Licensing showdown looming

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January 01, 2001 (Computerworld) -- UCITA proponents will push for adoption of the controversial software licensing law in four or five states in 2001, but they will face opposition from some end-user companies, along with warnings that the measure could significantly increase IT costs.

	One Estimate Nationwide estimates UCITA will boost its IT and contracting costs by at least $20M: Security, 45% of the cost: Increased spending is needed to offset risk associated with self-help and other restraints. Quality assurance, 35%: Liability-limiting provisions are disincentives to vendors to deliver good products. Contracting, 20%: UCITA’s provisions will make negotiations tougher.

Nationwide Insurance Cos. estimated that the Uniform Computer Information Transactions Act could boost its costs by a minimum of $20 million. The insurer cited security problems created by the law, which would give software vendors the ability to remotely disable systems through "self-help," as it's called in UCITA, as well as increased contracting and negotiation costs.

Moreover, UCITA's liability-limiting provisions would increase Nationwide's software quality assurance costs because the measure would act as a deterrent for vendors to deliver a working product, said Bruce Barnes, vice president of technology strategy and planning at Columbus, Ohio-based Nationwide.

"The best that we can do is to make people aware of the implications associated with the proposed act—in raw, baseline, quantifiable terms—on one's business," said Barnes.

But Nationwide's estimates were met with questions by UCITA proponents, who said they would like to see the company's study.

"I'm doubtful about that estimate being attributable to anything in UCITA," said Carlyle Ring, who headed the UCITA drafting committee at the National Conference of Commissioners on Uniform State Laws (NCCUSL), which drafts laws for state adoption.

UCITA may face a decisive showdown in 2001, as the Digital Commerce Coalition (DCC), which represents vendors, seeks to create momentum for its adoption by winning approval in a handful of states. The DCC hasn't said which states it's targeting, but they could include Texas, Oregon and Washington, according to some familiar with the issue. UCITA has been adopted in Maryland and Virginia.

The year 2001 "is pretty critical—if we can keep the DCC from getting any new states to accept this or pass it, I think that would be a critical blow to them," said Randy Roth, director of corporate purchasing at The Principal Financial Group in Des Moines, Iowa.

Dan Duncan, executive director of the Alexandria, Va.-based DCC, said he disagreed. "If we don't get UCITA passed in four to five states this year, it doesn't put a death knell on UCITA," he said. But the group would need to educate legislators "so that they can be prepared in the following years to pass UCITA," he added.

UCITA, which was sent by the NCCUSL in 1999 to the legislatures of all U.S. states and territories for their consideration, seeks to bring a set of consistent rules to software contracts and licensing agreements and give user companies the freedom to change terms and conditions in contracts. But opponents argue that the act would create a series of adverse default rules, such as self-help, that will be difficult to negotiate away.

The details of UCITA are complex, and opponents said it's not an easy task to raise awareness among end-user companies. The act "could be adopted because people just don't get it," said Bill Zumwalt, CIO at McLane Co., a wholesale distributor in Temple, Texas.

Opponents were unsuccessful in getting UCITA reshaped in Virginia. A study commission, formed after the state adopted the act, rejected many proposed amendments but did approve one significant provision that overturned a requirement for all software contract renegotiations in the event of an acquisition or merger.

In Oregon, UCITA has received conditional endorsement from a study commission that acknowledged that a uniform law is needed to deal with new kinds of transactions, said Peter Bragdon, an assistant general counsel at Columbia Sportswear Co. in Portland and the head of a state subcommittee that looked at UCITA. But Bragdon said the act needs more study. Enough "question marks" have been raised, he said, that "there ought to be concerns in the Legislature."

Still, Bragdon said adoption in 2001 of UCITA by the Oregon Legislature is possible. The state's part-time legislature "is heavily reliant on information from lobbyists and other outside experts," he said.

Related stories:

• Microsoft ending volume discounts on some Windows releases, Dec. 18, 2000


• Users look to FTC for help on reining in UCITA, Oct. 26, 2000


• Update: CA switching to subscription-based software licensing, Oct. 25, 2000


• Maryland's UCITA may have national reach, Sept. 4, 2000


• UCITA fix won't help big firms, Aug. 14, 2000

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