Formulating Software Contract Standards

The American Law Institute is working to establish unifying standards for software contract law.

The American Law Institute (ALI) is working to establish legal software contract standards that promise to level the legal playing field for software vendors and buyers alike. Dubbed the "Principles of the Law of Software Contracts," the project aims to draft a uniform set of standards to govern software transactions.

The ALI is an association of 3,000 senior lawyers, consisting mainly of judges and tenured law professors. Members include former Associate Supreme Court Justice Sandra Day O'Connor and sitting Associate Supreme Court Justice Samuel Alito.

Unified Guidelines
ALI member Dr. Cem Kaner is closely tracking the Principles project. An attorney with a geek pedigree, he's a professor of software engineering at the Florida Institute of Technology and director of Florida Tech's Center for Software Testing Education and Research.

Kaner is also one of the co-authors of a seminal book about software testing, "Testing Computer Software, 2nd Edition" (with Jack Falk and Hung Q. Nguyen; Wiley, 1999).

"Right now there's no national body of law governing software contracts, and as a result, when you publish a software product you're basically entering a lottery," Kaner tells RDN. "You don't know which of your contract terms will be enforced. Judges need guidelines. With the Principles, the ALI is saying: 'Look, this is a newer body of law, we can't be authoritative, but we can give you guidelines that are closely in line with traditions for similar kinds of cases.'"

This summer, Kaner posted on his blog a detailed "first look" at a draft of the Principles presented at the ALI's annual meeting in San Francisco. He hopes it will kickstart a vigorous public discussion of this evolving document.

Writing the Rules
ALI's effort would require vendors with knowledge of a "hidden material defect" in a product to disclose the defect, or be held liable for customer damages and expenses caused by one. This rule would effectively shield vendors from liability for defects they don't know about, Kaner explains, but require them to reveal bugs they're aware of.

The ALI is also trying to tackle reverse engineering. Historically, reverse engineering of all products -- everything from cars to Coca-Cola -- has been acceptable practice in the United States, Kaner says. But software makers argue that theirs is a special case: Unlike Coke, the flavor of which you can copy but the formula for which remains elusive, a program's formula is in its code.

"If I want to build a product that's compatible with yours, I have to reverse-engineer it," Kaner says. "And yet almost every software product that ships now ships with a boilerplate clause that says no reverse engineering of any kind is permissible."

Kaner points to the 2003 case of Baystate v. Bowers, in which a Massachusetts district court upheld as law that a shrink-wrap license can forbid reverse engineering.

This isn't the first time a legal group has tried to define a set of default software-licensing rules. In 2000, after 12 years of drafting, the National Conference of Commissioners on Uniform State Laws published the Uniform Computer Information Transaction Act (UCITA). But only the states of Virginia and Maryland adopted the UCITA guidelines, and the group abandoned the project in 2003.

Kaner worked extensively on the UCITA project. He encourages software developers and IT professionals to watch developments in the Principles effort closely, and to get involved where possible. "This is a body of legal material that, once it's adopted, will govern their working conditions and the contracts they live under," he says.

About the Author

John K. Waters is a freelance author and journalist based in Silicon Valley. His latest book is The Everything Guide to Social Media. Follow John on Twitter, read his blog on, check out his author page on Amazon, or e-mail him at

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