Users, vendors face off over UCITA law in Texas

A titanic struggle over the proposed new Uniform Computer Information Transactions Act - one that pits large corporate users against a group of major technology vendors - is under way in Texas and could become a key showdown for the controversial software licensing measure.

The legislation, known informally as UCITA, was approved relatively easily last year in two states: Virginia and Maryland. But things are different in Texas, where opponents are moving aggressively to prevent the state legislature from passing the measure.

The opposition has "definitely caught on," said Val Perkins, an attorney and lobbyist for the Texas Business Law Foundation, which is the lobbying arm of the State Bar of Texas in Austin. The foundation pushed for the recent introduction of UCITA in the Texas House of Representatives and Senate. "Long before the bill was filed, members in both houses had already received a barrage of e-mails and letters expressing opposition," Perkins said.

Because of the opposition, passage of UCITA is seen as unlikely in Texas this year. And if the measure isn't approved by the time the legislature adjourns in May, it won't be taken up again until the state's lawmakers-who meet only every two years-return for their next session in January 2003.

"We're certainly going to press the bill to try to get it through," said Celeste May, general counsel to state Sen. John Corona, a Republican who is sponsoring the bill in the Texas Senate. "But because of the amount of opposition out there, we're not really hopeful that this will happen," she added.

A number of large technology users, including The Boeing Co. in Seattle and Phillips Petroleum Co. in Bartlesville, Okla., are leading the attack against UCITA in Texas and other states that are considering the proposed law. They're up against Compaq Computer Corp., Microsoft Corp. and technology industry trade groups that back the measure.

Ken Rigsbee, director of government relations at Phillips, said the $21.2 billion petroleum refiner and distributor wants to see UCITA defeated in Texas. Among the reasons the company opposes the proposal written by the Chicago-based National Conference of Commissioners on Uniform State Laws (NCCUSL) are provisions that could allow vendors to remotely shut off software at user sites in the event of contract disputes.

Nationwide Insurance Cos. in Columbus, Ohio, recently estimated that UCITA could increase its internal costs by a minimum of $20 million annually due partly to security problems associated with the "self-help" remote disabling provision, as it's referred to in the measure. The insurer also cited the likelihood of increased contracting and negotiation costs if UCITA is adopted widely.

Giving vendors the right to unilaterally shut off software in the midst of a dispute "is an absolutely unacceptable situation," Rigsbee said. Phillips hasn't prepared a UCITA cost estimate similar to the one done at Nationwide, "but we know it's bad," he added.

The NCCUSL, which attempts to establish uniform state laws, drafted and approved UCITA two years ago. The proposed law has been sent to all 50 states for adoption. UCITA proponents are pushing for adoption in another four or five states this year in an attempt to give the law momentum.

But even some supporters see the need to compromise with opponents in order to win passage of the measure. UCITA has little chance of "passing around the country unless some of these groups [of users] start dropping their opposition," Perkins said. "And the only way that's going to happen is if we can work out some compromises with them."

UCITA would give more teeth to software licenses and set a series of default rules that would apply to the contracts between users and vendors. Opponents say those default rules would put users at a disadvantage, while supporters claim otherwise and argue that companies would still be free to contract with software vendors as they see fit.

Irene Kosturakis, senior intellectual property counsel at Compaq, said concerns about UCITA are overstated and asserted that the measure would add more safeguards in areas where vendors already have rights under existing laws, including remote software disabling.

"Compaq believes that it is better to have a consistent set of rules ... and that's what UCITA provides," Kosturakis said. But compromises will likely be needed to win widespread approval of the licensing law, she acknowledged, adding that Compaq executives "are willing to do that" if necessary.

UCITA has also been introduced in the Maine and Arizona legislatures and is expected to be taken up soon in Florida. Opponents plan to try to stop the act in every state. "We're not taking any state for granted. Having UCITA passed in any state is not acceptable," said Matt McGarty, a spokesman for Americans for Fair Electronic Commerce Transactions in Sacramento, Calif.

Users, vendors face off over UCITA law in Texas

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