An access provider may, or may not, provide contractual rights in the information accessed. Some transactions entail a three-party framework: in addition to the customer, one licensor provides access, while another (the content provider) licenses the information. This transaction involves two and, in some cases, three contracts. The first is between the content provider and the access provider. The second is between the access provider and the end user. The third arises if the content provider contracts directly with the end user; that too is an access contract. The contracts are independent of each other.

ATM cards, "smart cards," home banking products, and the like enable a customer to obtain information from an information processing system maintained by a financial institution, and would therefore be "access contracts" were they not excluded by section 103(d)(1) as a "financial services transaction", which excludes "related identifying, verifying, access-enabling, authorizing or monitoring information." Under section 104, the parties may agree to use the contract formation provisions of this Act to enter into the initial customer relationship and thereafter to obtain an ATM card, smart card, or home banking software. They may further agree that the licensing aspects of their relationship will be governed by the provisions of this Act. If so, the agreement is an "access contract." The agreement does not subject any transaction effected through use of an ATM card or home banking product to this Act, or alter the rules that would otherwise apply to such transaction.

2. "Agreement". This definition derives from Uniform Commercial Code § 1-201(3) (1998 Official Text). The term includes full recognition of usage of trade, course of dealing, course of performance and the surrounding circumstances as effective parts of an agreement. The meaning of the agreement is determined by the language the parties use and their actions, interpreted in the light of commercial practice and other surrounding circumstances. See Section 113(b); Section 301 (parol evidence rule). Whether an agreement has legal effect is determined by this Act or other applicable law. Section 114(d).

3. "Attribution procedure." An "attribution procedure" is a procedure used to identify the person who sent an electronic message or to verify the integrity of its content. In general, under this Act, an attribution procedure has substantive effect only if it was agreed to or adopted by the parties or established by applicable law. Agreement to or adoption of a procedure may occur directly between the two parties or through a third party. For example, the operator of a multi-database system that includes information provided by third parties, may arrange with database providers and customers for use of a particular attribution procedure. Those arrangements establish an attribution procedure between the customers and the database providers. An attribution procedure may also be a procedure established by two parties in the expectation that a third party may rely on it when the third party in fact relies on or adopts it. For example, a digital signature may be issued to an individual pursuant to an agreement between the issuer and the individual, but then accepted or relied on by another party in a separate transaction. Use of the signature is an attribution procedure in that subsequent transaction. Similarly, a group consisting of member companies may establish attribution procedures that are intended to bind members in dealing with one another. All such arrangements are attribution procedures under this Act. The substantive provisions on attribution are set out in Sections 108, 212 and 213.

4. "Authenticate." This term replaces "signature" and "signed." A similar change in terminology is made in Uniform Commercial Code Article 9 (1998 Official Text). In this definition, the term "sign" should be interpreted consistent with the use of that term in Uniform Commercial Code § 1-201 (1998 Official Text), except that there is no limitation that signing be limited to authenticating a writing.

The definition is technologically neutral, but makes clear that qualifying electronic systems fulfill what once were paper-based requirements. Any signature under other law is an authentication under this Act. In addition, authentication includes qualifying use of any identifier such as a personal identification number (PIN) or a typed or otherwise signed name. It can include actions or sounds such as encryption, voice and biological identification, and other technologically enabled acts if done with proper intent. There is no requirement that the authenticated record be retained by a party unless that requirement is established under other law.

An authentication may be on, logically associated with, or linked to the record. With digital technology, the analogy between signing a record electronically and signing a paper is not precise. "Logically associated" makes it clear that the association between an authentication and a record need not be physical in nature. However, the association must support the inference that the authenticating party intends to adopt or accept the associated or referenced record. See Parma Tile Mosaic & Marble Co. v. Short, 663 N.E.2d 633 (N.Y. 1996) (intent requirement not met). "Referring to" or "linked to" captures the traditional concept of incorporating a record or terms by reference, as well as use of an electronic connection, such as an Internet hyperlink.

An "authentication" may express various intended effects. The ordinary effects are (i) accepting an agreement, or (ii) adopting a record or specific term(s). Authentication may also confirm the content of the record or identify a person. What effects are intended are determined by the context and objective indicia associated with that context.

5. "Automated transaction." This term refers to contracts formed automatically and which are effective even though one or both parties operates through an electronic agent instead of a human being (an individual). In some systems a human being might review a particular transaction or aspect of it before the transaction is completed, such as when there is a problem with the system or when some aspect of the transaction appears to be irregular. If such review does not occur in the ordinary course (e.g., when no system problems exist), the transaction qualifies as an automated transaction. The term automated transaction is not inconsistent with a system in which, when some aspect of the transaction appears to be irregular, or when a message or transaction being processed by an automated system fails system edits and is repaired by a data entry clerk or other employee with no authorization to bind a party.

