NEWS RELEASE, 07/16/98

UC Berkeley experts call for immediate hold on proposed legislation to regulate information commerce

By Kathleen Scalise, Public Affairs

BERKELEY -- A "dangerously ill-conceived law" to regulate all transactions in information is hurtling toward enactment despite the enormous legal tangles it will cause, say UC Berkeley experts, who are calling for another look at the legislation before it is approved.

If the proposed Article 2B of the Uniform Commercial Code "is enacted by state legislatures over the next six months, it would be a disaster," said Professor Pamela Samuelson of the University of California, Berkeley. She said it could affect everything from whether book publishers take a cue from software developers and start "shrink wrapping" books to restrict sharing to whether Internet robots can make legally binding contracts for computer users who unleash them.

Despite the awesome breadth of the proposed legislation and the need to consider its implications, "drafters of this 'model' law intend to push forward as hard and as fast as they can to get approval so that states will begin enacting it as soon as this fall," Samuelson said.

A key vote on the fate of the proposed law will be held July 24-31 at the meeting of the National Conference of Commissioners of Uniform State Laws (NCCUSL) in Cleveland, Ohio. They intend to discuss and vote on the text of 2B section-by-section. Samuelson and many other experts hope NCCUSL can be persuaded to slow down and take a hard look at Article 2B before giving the go ahead to any sections of the law.

Article 2B proposes to regulate almost all transactions in information. It is a so-called "model law" that each state legislature can accept or reject. States usually adopt model laws put forward in the Uniform Commercial Code so that business transactions across state lines remain consistent.

Among other effects, Article 2B could chill the "fair use" doctrine that the public and libraries depend on to share information. Like computer software, which is often packaged with the admonition that whoever breaks the seal is bound by the terms of an enclosed manufacturer's contract, so too books could be wrapped in cellophane and sold with all types of limitations.

The buyer could even be "barred from passing the purchased copy onto a friend," according to a paper presented at a recent UC Berkeley conference by David Nimmer, Elliot Brown and Gary Frischling of the Los Angeles firm Irell & Manella LLP. "Nor is there any reason that the publisher should stop there," the paper went on, pointing out the ridiculous breadth of the law as currently proposed. "It could likewise require the reader not to skip chapters, not to read any paragraph more than three times, not to reveal the surprise plot twists to family or acquaintances, and certainly not to quote in a book review the few paragraphs that the fair use doctrine would otherwise permit."

People "have no idea how dramatically the relationship to information is going to change if and when Article 2B passes," said Professor Peter Lyman, former head of the UC Berkeley library system, one of the most distinguished research libraries in the country. "In fact, I doubt if libraries will continue to exist in their present form."

At the recent conference organized by the Berkeley Center for Law and Technology and the Institute of Management, Innovation and Organization at UC Berkeley, those expressing doubts about whether Article 2B is the right set of rules for the sale of information included representatives from sectors as diverse as Silicon Valley law firms, major motion picture companies, top accounting firms, computer technology companies and the World Bank.

But despite such intensifying concerns, "proponents of Article 2B want it to be the commercial law of the global information economy," said Samuelson, who holds a joint appointment with UC Berkeley's School of Information Management & Systems and the Boalt Hall School of Law.

Others concerned with Article 2B include:

· James Davis of Xerox's Palo Alto Research Center, who criticized Article 2B's validation of contracts by electronic agents, for instance authorizing Internet robots to enter into binding sales. He felt giving such contracts the nod was premature since Internet robot technology is at best only being tested.

· Rochelle Dreyfuss of the New York University Law School said Article 2B would affect U.S. innovation - a vital engine driving business entrepreneurship and economic growth - by discouraging information sharing.

· Michelle Kane of Walt Disney Company said Article 2B was "software-centric" - written from the point of view of the software industry - and expressed dismay that concerns of the motion picture industry had been ignored by the drafting committee.

· Matthew Lynde of Price Waterhouse, a major accounting and consulting firm whose clients would be greatly affected by Article 2B, was unable to take a position on Article 2B because the legislation was too complicated to determine its implications for Price Waterhouse.

· Copyright scholars such as Jerome Reichman of Vanderbilt Law School and Charles McManis of Washington University argued forcefully for continuing "fair use" principles, which Article 2B possibly jeopardizes, as a way to maintain a balance between information provider and user interests.

At a May 14 meeting in Washington, D.C., the American Law Institute, one of the two original sponsors of the Article 2B effort, decided the legislation needs work before it is ready for approval, raising many of same objections that surfaced at the Berkeley conference.

The other sponsor of the legislation - the National Conference of Commissioners of Uniform State Laws, which meets this month - is under pressure to withhold approval, said Samuelson.

However the chair of the Article 2B drafting committee, Carlyle Ring, continues to insist that the U.S. get on with adopting a model law on licensing information to ensure that its rules become the standard for the global information economy, said Samuelson.

"What I want to see happen," said Samuelson, "is for Article 2B to be pared down to the bare minimum necessary to jump-start electronic commerce and then watch how that commerce develops before we put any more legislation in place."

She cites Mark Lemley of the University of Texas Law School, who called for a moratorium on Article 2B until affected parties can study the draft, understand its meaning, and suggest revisions. Article 2B, Lemley said, should reflect existing commercial practice and not untested new rules that could prove unworkable.

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