Applicable to Contractual Obligations, Article 3(1) (Rome 1980)" 6

Under UCITA, choice of law cannot alter applicable consumer protection law. Choice of forum cannot be "unjust and unreasonable" + which is current federal and predominant state law.

L. Copyright Law - Libraries: Quest for Change in Copyright Law

The libraries, through their associations and the Digital Futures Coalition, have focused their concern primarily on issues related to the Copyright Law, that are the same concerns for which they have been lobbying Congress for changes in the Copyright Law.
The dramatic transformation from books to digital technology over the last two decades has had an exciting but challenging impact on the speed and availability of information. A book can be used by only one person at a time; a digital record can be simultaneously available to thousands, 24 hours a day, anywhere.

Both Congress and the libraries have struggled with how ""fair use"" and ""first sale"" apply to a digital record; the libraries have not been satisfied with what Congress has done to date.

The Digital Future Coalition (DFC) (composed of some 40 library and educational associations) actively lobbied Congress on the Digital Millennium Copyright Act of 1998 (""DMCA""). They publicly state they were ""disappointed [in] the final text"" of DMCA. In August, 2000, DFC requested specific ""limitations on the implementation of the technological measuresBB"" and ""BBnew legislationBBas to the supremacy of federal lawBB"" including amendments rejected by Congress in the initial DCMA. See Excerpts attached.

Five library associations, for the same Copyright Office study in August 2000, state ""BBrethinking of federal policy is urgently neededBB"" and petitioned for changes for digital records from Congress in the Copyright Law in the ""first sale"" doctrine for interlibrary loans, classroom use, preservation, donation and licensing terms. See the Excerpts attached.

IP professors, writing to the Presiding Officers of the Maryland General Assembly, acknowledge that the matter is in the hands of Congress, and case-by-case application of the Law: ""[T]he U.S. Constitution may still preempt some of these license termsBB We believe that when this issue reaches the Supreme Court, the Court will conclude that federal law indeed does preemptBBterms that interfere with fair use of override other statutory limitations on copyright protectionBBThe federal copyright law does not specify with particularity which terms may and may not be varied by contract; these decisions are made on a case-to-case basis by federal courts.""

Federal copyright law is not for States to change. UCITA specifically provides that whatever federal law preempts is preempted. What Copyright Law permits or prohibits is the prerogative of Congress. State contract law is not the place to change copyright law.

Excerpts from DFC Statement of August 2000 to U.S. Copyright Office

""We were concerned and disappointed [in] the final text of the Digital Millennium Copyright Act of 1997(""DMCA"")BB""

"Our immediate concernBBstems from comments included in the 1995 White Paper on Intellectual Property and the National Information Infrastructure (at 93-94) suggesting that the doctrine [first sale] should be inapplicableBBto electronic retransmissions by consumers of material originally received (by way of gift or purchase over digital networks).""

""After enactment of the DMCA, however, ''first sale'' proved to be in greater jeopardy.""

""Although such controls [anti-circumvention] are in their infancy, they clearly have the potential to erase any remaining vestiges of ''first sale'' in current law, where the digital environment in concerned.""

""BBthe DFC believes that recommendations to CongressBBshould be focusedBBon formulating a restatement of ''first sale'' appropriate for the digital condition.""

""We look forward to presenting specific proposals for BBlimitations on the implementation of technological protection measuresBB[W]e hope that the report will recommend new legislationBBthat will provide a clear statement as to the supremacy of federal lawBBAgain, the DFC hopeBBto assist the workBBproposing specific amendments on this preemption issue.""

Excerpts for Library Associations'' Statement of August 2000 to U.S. Copyright Office

""The Copyright OfficeBBshould urge Congress to take meaningful steps to clarify the terms of the first sale doctrine to ensure that state laws and contractual terms that unduly restrict the rights of information users do not preempt federal copyright policy""

""BB[R]ecent adoption of legislative changes in the DMCA has reinforced a view of the legal environment that makes sharing of certain digital works suspect""

""In the past decade, electronic distribution has grown into a dominant method for publishing many kinds of copyrighted works""

""BB[R]ethinking of federal policy is urgently neededBB[The]Copyright Office shouldBBrecommend changes to Section 109BBSpecifically, a first sale doctrineBBshould includeBB

1. Interlibrary LendingBBThe Copyright Act should reaffirm and strengthen the rules on interlibrary loans of digital works.
   
   
2. Unchaining Works: All works BBshould be available for use in the classroomBBwherever they are located
   
   
3. Preservation:BBOne such initiative to ensure preservation of works in digital formats would be creation of a national system of digital library repositoriesBB
   
   
4. Unreasonable Licensing Restrictions: Federal law should preemptBBcontractual terms which unduly restrict the access rightsBBA unitary federal policy, providing minimum standards respecting limitations on the exclusive rights of ownership (including but not limited to first sale, fair use and preservation) should be established.
   
   
5. Donations: Federal policyBBshould encourage donation of works to libraries irrespective of format.
   

1 U.S. Department of Commerce, "The Emerging Digital Economy II" (issued June 1999).

2 A framework for Global Electronic Commerce, http://iitf.nist.gov/eleccomm/ecomm.htm, at page 2.

3 id at page 5.

4 An international meeting of 70 CEO's or Board members, 110 government officials and representatives of international multilateral organizations. Principal presenters and participants included Mozelle Thompson, FTC; Sanford Lituach, The Walt Disney Co.; Richard Brown, EDS; Steve Case, AOL; Louis Gerstner, IBM; David House, Nortel; Lew Platt, Hewlett Packard; and Bert Roberts, MCIWorld Com.

5 Conference Communiqué dated September 13, 1999. http://www.gbde.org/conference/recommendations.html.

6 Professor William Woodward's various papers and his personal advocacy were considered at each meeting by the UCC Article 1 Drafting Committee at length. The Committee, however, unanimously adopted the above proposed drafts.