The Principles of the Law of Software Contracts, or the “Principles,” seek to “unify and clarify” the law of software transactions. The drafters, however, excluded “digital content” from the scope of their project. This Essay explains why the scope of the Principles should encompass digital content. The exclusion of digital content creates two different but related problems. The first problem is that it creates what I refer to as “classification confusion.” Given the complexity and speed of technological innovation, the task of distinguishing digital content from software may be difficult for courts. The second problem is that it fails to resolve the conundrum of how to balance the proprietary rights and interests of licensor-owners and the rights and interests of licensee-consumers. This conundrum in turn has created problems of contractual form and user assent that arose out of software transactions but which have much more troubling applications in other contexts. With (and sometimes, even without) a click of a mouse, one can relinquish intellectual property, privacy, and expression rights. This Essay proposes that the Principles should generally apply to digital content. The Principles are an impressive accomplishment and go a long way toward unifying and clarifying the law of software transactions. This Essay urges that they go even further.
This Article will describe the drafting history of the Principles of the Law of Software Contracts, with particular attention to the extent of consumer and public interest group representation in the process. The drafting process, I will argue, did not take adequate stock of problems identified in the late 1990s with proposed Article 2B of the Uniform Commercial Code, and then the Uniform Computer Information Transactions Act. Persistent problems include provisions encouraging terms that violate public policy, that constitute copyright or patent misuse by attempting to prohibit fair use or withdraw material from the public domain, or that are not properly disclosed before the purchase. The difference between the present situation and the 1990s, however, is that European Union (EU) directives on the subject of consumer protection and electronic commerce are of much greater importance today, particularly given the explosion in e-commerce between the United States and Europe. This Article will analyze whether the Principles do enough to protect the interests of consumers and the public in four key areas: (1) consistency with U.S. federal and state statutory and common law, (2) clear and conspicuous disclosure of all relevant terms and conditions prior to the sale, (3) regulation and prevention of one-sided and unconscionable contract terms, and (4) consistency with EU and domestic European law. The Principles and the comments thereto appear to sanction conduct that is in tension with the federal Copyright and Patent Acts, the common law of several U.S. states, and the EU's directives on Unfair Terms in Consumer Contracts (1993) and Protection of Consumers in Respect of Distance Contracts (1997). The Principles seem to be an imperfect attempt to unify the law of software contracts, codify best practices, and develop the law in a desirable direction. Finally, the Article will discuss when it is appropriate to harmonize U.S. and EU law and public policy.
In May 2009, the American Law Institute (ALI) approved its Principles of the Law of Software Contracts (Principles). The attempt to codify, or at least unify, the law of software contracts has a long and contentious history, the roots of which can be found in the attempt to add an Article 2B to the Uniform Commercial Code (UCC) in the mid-1990s. Article 2B became the Uniform Computer Information Transactions Act (UCITA) when the ALI withdrew from the project in 1999, and UCITA became the law in only two states, Virginia and Maryland. UCITA became a dirty word, with several states enacting “bomb shelter” provisions to ensure that UCITA would never enter those states by way of a choice of law clause. Although the Principles was conceived, in part, as a counterweight to UCITA, the latter was dead in the water by the time the Principles Project became active. Nevertheless, the Principles Project proceeded apace. This Article examines the results of that decision.
In this Essay, we discuss the nature of the Software Principles and describe some of what we believe are their highlights. By highlights, we mean not only Principles that we believe are helpful contributions to the goal of clarification and unification of software contract law, but also those that have already received some attention because of their controversial nature. Specifically, we first explain the focus of our project, which itself presents some challenging issues. We then discuss several of the specific Principles. We present the Principles' treatment of terms that may conflict with federal intellectual property law. We explain the Principles' approach to the thorny issue of what constitutes assent to electronic standard forms. We illustrate how the Principles have modified some of the UCC's warranty rules that, because of their fogginess, have created much litigation and controversy. Sticking with warranty issues, we discuss what is probably the most controversial Principle (at least among software vendors), namely, the nondisclaimable warranty of no material, hidden defects. Finally, we set forth the Principles' treatment of automated disablement of software's functionality.
The recognition of the contract of sale is rightly said to be a key achievement of the Roman jurists. In Roman law, it had three characteristics. First, a sale is entered into informally. The parties are bound without the use of any special formality such as an oath, a document, a deed, or even a handshake. Second, sale is what the Romans called a contract of good faith (bonae fidei) as distinguished from a contract of strict law (stricti iuris). The parties are bound, not only to what they said, but to all the obligations that follow as a matter of good faith. Third, a sale is binding upon consent before delivery of the goods to be sold or payment of any of the purchase price. Virtually all modern legal systems recognize a contract of sale with these three features. The Romans were the first.. . .