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Major Differences Between Article 2 of the Uniform Commercial Code and UCITA

After more than 10 years of proposals, revisions and re-revisions, the National Conference of Commissioners on Uniform State Laws (NCCUSL) at long last voted to adopt the Uniform Computer Information Transactions Act (UCITA) on July 29. Like its better known cousin, the Uniform Commercial Code (UCC), this act is intended to promote uniformity in the area of computer information transactions.

"What are computer information transactions?" you ask? Under the language of the model act, they would include any "commercial agreements to create, modify, transfer or distribute computer software, multimedia interactive products, computer data and databases [and] Internet and online information." Members of the NCCUSL have been concerned about the lack of clear, consistent rules governing such transactions in this rapidly expanding part of our national economy (which now accounts for more than a third of the nation's economic growth). Contracts for computer information may be valid in one state while not in others, or terms within such contracts may or may not be enforced, thus creating uncertainty and risk which both sides to such contracts would prefer to avoid.

Five basic themes underlie many of the provisions of the UCITA. They are the following:

Computer information transactions involve licenses, not sales.

Small companies play a more significant role in the computer information industry than many other industries.

Computer information transactions implicate fundamental free speech issues.

Freedom to contract and practical commercial context of the transactions are important.

The law should facilitate continued expansion of e-commerce and be technologically neutral.

Like the UCC, the UCITA will remain as a model act until it has been presented to each state's legislature and until it is adopted as part of the state's statutory law. That could be its biggest hurdle yet. Several well-funded information industry groups remain opposed to some of the terms contained in the model act's language. Many consumer advocates would also like to see more protection for consumers be added. Because these groups may have more sway over legislatures in some states than others, the result may be a uniform act that differs from state to state. Does that sound unusual? Its not-remember that UCITA's distant cousin, the UCC, also varies from state to state.

Before the UCC and the UCITA, what was one of the first, and most significant, of the U.S. government's attempts to promote uniformity in commercial laws from state to state? (Hint: think of "commerce" and Constitution).

Based on the information presented above, what do you see as the major differences between Article 2 of the Uniform Commercial Code and UCITA?

What is the legal distinction between selling a product and licensing it?

Many of the provisions in the UCITA were first proposed as a modification to Article 2 of the UCC. Why do you think the drafters decided to propose it as a separate and distinct uniform act?

Thank you!

Solution Preview

Please see response attached for best formatting (also presented below), as well as two supporting articles. I hope this helps and take care.

RESPONSE:

1. Before the UCC and the UCITA, what was one of the first, and most significant, of the U.S. government's attempts to promote uniformity in commercial laws from state to state? (Hint: think of "commerce" and Constitution).

I have located two of the earlier attempts to promote uniformity in commercial laws from state to state. However, it is unclear if these are the two most significant ones, so to be sure, I attached a list of all the commercial codes (attached as NCCUSL) for you to go through:

DECEPTIVE TRADE PRACTICES ACT (1964)(1966)
Legislative Fact Sheet | Final Act

TRADE SECRETS ACT (1979)(1985)
Legislative Fact Sheet | Summary | Why States Should Adopt | Final Act

2. Based on the information presented above, what do you see as the major differences between Article 2 of the Uniform Commercial Code and UCITA?

The major difference is one of focus. In fact, UCITA was intended to be an extension of UCC (see http://www.law.cornell.edu/ucc/2/article2.htm#s2-101). Whereas UCC Article 2 is focused on sales in general, the focus of UCITA is specifically on computer software - to govern all contracts for the development, sale, licensing, support and maintenance of computer software and for many other contracts involving information. It also extends easily (vendor's choice) to sales of computers and computer peripherals and probably extends to many types of embedded software, such as the fuel injectors in your car.

See page 3 and 4 of the attached article (UCITA and UCC) that lists at least 4 differences to consider.

However, it is a controversial bill (http://www.badsoftware.com/networld.htm http://www.badsoftware.com/badindex.htm). Others argue that UCC was sufficient as it already covers copyrights and patents sufficiently, and rather, that UCITA is promoted by the publishers of software to avoid legal sanctions for poor quality products, etc. In contrast, the usual purpose of Codes is that of clarity - for judge rulings in the event that a case comes before him or her. ...

Solution Summary

Prior to the UCC and the UCITA, this solution identifies one of the first, and most significant, of the U.S. government's attempts to promote uniformity in commercial laws from state to state. Based on the information presented in the scenario, this solution explains the major differences between Article 2 of the Uniform Commercial Code (UCC) and UCITA. It then explains the legal distinction between selling a product and licensing it. Since many of the provisions in the UCITA were first proposed as a modification to Article 2 of the UCC, this solution explains why the drafters decided to propose it as a separate and distinct uniform act.

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