Software licensing bill moves forward in Virginia

Virginia appears to be headed toward becoming the first state in the U.S. to adopt regulations that proponents say will bring a much needed common understanding of software licenses and a uniformity to software licensing contracts across states.

But even as identical versions of the bill were passed overwhelmingly Tuesday by the two chambers of the Virginia General Assembly (see story), opponents reaffirmed their plans to continue fighting it.

Virginia took a "giant step forward" with the passage of the Uniform Computer Information Transactions Act (UCITA), which has been backed by Microsoft Corp., Apple Computer Corp., Adobe Systems Inc., America Online Inc. and other software vendors and software industry advocacy groups, said Keith Kupferschmid, intellectual property counsel for the Software and Information Industry Association.

"UCITA is important because of what it stands for overall. Basically, it establishes rules of the road for the licensing of software and information products," Kupferschmid said. "Virginia took the first step in getting this patchwork of licensing laws in each of the different states to become a uniform set of laws that companies can then rely on across state lines."

Sen. Edward Schrock, a Republican from Virginia Beach, Va., and the Senate sponsor of the bill, said the legislation provides greater protections for companies and individuals that license software and sets clear procedures governing a software manufacturers' ability to take action against users who don't maintain proper licenses.

But not everyone agrees that the need for the legislation is that clear. The bill has come under fire from an alliance comprised chiefly of insurance companies and library associations that say it's too broad and would impose uncertainty on their right to use licensed software.

Skip Lockwood, director of For a Competitive Information and Technology Economy (4Cite), called the bill "dysfunctional" and said it runs roughshod over the rights of consumers. He said it is unnecessary because software companies' products already are protected under the Digital Millennium Copyright Act.

Under UCITA, licensing terms will have teeth, so a clause that bars a buyer from writing a review of the software product without the company's approval, for example, would have legal legs, Lockwood said. It's especially troubling to 4Cite that buyers don't get to review licensing contracts before they purchase shrink-wrapped software.

"Many (licensing contracts) are confusing, conflicting and otherwise confounding for the average human being," Lockwood said. "Traditionally, courts have not enforced the terms because they violate a lot of consumer laws, and there are issues about the fact that it's not negotiated."

Opponents also dislike a provision that says users who don't uphold software licensing agreements could have their software "repossessed" by giving the manufacturer the right to reach into the user's computer and disable the software.

But Schrock said there is nothing new about allowing a company to repossess something it has sold if the buyer fails to pay for it — for example, electric companies and other utilities typically cut off service if people don't pay their bills.

The bill establishes procedures designed to protect licensees, Schrock said, such as a right to return software and a 45-day period during which a company or individual accused of breaching a software license can seek a court-ordered injunction that would prevent the manufacturer of the software from "repossessing" it.

"It's not like somebody is going to throw a switch and (the software) will go away," Schrock said.

Since the bills that passed Tuesday in Virginia are identical, the remaining approval of the two chambers is considered a formality. Each chamber must now vote on the bill passed by the other chamber. Once those votes occur, the bill appears to have a good chance of becoming law since Virginia Gov. James Gilmore has expressed support for it.

The Virginia General Assembly, however, left some doubt about its full faith in the bill by making the effective date July 1, 2001, and turning it over to the Joint Commission on Technology and Science so that it can be further discussed and amended.

The Maryland General Assembly is also considering UCITA legislation. The Business Software Alliance has lobbied both state legislatures in favor of UCITA, saying it is needed to provide certainty for sellers of software and customers, and to provide a clear, consistent set of rules so that companies don't have to navigate the laws of 50 U.S. states.

Lockwood said legislators are being sold on the idea that the bill is needed to attract and keep jobs in the high-technology sector. However, he added that the legislation has the potential to drive jobs away by stifling the software innovations of smaller companies.

"Most of your jobs aren't coming from the big companies" that support the bill, he said. "This piece of legislation is going to hamstring those little companies that provide supplementary products and do court-approved reverse-engineering, which are the true engine of the economy," Lockwood added.

More information about UCITA:

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Copyright © 2000 IDG Communications, Inc.

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