RE: Consideration in a Shrinkwrap Contract

Is there any listserv devoted to UCITA?

-----Original Message-----
From: Brad Englund [mailto:benglund[_at_]halversonlaw.com] Sent: October 19, 2000 5:57 PM
To: Multiple recipients of list
Subject: Re: Consideration in a Shrinkwrap Contract   

JQ Johnson wrote:

Of course, under UCITA the vendor will still have the right to include a trojan horse in the software that erases the users' hard disk as penalty for ignoring this invalid clickwrap contract.

This is just one of many popular misconceptions of UCITA. It has great appeal, but it simply is not true.

There are two sections of UCITA that give remote rights to software developers, Section 605 (dealing with automatic restraints) and Section 815 (dealing with the right of possession and the power to prevent use).

Section 605 provides in part:   

        "A party entitled to enforce a limitation on use of information may include an automatic restraint in the information or a copy of it and use that restraint if:

"(1) a term of the agreement authorizes use of the restraint;
"(2) the restraint prevents a use that is inconsistent with the
agreement;

"(3) the restraint prevents use after expiration of the stated
duration of the contract or a stated number of uses; or

"(4) the restraint prevents use after the contract terminates,
other than on expiration of a stated duration or number of uses, and the licensor gives reasonable notice to the licensee before further use is prevented."

An automatic restraint is "a program, code, device, or similar electronic or physical limitation the intended purpose of which is to restrict use of information."

Clearly, section 605 will not authorize a "trojan horse in the software that erases the users' hard disk as penalty." In fact, subsection (c) of that section provides: "This section does not authorize an automatic restraint that affirmatively prevents or makes impracticable a licensee's access to its own information or information of a third party, other than the licensor, if that information is in the possession of the licensee or a third party and accessed without use of the licensor's information or informational rights."

Additionally, subsection (f) of that section provides: "This section does not authorize use of an automatic restraint to enforce remedies in the event of breach of contract or of cancellation for breach."

Section 815 does authorize a licensor to undertake certain "electronic self-help" in order exercise the following rights:   

"(1) to possession of all copies of the licensed information in the possession or control of the licensee and any other materials pertaining to that information which by contract are to be returned or delivered by the licensee to the licensor; and

"(2) to prevent the continued exercise of contractual and informational rights in the licensed information under the license."  

Under section 815, electronic self-help can be exercises only if the following four conditions exist:   

1. The license has been canceled;
2. The self-help can be done without a breach of the peace;
3. The self-help can be done without a foreseeable risk of personal injury or significant physical damage to information or property other than the licensed information; and
4. The self-help is done in accordance with Section 816.

Section 816 contains an outright prohibition against using electronic self-help on mass-market transactions. Generally speaking, mass-market transactions are either consumer transactions or transactions where the transaction was directed to the general public as a whole. Thus, for most software in use, electronic self-help is not an available option.

As for non-mass-market transactions, section 816 places significant impediments to exercising electronic self-help, including a requirement that the licensor provide the licensee advance notice after default of the exercise of electronic self-help. Additionally, section 816 allows a licensee to recover direct and incidental damages caused by wrongful use of electronic self-help, and consequential damages for wrongful use of electronic self-help under certain circumstances.

Brad Englund
Halverson & Applegate, P.S.
Yakima, WA   

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