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There are breaking developments in the effort to craft a new article of the Uniform Commercial Code concerning certain licensing transactions. NOW UCITA, NOW YOU DON’T The saga of UCC Article 2B has lasted several years. The proposed article would, depending on the particular draft, govern “licenses,” “software contracts,” and/or “computer information contracts.” The proposed article attracted a large amount of interest (resulting, among other things, in a World Wide Web page devoted solely to news about it, http://www.2bguide.com) and no small amount of controversy. Well, to paraphrase Richard Nixon, we won’t have Article 2B to kick around any more — at least not in its present form. Last week, the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) announced that Article 2B will not, in fact, become part of the Uniform Commercial Code. Rather, NCCUSL intends to promulgate the rules in Article 2B as a separate, free-standing uniform act to be known as the Uniform Computer Information Transactions Act (UCITA). NCCUSL will consider a draft of UCITA at its annual meeting in July. The transformation of Article 2B to UCITA is so important in light of both the transactions governed by the proposed law and the controversy that the proposed rules have generated, that the announcement is worth presenting in full:
April 7. The National Conference of Commissioners on Uniform State Laws and the American Law Institute have announced that legal rules for computer information transactions will not be promulgated as Article 2B of the Uniform Commercial Code, but the Conference will promulgate the rules for adoption by states as the Uniform Computer Information Transactions Act. The Conference, a 107-year-old organization whose purpose is to prepare statutes for enactment uniformly among the states, and the Institute, a 76-year-old organization whose purpose is “to promote the clarification and simplification of the law and its better adaptation to social needs,” have long been partners in drafting the various articles of the Uniform Commercial Code (Code or UCC). For the past several years the two organizations have worked cooperatively on a UCC project to prepare a statute that would codify evolving legal rules for computer information transactions. The information industry has grown exponentially in the past decade and is already bigger than most manufacturing sectors. The number of transactions in information and their dollar value are immense. The Internet and information technology and commerce are major components of the future economic prosperity of the United States. As the nation moves from an economy centered around transactions in goods and services to an information economy, the need has grown dramatically for coherent and predictable legal rules to support the contracts that underlie that economy. Lack of uniformity and lack of clarity of the legal rules governing these transactions engender uncertainty, unpredictability and high transaction costs. Nonetheless, it has become apparent that this area does not currently allow the sort of codification that is represented by the UCC. Institute members will have an opportunity to discuss the Uniform Computer Information Transactions Act (UCITA) at the Institute’s annual meeting in San Francisco in May, but will not have votes on it. The proposed statute is then scheduled to be completed and promulgated at the annual meeting of the Conference in Denver this summer. It will be targeted by the Conference for immediate introduction and enactment beginning this fall in the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The Conference believes that UCITA can provide a framework in which sound business practices may further evolve in the marketplace bounded by standards of appropriate public policy.

The relocation of this project from the Uniform Commercial Code to a separate free-standing uniform act will likely make the path of approval for other UCC projects nearing completion (revised Articles 2 and 2A) somewhat smoother. Gerald T. McLaughlin is dean of Loyola Law School in Los Angeles. Neil B. Cohen is a professor at Brooklyn Law School.

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