Transaction And International Law sample essay

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Transaction And International Law sample essay

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Question 1. Before the UCC and the UCITA, what was one of the first, and most significant, of the U.S. government’s attempts to promote uniformity in commercial laws from state to state? (Hint: think of “commerce” and Constitution).

The first, and most significant, of the U.S. government’s attempts to promote uniformity in commercial laws from state to state is firstly, the relevant provisions of the US Constitution and also Section 118 of the General Business Law which predates that of Section 7-210.[1]

Question 2. Based on the information presented above, what do you see as the major differences between Article 2 of the Uniform Commercial Code and UCITA?

The UCITA, as a controversial model law promulgated by the National Conference of Commissioners on Uniform State Laws, covered transactions in computer and digital information, in place of Article 2 of the UCC. UCITA would codify the view that traditional software distributions are licenses, not sales. Section 102(43), (44) of the UCITA (1999 Official Text) recognized mass marketed binary software transactions as licenses.[2] UCC Article 2 covers only contracts for sale of goods, so computer software is not expressly covered by Article 2. Computer software is different considering that it is so easily copied, thus it needs special protection.

It is one of a few commercial enterprises that entirely depend on a single traditional copyrighted work such as a book, musical recording, motion picture, or painting.[3] Licensing thus becomes very important. Licensing enables the developer to control software distribution, to price software to reflect its value to the user, and to ensure that users are subject to developer’s limitation of liability provisions. However, there is a legislative gap that has forced courts to apply the UCC to license transaction, which it was never meant to address. Hence, the UCITA.

Question 3. What is the legal distinction between selling a product and licensing it?

The overlap of terminology between sale and license has caused confusion within the courts and has led to some acceptance of a license as a sale in some jurisdictions. The courts have used several methods to establish that a sale of software is the sale of a good within the meaning of the UCC Article 2. The simplest method of establishing software as a sale is when the parties agree in their briefing that Article 2 applies to the licensing of their software. Court would thus only have to look at the contract to see what rules would apply.

For other courts, the analysis is more in-depth. In Architectronics, Inc v. Control Systems, the court applied UCC Article 2 to a software development transaction for a license of the software. The court held that the applicability of Article 2 is not defeated by use of license in lieu of sales if license provides for transfer of some of incidents of goods ownership. In Microsoft Corp. v. DAK Industries, the court looked to the economic realities of the particular arrangement. Upon this analysis, the court found that DAK had a right to sell the software and thus the arrangement was similar to a purchase of goods thus indicating that it was a sale, not a license to use.[4]

Question 4. Many of the provisions in the UCITA were first proposed as a modification to Article 2 of the UCC. Why do you think the drafters decided to propose it as a separate and distinct uniform act?

To be effective, a provision must be approved both by the NCCUSL and the ALI. Since the final draft of Article 2B as proposed was rejected by the American Law Institute or ALI, the required approval of both bodies was thus lacking. As a consequence, the NCCUSL renamed it as the now UCITA.[5] Specifically, the UCITA, as a controversial model law promulgated by the National Conference of Commissioners on Uniform State Laws, covered transactions in computer and digital information, in place of Article 2 of the UCC. UCITA would codify the view that traditional software distributions are licenses, not sales. Section 102(43), (44) of the UCITA (1999 Official Text) recognized mass marketed binary software transactions as licenses

.[6] UCC Article 2 covers only contracts for sale of goods, so computer software is not expressly covered by Article 2. Computer software is different considering that it is so easily copied, thus it needs special protection. It is one of a few commercial enterprises that entirely depend on a single traditional copyrighted work such as a book, musical recording, motion picture, or painting.[7] Licensing thus becomes very important. Licensing enables the developer to control software distribution, to price software to reflect its value to the user, and to ensure that users are subject to developer’s limitation of liability provisions. However, there is a legislative gap that has forced courts to apply the UCC to license transaction, which it was never meant to address. Hence, the UCITA.

References:

Adobe Systems Inc., 84 F. Supp. 2d; SoftMan Products, 171 F. Supp. 2d.

August, R. International Business Law (3rd Edition), New Jersey: 2000

Ayyappan, UCITA: Uniformity at the Price of Fairness?, 69 Fordham L. Rev. 2471, 2471-72

(2001)

Brownlie, I. Principles of Public International Law (6th edition), OUP, 2003.

Davidson & Assocs., Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d 1164, 1177 (E.D. Mo.

2004)

Lake v Dye, 232 NY 209 [1921]

Maritime World Corp. v Grefe Steel Warehouse Corp., 154 NYS 2d684

Nadan, Software Licensing in the 21st Century: Are Software “Licenses” Really Sales, and

How Will the Software Industry Respond?, 32 AIPLA Q.J. 555, 558 (2001).

[1] August, R. International Business Law (3rd Edition), New Jersey: 2000; Lake v Dye, 232 NY 209 [1921]; Maritime World Corp. v Grefe Steel Warehouse Corp., 154 NYS 2d684 [Sup Ct, Trial Term, NY County 1956])

[2] Davidson & Assocs., Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d 1164, 1177 (E.D. Mo. 2004) where the court finds first sale doctrine does not apply because defendants did not buy the software, they bought a license to the software.

[3] Nadan, Software Licensing in the 21st Century: Are Software “Licenses” Really Sales, and How Will the Software Industry Respond?, 32 AIPLA Q.J. 555, 558 (2001).

[4] Adobe Systems Inc., 84 F. Supp. 2d; SoftMan Products, 171 F. Supp. 2d.

[5] Ayyappan, UCITA: Uniformity at the Price of Fairness?, 69 Fordham L. Rev. 2471, 2471-72 (2001)

[6] Davidson & Assocs., Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d 1164, 1177 (E.D. Mo. 2004) where the court finds first sale doctrine does not apply because defendants did not buy the software, they bought a license to the software.

[7] Nadan, Software Licensing in the 21st Century: Are Software “Licenses” Really Sales, and How Will the Software Industry Respond?, 32 AIPLA Q.J. 555, 558 (2001).


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