New Basics: 12 Principles for Fair Commerce in Mass-Market Software and Other Digital Products

Abstract

This paper gives an overview of the principles project of Americans for Fair Electronic Commerce Transactions (AFFECT), the coalition of business, consumer and library customers of mass-market software products. AFFECT has successfully blocked passage of the Uniform Computer Information Transactions Act (UCITA) since two quick enactments in 2000, before the opposition effectively organized. The law of mass-market digital products is in need of clarification to protect both the consumer interest and the public interest in sound information policy that fosters innovation and competition. Unfortunately, UCITA is poorly drafted and not an improvement over the existing patchwork of common law, Article 2 of the Uniform Commercial Code, and federal intellectual property law. UCITA is slanted toward mass-market producers and against the interests of consumers and the public more generally. AFFECT has now moved beyond opposition to a bad statute and is engaged in a positive search for better alternatives. As a first step, it has produced a statement of principles. These principles can be used as a basis for specific reform efforts, including drafting a model license and writing a more modest and targeted model statute than UCITA. They also can be used by consumer protection officials and consumers' counsel to choose cases to litigate and by consumer advocates to identify bad practices to bring to the attention of the media and the consuming public. The principles have been written to be accessible to the general public as well as lawyers and policymakers. Many end-users of mass-market digital products are alarmed by unfair terms and practices. They are looking for ways to effect change. The principles identify what is wrong in current practices as they envision better ones.

This paper, in addition to tracing the origins of the principles in the struggle against UCITA and discussing their possible uses, explains their underlying theory. The principles draw upon familiar ideas from the law of contracts, commercial transactions, consumer protection and intellectual property law. They also adapt these ideas to the digital world. Some key concepts are good advance disclosure (easy on the Internet) to maximize shopping for the best terms, meaningful assent, and substantive limits on terms that are unfair or contrary to public policy, particularly information policy. The principles also reflect the insight that the category "consumer" should include all customers who purchase mass-market products with non-negotiated terms. The minority of customers who read and shop over terms introduce only weak competition in non-salient terms in the mass-market. This is why substantive limits are also needed. In mass-market transactions, general standards such as unconscionability - requiring expensive and time-consuming case-by-case litigation - are not an effective way to deal with identified problems that could be quickly solved by specific rules. The principles address such common issues in the world of digital products as transfer and use rights, disclosure of product defects, and security of systems and data.

Keywords: Software contracts, consumer protection, UCC Article 2, UCITA, licensing, commercial law reform

JEL Classification: K12