What’s Software Got to Do with it? The ALI Principles of the Law of Software Contracts

Abstract

In May, 2009, the American Law Institute (“ALI”) approved its Principles of the Law of Software Contracts (“Principles”). The attempt to codify, or at least unify, the law of software contracts has a long and contentious history, the roots of which can be found in the attempt to add an Article 2B to the Uniform Commercial Code (“UCC”) in the mid-1990s. Article 2B became the Uniform Computer Information Transactions Act (“UCITA”) when the ALI withdrew from the project in 1999, and UCITA became the law in only two states, Virginia and Maryland. UCITA became a dirty word, with several states enacting “bomb shelter” provisions to ensure that UCITA would never enter those states by way of a choice of law clause. Although the Principles were conceived, in part, as a counterweight to UCITA, the latter was dead in the water by the time the Principles project became active. Nevertheless, the Principles project proceeded apace. This Article examines the results of that decision.

The proponents of efforts to formulate a body of law for software contracts tend to insist that such a body of law is necessary because software transfers, as transfers of copies of information, are different from transfers of goods, and these differences make the common law of contracts and Article 2 of the UCC inappropriate bodies of law to govern software contracts. The ALI Principles constitute the latest attempt at such unification, and in this article, we argue that there is little in the Principles that addresses any unique characteristics of software. Neither one of us was involved in the Article 2B/UCITA project, so we approach this problem by looking at the law as it existed at the time the Principles project started instead of looking at the law at the time Article 2B was conceived.

Keywords: Software, Licensing, American Law Institute, Software Contracts