Preliminary thoughts on UCC Article 2B

by Glenn Tenney

September, 1996

These are some very rough notes of my concerns regarding proposed UCC Article 2B. The proposed article 2B does not do enough to protect consumers from onerous terms and conditions foisted upon us by various IP industries (e.g. the entertainment industry and the software industry).

Article 2B essentially makes "shrinkwrap" licenses the law of the land for all computer users. Some of the "standard terms" found in shrinkwrap agreements preclude modifying the software in any way or translating it even for your own personal use and not for further distribution, reverse engineering it, decompiling it, making archival backups (often precluded), etc. It would then become impossible to use any personal computer or any commercial software unless you accepted the industry's imposed terms and conditions.

These terms are intended to not only protect their standard copyright or patent rights (which is reasonable), but goes far beyond what copyright covers. This works to preclude competition and require additional purchases and has the same effect as if the copyright law had been changed to suit the entertainment and publishing industry.

The Consumer Not Adequately Protected

Nimmer's UCC Article 2B Issues paper provides some background that I believe points out the underlying problem in 2B:

"This project began at the recommendation of an ABA Study Committee. A subsequent study committee of NCCUSL proposed a separate article of the UCC. In 1992, representatives of the software industry objected. A second study committee was appointed. ...

During this period of discussion, industry groups concluded that treatment of contracts affecting their industries within the UCC was appropriate and desirable. The industry strongly advocated a separate UCC article on licensing. It believes the unique character of such transactions merited separate treatment, and separation would make moving forward more expeditious. In July, 1995 the Executive Committee of NCCUSL agreed."

It is clear from this background that the primary input in the process has been from IP owners and the software industry. This has, in my opinion, left the consumer swinging in the wind at the whim of the industry and that the UCC does little to afford any protection for the consumer. It appears that I am not alone:

"Shortly before the Annual Meeting, the representatives of the Consumer's Union distributed a memorandum to Uniform Law Commissioners in which that organization expressed "serious concerns about the approach and balance of draft Article 2B. [It] eliminates protections for consumers and other licensees of computer software that would be available under current Article 2." During the floor discussion, several commissioners expressed a similar concern. This proposition, which surprised many who have been involved in Article 2B as a project for many years, needs to be addressed by the Drafting Committee."

Online Users At Risk

Online users are faced with two problems. First, users are often are faced with a "take it or leave it" agreement (e.g. "click 'ok' to accept these terms or quit to abort the installation of this software") to download software, to access WEB pages, and even to use programs purchased through retail channels. Second, many WEB applications reference programs and databases automatically acknowledging "license terms" often without even displaying the terms (this may be optional and is used to save connect time). The impact of this is that you might be held responsible for having agreed to terms and conditions that you never even saw!

"A response by an electronic agent which signifies acceptance or commences performance constitutes acceptance of an offer even if the response is not reviewed or authorized by any individual." and

" (a) In an electronic transaction, if an electronic message initiated by a party or an electronic agent evokes an electronic message in response, a contract is created when:

  (1) the response is received if the response consists of furnishing information or access to information and the originating message did not preclude such a response; or

  (2) the sender of the originating message receives an electronic message signifying acceptance.

  (b) A contract is created under subsection (a) although no individual representing either party was aware of or reviewed the initial message, response, reply, information, or action signifying acceptance. An electronic message is effective when received even if no individual is aware of its receipt."

Embedded Applications Not Adequately Covered

All of the above situations get even worse when we consider the situation of (a) buying computers loaded with software (e.g. every major computer manufacturer), and (b) software embedded in various other products.

What choice do users have if they purchase a zzzzzzz brand computer but find the terms unacceptable to some component of xxxxxxxxx's operating system? Is it acceptable to society at large to say "you can get your money back on the computer if you don't like the terms when you get it home" (knowing that there would then be NO computer available without those terms!).

What choice would users have if they purchase a some device (or peripheral) with embedded software yet they find the terms for that software unacceptable? What if they rent the computer or device with software pre-installed -- where no license agreement even pops up on the screen, and often with the "shrinkwrap" piece of paper no longer in existence? What if you rent a car with an embedded microprocessor controlled fuel injection system which contained (in the original owner's papers) a license precluding reverse engineering or disassembly of the code inside?

The following are excerpts from some software licensing agreements for currently available "shrink wrapped" commercial products. It is essential to show these excerpts (example 1 and example 2) for everyone to understand what generic terms might be made "the law of the land" if UCC 2B passes.

Example 1:


You may:

* use the Software on any single computer;

* use the Software on a network, provided that each person accessing the Software through the network must have a copy licensed to that person;

* use the Software on a second computer so long as only one copy is used at a time;

* copy the Software for archival purposes, provided any copy must contain all of the original Software's proprietary notices; or

* if you have purchased licenses for a 10 Pack or a 50 Pack, make up to 10 or 50 copies, respectively, of the Software (but not the Documentation), provided any copy must contain all of the original Software's proprietary notices. The number of copies is the total number of copies that may be made for all platforms. Additional copies of Documentation may be purchased.

You may not:

* permit other individuals to use the Software except under the terms listed above;

* permit concurrent use of the Software;

* modify, translate, reverse engineer, decompile, disassemble (except to the extent applicable laws specifically prohibit such restriction), or create derivative works based on the Software;

* copy the Software other than as specified above;

* rent, lease, grant a security interest in, or otherwise transfer rights to the Software; or

* remove any proprietary notices or labels on the Software.


