TheWorldJournal.com - Technology

UCITA Makes Microsoft Jealous of AOL
By Dan Calloway, TheWorldJournal.com

UCITA will become law on July 1, 2001. When Microsoft wrote the terms for MSN, was it thinking about UCITA and the fact that AOL's home state is Virginia?

Has Microsoft structured the terms of its online services agreement to deliberately conflict with the consumer protection laws of some states? One possible explanation might be a jealousy between Microsoft and AOL. This comes on the heels of UCITA's control over terms of services for ISP's (Internet Service Providers), which will go into effect on July 1.

UCITA is the Uniform Computer Information Transactions Act. UCITA will not only control the way in which ISPs provide their terms of services to customers, but will also play a big role in the way in which transactions (secure and non-secure) are handled by web surfers throughout the United States.

AOL has been involved in a number of lawsuits (primarily class-action lawsuits) in which it has attempted to invoke its license terms on individual consumers, usually without much success. But with UCITA governing the terms of licensing, similar lawsuits in the future may turn out much less favorably for AOL customers.

AOL is a recent newcomer to UCITA's-proponent bandwagon. AOL was nowhere to be seen through most of the years when Microsoft and its Business Software Alliance allies were pouring money into dominating the UCITA Article 2B draft proceedings. However, it's ironic that AOL may be its first beneficiary.

Virginia is enacting a bill that is much closer to the law the software industry wanted. The largest difference between Maryland's (home of AOL) and Virginia's (home of MSN) version of UCITA is that Maryland is one of the states that does not allow a disclaimer of the implied warranty of merchantability in consumer transactions. Because of this, Microsoft may have had Maryland in mind when it rewrote its MSN terms, seeing that companies that offer online services don't like to warranty anything for reasons that are obvious anytime there's a service outage. By UCITA's definition none of the consumer protections apply to products or services that are used at work, even if you are a Maryland resident.

The implication here is that in as little as one month, AOL will be able to disclaim all warranties it wants and will be able to rely on the law for protection. In the past, AOL has come under tremendous fire by customers who use their AOL 5.0 version software. Class-action lawsuits have been filed against AOL claiming that AOL has deceived its users because installing version 5.0 software reconfigured their computers to prevent their access to other non-AOL services. The new law under UCITA will protect AOL against such lawsuits.

AOL's first line of defense against these lawsuits has been to argue that they should be transferred to Virginia for the courts to decide the outcome. This is something that AOL has clearly stated in its terms of licensing use of its products. Such transference of legal venue would effectively eliminate many of the lawsuits, of course, because not many complainants would be willing to bear the expense of traveling to Virginia to sue for a few dollars.

Judges in other states have not been sympathetic to this argument contained in AOL's licensing agreement. For example, in February a Massachusetts court ruled that a case filed in that state did not have to be moved to Virginia, in large part because the reconfiguration that the complainants were complaining about happened prior to the licensing agreement even being displayed to the installer of the software.

Judges in other states will probably remain unsympathetic to AOL's arguments as well. However, one action that will allow the forum-selection term to be strictly enforceable will be a decision on appeal by a higher court somewhere agreeing to apply UCITA. If you don't think this is possible, take a look at the case of Gateway v. Hill and other similar court decisions.

Another way in which AOL would directly benefit from UCITA lies in the law's endorsement of sneak-wrap changes to license terms. In 1998, a group of 44 state attorneys general forced AOL to pay several million dollars as a penalty for not properly notifying AOL customers when they enforced a pay increase. With the implementation of UCITA, AOL would win such a case.

AOL also came under fire when in 1997, after several months of severe service outages, AOL finally agreed to pay a settlement in which they paid millions of dollars in credits to its customers in the form of refunds.

Under the Virginia version of UCITA, of course, AOL would not be required to pay a dime, no matter how serious the service outages became because of AOL's disclaimers that say the service is sold "as is."

What will happen if a Maryland customer sues AOL over an alleged breach of implied warranty? Which version of UCITA will triumph? We'll just have to wait and see what happens.

© May 31, 2001

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