Letter from Motion Picture Association of America (MPAA) and Other Allied Associations to NCCUSL Objecting to UCC 2B
December 7, 1998
Gene N. LEBrun, President
Geoffrey Hazard, Jr., Director
Connie Ring, Jr., Chairman
On behalf of our respective trade associations and member companies, we are writing to inform you of our continued opposition to proposed Article 2B because we strongly believe the latest draft fails to cure the serious infirmities that caused us to oppose previous drafts. Apart from the numerous substantive concerns that have been previously raised and are still not addressed, including the troublesome fact that the Reporter's Notes are often inconsistent with the text, we continue to have grave general concerns.
First, the draft continues to violate two of the most fundamental underlying purposes of the Uniform Commercial Code: the simplification and clarification of existing law. §1-102(2)(a). Contrary to this express mandate, the application of proposed Article 2B to our industries will result in confusion, uncertainty and the risk of extensive litigation.
Second, the ever-changing scope section suffers from the same deficiencies found in prior iterations. For example:
Another concern arises from the fact that proposed Article 2B lacks the generic product-neutral nature of the existing UCC. For example, Article 2A "applies to any transaction, regardless of form, that creates a lease." §2A-102. Similarly, Article 2 generally governs the sale of goods and does not differentiate among different types of goods. Apples, autos and aardvarks fall within the same general framework. To address product differences, the UCC relies on trade usage and similar concepts. By contrast, proposed Article 2B departs from this sound model by providing highly specialized default rules based on practices advocated by only one segment of a much broader and more diverse group of licensing industries. We suggest this project would be more consistent with the architecture of the existing Code, substantially shorter and much less controversial if it contained only generic licensing rules and relied on trade usage and similar concepts to address product differentiation.
A related concern is the impact that proposed Article 2B's software model would have on future harmonization efforts. As we have previously stated, using Article 2 as the basis for a licensing statute is inappropriate and many of the problems in proposed Article 2B can be traced to that effort. If proposed Article 2B were enacted, it would likely exert the same improper influence on future licensing statutes.
Another concern is the application of proposed Article 2B by analogy. Courts often apply UCC concepts outside of its designated scope. For example, in Pollard v. Saxe & Yolles Dev. Co., 12 C.3d 374 (1974), the California Supreme Court applied the implied warranty provisions of §2-314 and the notice provisions of §2-607 to a real estate transaction. Similarly, we believe that the controversial software licensing paradigm established by proposed Article 2B will likely be applied by analogy to licensing transactions in our industries. Although the notes to §2B-104 state that the "principles set out in this article should not be applied" to "the entertainment industry," we do not believe that a proposed statute, much less the Reporter's Notes, will restrict the manner in which a court reasons. Even if it could, our industries encompass far more than "entertainment." They include newspapers, magazines and other content providers.
Finally, we urge everyone involved in the Article 2B process to consider seriously the broad-based opposition to the proposed law. Many groups including consumers, academics, commercial licensees and even the Federal Trade Commission have heavily criticized proposed Article 2B. We understand that when previous major additions to or revisions of the Uniform Commercial Code were made it was with substantial support from affected parties, not over their strong objection. It is fundamentally unfair and unwise to enact a new UCC Article, which enters vital new legal territory, in the face of such significant opposition.
For these reasons we strenuously object to the current draft and direction of proposed Article 2B and will be forced to actively oppose its enactment.
President & CeO
President & CeO
President & CeO
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