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Group pulls support of software-sales rules

The American Law Institute parts ways with supporters of proposed additions to state laws governing the sale of software and digital information.

A venerable law association has pulled its support of controversial draft rules for the sale of software and information, placing the future of the proposed law in question.

Without the support of the American Law Institute, the bill is likely to lose some of its cachet with state legislatures, whose support is crucial. Both supporters and opponents, however, said the proposal is likely to move forward.

The proposed Article 2B to the Uniform Commercial Code was designed to unify state laws covering the burgeoning sale of software and other digital products. The UCC wields tremendous influence over commercial transactions as common as setting up bank accounts and leasing real estate. Its purpose is to ensure that laws in different states do not hamper interstate commerce.

People in the computer industry generally agree that existing articles did not adequately address the licensing of software or the sale of information online. But they part ways when it comes to Article 2B. Consumer advocates said that it threatens to uphold even the most unconscionable terms in a shrinkwrap license, and some trade groups, such as the Motion Picture Association of America said the bill's breadth would be disastrous to the industry.

But other groups, such as the Business Software Alliance and the Software & Information Industry Association, said Article 2B is necessary for electronic commerce to flourish.

In order for a new article to become part of the UCC, it must receive support from the National Conference Commissioners on Uniform State Law and the American Law Institute. Once an article is passed, it travels through individual state legislatures, which generally pass the bills out of fear their states will be left behind if they don't.

Elena Cappella, deputy director for the ALI, said the group is not prepared to approve the bill until May 2000 at the earliest, adding that it "was not in a form that the institute felt it could approve." Faced with the delay, proponents decided to rely only on the National Conference Commissioners on Uniform State Law, which generally has been much more supportive.

Now that the ALI has withdrawn its support, the proposed law is no longer a part of the UCC framework and has been renamed the Uniform Computer Information Transactions Act. The ALI's withdrawal of support is likely to have a mixed effect. On the one hand, it removes some of the most vocal critics from the approval process, making it much more likely that the bill will reach state legislatures by this fall. On the other hand, once it gets there, it is likely to face more opposition without the UCC seal of approval.

"I can assure you it's not the demise of the project," said Raymond Nimmer, the chief drafter of Article 2B. "The expectation is that assuming it passes, there will be a fairly strong push in the states to get it enacted.

But Pam Samuelson, a professor at the University of California at Berkeley who has vocally opposed 2B, said supporters will have more trouble getting the proposal passed without the support of the ALI.

"It's going to make it harder from them to sweep it through," Samuelson said. "It will be possible for groups concerned about it to go to some of the legislatures and say, 'If the ALI doesn't think this is a workable law you shouldn't either.'"