Intellectual Property Law

Mixed Transactions under the Uniformed Computer Information Transaction Act

By Martha L. Arias

The Uniformed Computer Information Transaction Act (UCITA) is a proposed law whose goal is to provide uniformity to information technology transactions just as the Uniformed Commercial Code (UCC) does for the sale of goods. "Mixed transactions" are those that involve computer information and other subject matter and may be subject to one or more sources of contract law. UCITA § 103(4) addresses the issue of mixed transactions and clarifies what mixed transactions are subject to UCITA. 

UCITA does not apply to "information," but to contracts and agreements regarding "computer information." In practice, it may be difficult to determine whether a specific agreement involves transactions subject to UCITA, the UCC, or common law.  UCITA § 103(4) states that the issue is not whether multiple source of contract law apply, but to what extent UCITA applies in lieu of another law.  Section 103(4) addresses this issue as follows:

1. Computer information v. UCC: If an agreement involves transactions for the sale of computer information and other subject matter governed by the UCC, the general rule is that, in the absence of the contrary, the rules of the UCC apply to its respective subject matter and the UCITA rules apply to its subject matter -computer information. This principle is in accord with UCC's and state statutes' principles.

2.  Computer information v. Goods: Computer information and information rights are not goods. Information contained on a tangible medium is still information regardless of the tangible object in which it is incorporated.  Thus, information contained in a diskette or a database is still information and should be treated as computer information for UCITA purposes.  In United States v. Stafford, 136 F.3d 1109 (7th Cir. 1998) and Fink v. DeClassis 745 F.Supp. 509, 515 (N.D. Ill. 1990), the court held that trademarks, tradenames, customer lists, artwork, advertising, sales records, unfulfilled sales orders, and licenses are not goods.  This is different than information contained in a book; the book binding and paper may constitute UCC Article 2 goods as established by case law.  Therefore, when an agreement involves computer information and goods, such as the sale of a computer and its software, the UCC applies to that part of the transaction that involves the sale or lease of goods, but UCITA applies to that part of the transaction that involves the creation, modification, access to, or transfer of it.  This general rule, though, has some exceptions.

3.  Computer information v. goods: exceptions to the general rule:  UCITA treats computer information as such regardless of whether it is contained in a tangible object or electronic medium. UCITA applies to the copy, documentation, and packaging of computer information. Yet, there are exceptions to this general rule. UCITA, for instance, states that when a copy of a computer program is embedded in and sold or leased as part of the goods, its precepts would not apply, but the UCC. E.g., a computer program embedded in a car engine.  Hence, application of this exception requires careful analysis because not every embedded computer program is the object of this exception; UCITA specifically mentions two situations:

First, despite the above-mentioned exception, UCITAS applies to the computer program and the copy of it if the goods in which that program is embedded is a computer or a computer peripheral. UCITA specifically states that a commercial choice to distribute a program in embedded form rather than in a form requiring loading the program into a computer does not change the applicability of UCITAS.   

Second, if the computer program or a copy of it is sold or leased as part of goods other than a computer of peripheral, UCITA applies to the program and copy if giving the buyer or lessee of the goods access to or use of the program is ordinarily a "material purpose" of this type of transaction. UCITA requires that this material purpose analysis be centered on the type of transaction rather than on the subject goals or intent of the parties. Also, focus must be on the particular goods in which the program is embedded, rather than the overall transaction as a whole. Courts are to examine the commercial context when determining whether the use of the program constitute a material purpose.

Thus, UCITA § 103(4) illustrates on those mixed transactions that involve computer information and goods and how UCITA and the UCC interplay for contract law purposes.

Full post as published by IBLS Internet Law Blog on May 17, 2009 (boomark / email).