Title, ownership rights, and intellectual property rights in the Software shall remain in Netscape and/or its suppliers. The Software is protected by the copyright laws and treaties. Title and related rights in the content accessed through the Software is the property of the applicable content owner and may be protected by applicable law. This License gives you no rights to such content.


The license will terminate automatically if you fail to comply with the limitations described herein. On termination, you must destroy all copies of the Software and Documentation.


None of the Software or underlying information or technology may be downloaded or otherwise exported or reexported (i) into (or to a national or resident of) Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any other country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S. Treasury Department's list of Specially Designated Nationals or the U.S. Commerce Department's Table of Denial Orders. By downloading or using the Software, you are agreeing to the foregoing and you are representing and warranting that you are not located in, under the control of, or a national or resident of any such country or on any such list.

Example 2:


IMPORTANT READ CAREFULLY: This xxxxxxxxx End-User License Agreement (EULA) is a legal agreement between you (either an individual or a single entity) and xxxxxxxxx Corporation for the xxxxxxxxx software product identified above, which includes computer software and associated media and printed materials, and may include online or electronic documentation (SOFTWARE PRODUCT or SOFTWARE). By installing, copying, or otherwise using the SOFTWARE PRODUCT, you agree to be bound by the terms of this EULA. If you do not agree to the terms of this EULA, promptly return the unused SOFTWARE PRODUCT to the place from which you obtained it for a full refund.


The SOFTWARE PRODUCT is protected by copyright laws and international copyright treaties, as well as other intellectual property laws and treaties. The SOFTWARE PRODUCT is licensed, not sold.

1. GRANT OF LICENSE. This EULA grants you the following rights: * Software. You may install and use one copy of the SOFTWARE PRODUCT on a single computer. If the SOFTWARE PRODUCT includes functionality that enables your single computer to act as a network server, any number of computers or workstations may access or otherwise utilize the basic network services of that server. The basic network services are more fully described in the printed materials accompanying the SOFTWARE PRODUCT. * Storage/Network Use. You may also store or install a copy of the SOFTWARE PRODUCT on a storage device, such as a network server, used only to install or run the SOFTWARE PRODUCT on your other computers over an internal network; however, you must acquire and dedicate a license for each separate computer on which the SOFTWARE PRODUCT is installed or run from the storage device. A license for the SOFTWARE PRODUCT may not be shared or used concurrently on different computers. * License Pak. If you have acquired this EULA in a xxxxxxxxx License Pak, you may make the number of additional copies of the computer software portion of the SOFTWARE PRODUCT authorized on the printed copy of this EULA, and you may use each copy in the manner specified above.

2. DESCRIPTION OF OTHER RIGHTS AND LIMITATIONS. * Limitations on Reverse Engineering, Decompilation, and Disassembly. You may not reverse engineer, decompile, or disassemble the SOFTWARE PRODUCT, except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation. * Separation of Components. The SOFTWARE PRODUCT is licensed as a single product. Its component parts may not be separated for use on more than one computer. * Rental. You may not rent or lease the SOFTWARE PRODUCT. * Software Transfer. You may permanently transfer all of your rights under this EULA, provided you retain no copies, you transfer all of the SOFTWARE PRODUCT (including all component parts, the media and printed materials, any upgrades, this EULA and, if applicable, the Certificate of Authenticity), and the recipient agrees to the terms of this EULA. If the SOFTWARE PRODUCT is an upgrade, any transfer must include all prior versions of the SOFTWARE PRODUCT. * Termination. Without prejudice to any other rights, xxxxxxxxx may terminate this EULA if you fail to comply with the terms and conditions of this EULA. In such event, you must destroy all copies of the SOFTWARE PRODUCT and all of its component parts.

3. UPGRADES. If the SOFTWARE PRODUCT is an upgrade from another product, whether from xxxxxxxxx or another supplier, you may use or transfer the SOFTWARE PRODUCT only in conjunction with that upgraded product, unless you destroy the upgraded product. If the SOFTWARE PRODUCT is an upgrade of a xxxxxxxxx product, you now may use that upgraded product only in accordance with this EULA. If the SOFTWARE PRODUCT is an upgrade of a component of a package of software programs that you licensed as a single product, the SOFTWARE PRODUCT may be used and transferred only as part of that single product package and may not be separated for use on more than one computer.

4. COPYRIGHT. All title and copyrights in and to the SOFTWARE PRODUCT (including but not limited to any images, photographs, animations, video, audio, music, text, and applets, incorporated into the SOFTWARE PRODUCT), the accompanying printed materials, and any copies of the SOFTWARE PRODUCT, are owned by xxxxxxxxx or its suppliers. The SOFTWARE PRODUCT is protected by copyright laws and international treaty provisions. Therefore, you must treat the SOFTWARE PRODUCT like any other copyrighted material except that you may either (a) make one copy of the SOFTWARE PRODUCT solely for backup or archival purposes, or (b) install the SOFTWARE PRODUCT on a single computer provided you keep the original solely for backup or archival purposes. You may not copy the printed materials accompanying the SOFTWARE PRODUCT.

5. DUAL-MEDIA SOFTWARE. You may receive the SOFTWARE PRODUCT in more than one medium. Regardless of the type or size of medium you receive, you may use only one medium that is appropriate for your single computer. You may not use or install the other medium on another computer. You may not loan, rent, lease, or otherwise transfer the other medium to another user, except as part of the permanent transfer (as provided above) of the SOFTWARE PRODUCT.

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