Letter from American Committee for Interoperable Systems (ACIS) to Article 2B Drafting Committee Opposing UCC 2B
October 7, 1998
Mr. Connie Ring
Mr. Ray Nimmer
c/o National Conference of Commissioners
I am writing to you in my role as Chairman of the American Committee for Interoperable Systems (ACIS) to comment on the most recent revised draft of UCC Article 2B. I wish to express concern with the change to Section 2B-105(b) that was intended to incorporate a motion put forward by Commissioner Harvey Perlman, and adopted during the deliberations of the NCCUSL Annual Meeting in July. In a nutshell, I am troubled by the change from the original language of the Perlman motion, which I support in full, to the new formulation that appears in the most recent Article 2B draft.
ACIS is a voluntary association of more than 30 corporations and organizations concerned with the future of the computer and communications industry. Members include: Advanced Micro Devices; Amdahl Corporation; Bull HN Information Systems Inc.; NCR Corporation; Seagate Technology Corporation; Storage Technology Corporation; Sun Microsystems, Inc; and 3Com Corporation among others. ACIS was created by its members to support policies and principles of intellectual property law providing for a careful balance between the goals of strong protection and rewards for innovation, and the goals of interoperability, fair competition and open systems. Our paramount concern is that intellectual property protection not be improperly extended in scope or practice in ways which would impede further innovation and development in this critical industry.
For some time, ACIS has been concerned that Article 2B would lead to a disruption of important principles of intellectual property law by rendering enforceable non-negotiated, mass-market license terms which prohibit reverse engineering. Such "shrink wrap" or "click-on" license terms would be a major impediment to the goals of achieving interoperability and promoting open systems. The original Perlman motion helped to significantly allay our fears with regard to this potential detrimental effect of Article 2B. However, the language used to incorporate the Perlman motion in the most recent Article 2B draft seems to dilute the motion's primary intent.
The new language of Section 2B-105(b) reads as follows: "A contract term that violates a fundamental public policy is unenforceable to the extent that the term is invalid under that policy." To be specific, the wording "FUNDAMeNTAL public policy" and "to the extent that the term is INVALID..." seem to be changes that erode the effectiveness of the Perlman motion. Requiring that the public policy be "fundamental" seems to invite further confusion and debate rather than provide certainty. Further, the qualification that contract terms would only be unenforceable to the extent that they are "invalid" under "that policy" seems to say that the public policy itself must specifically reference that type of contract term and label it as invalid.
In contrast, the original Perlman motion would permit a court to find a contract term to be unenforceable if the term is contrary to specific public policies relating to innovation, competition, and free expression, whether or not those policies have deemed certain contract terms to be invalid through explicit reference. This is a determination more appropriately left to the courts.
even the Reporter's notes to 2B-105 seem to backslide from the thrust of Commissioner Perlman's motion. Portions of the note establish an overly restrictive lens through which to view whether a term may be found unenforceable. The test, according to the Reporter's notes, would be whether or not the fundamental public policy said to make a term invalid itself "clearly over-rides the fundamental policies that support freedom of contract..." Taken together, the terminology used in Section 105(b) and the severe requirements suggested in the notes create a "belt and suspenders" framework that seems designed to prevent any term from ever being found unenforceable under this basis.
The Reporter's note also misses the mark with its characterization of reverse engineering. The note states that "debate" over when it would be proper to reverse engineer is an area where the public policy is "in flux." In truth, that "debate" has enjoyed considerable consensus of late, not only among court decisions, but also in federal legislation. Both the House and the Senate have passed legislation, the Digital Millennium Copyright Act, that specifically allows reverse engineering for purposes of achieving interoperability. This is a significant development that dramatically clarifies public policy on the issue of reverse engineering. This acceptance of reverse engineering should be reflected in the notes accordingly.
In conclusion, ACIS recommends that the language from the original Perlman motion be used in place of the current Section 2B-105(b), and that the Reporter's note be modified to be less restrictive in its tone and effect. Thank you for your consideration of these points.
Peter M. C. Choy
cc: ellyce Anapolski, NCCUSL
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