6. "Cancellation." This definition follows Uniform Commercial Code § 2-106(4) (1998 Official Text); no substantive change is intended by language variations. Cancellation is a remedy for breach. The effect of cancellation is stated in Section 802.

7. "Computer". The definition of "computer" draws on definitions in federal and state criminal, tax and other sources. The term does not include a traditional television set, radio or toaster even though such goods may include a microprocessor chip. It might include new generations of machines that combine computation, word processing, Internet access, and traditional broadcast reception. The definition should be applied by the courts with common sense. Under various state statutes, unauthorized access to a computer is a crime, but while the definition of computer in those statutes is broad, courts exercise common sense in applying the definition, an approach that should also be true here. Thus, while an automobile might contain a computer or several computers, the automobile is not itself a computer. A microwave oven with timing and heat operations controlled by software is not a computer, but merely ordinary goods enhanced by software. On the other hand, a desktop computer that receives telephone calls or fax messages is still a computer.

8. "Computer information." This term covers information that is in electronic form and that is obtained from, accessible with, or usable by, a computer; it includes the information, the copy of it (e.g., a diskette containing the information), and its documentation (including non-electronic documentation). As defined, "electronic" includes digital information or information in another form having similar capabilities. This covers analog and future computational technologies, eliminating the possibility that the Act might be limited to current technology. The term does not include information merely because it could be scanned or entered into a computer; it is limited to electronic information in a form capable of being directly processed in a computer. "Computer information" does not generally include printed information or other non-electronic formats of information.

9. "Computer information transaction." This term establishes the scope of this Act. Section 103. It requires an agreement involving computer information. The term includes transfers of computer programs or multimedia products, software and multimedia development contracts, access contracts, and contracts to obtain information for use in a program, access contract, or multimedia product. However, the mere fact that parties agree to communicate in digital form does not bring a transaction within this definition, nor does a decision by one party to use computer information when the contract does not require this. An agreement to use e-mail to communicate about a contract for the shipment of petroleum or to file an application in digital form does not bring the transaction within this definition. A contract for an airline ticket is not a computer information transaction simply because the ticket may be represented in digital form. The subject matter of that agreement is not the computer information, but the service - air transportation. See comments to Section 103.

A transaction is not for the "creation" of computer information in the sense intended here where the contracted-for activities are merely secretarial, ministerial, or clerical in nature. The computer information must be created, i.e., produced or developed through some business, professional, artistic, imaginative, or similar effort. Of course, a transaction that otherwise qualifies and that occurs with respect to information already in the form of computer information is within the definition regardless of how it was put into that form.

10. "Computer program." The first sentence parallels copyright law. 17 U.S.C. § 101 (1998). The second sentence distinguishes between computer programs as operating instructions communicated to a computer and "informational content" communicated to human beings. This distinction parallels that used in discussions of formal programming languages between syntax (grammar) and semantics (meaning). As used in this Act, "computer program" refers to functional and operating aspects of a digital or similar system, whereas "informational content" refers to material that communicates to a person. In resolving an issue that turns on this distinction, the test lies in whether the issue concerns operations (program) or communicated content (informational content). The definition pertains solely to contract law issues. It does not relate to the copyright law issue of distinguishing between a process and copyrightable expression. The distinction here is more like that in copyright law between a computer program as a "literary work" (code) and output as an "audiovisual work" (images, sounds). In copyright, that distinction relates to property and infringement issues. In this Act, the distinction relates to contract law issues such as liability risk and performance obligations.

11. "Consequential damages." This definition is from Uniform Commercial Code § 2-715(2)(1998 Official Text). Except for the clarification regarding "direct damages" and "incidental damages," no substantive change is intended. For example, while the definition does not specifically exclude losses that could be avoided by mitigation through cover or otherwise, a duty to mitigate exists under Section 807. A party can recover compensation only for losses that it could not reasonably have avoided. Of course, the idea of avoidance through reasonable steps such as cover or otherwise must be assessed with due regard to how damages are measured. For example, if recovery is based on lost volume, the damages measure assumes that another transaction is not a substitute for the lost transaction and, thus, the idea of mitigation through a replacement transaction is not germane. See discussion of substitute transactions in Sections 808 and 809.

Consequential damages do not include "direct" or "incidental" damages. Consequential loss includes loss of anticipated benefits as a result of not being able to exploit or rely on the expected contractual performance, such as lost profits of the injured party, lost third-party royalties that would have accrued from a licensee's proper performance, and lost income from wrongful gains realized by another party from misuse of confidential information. Consequential damages also include damage to reputation, loss of privacy, lost value of a trade secret from wrongful disclosure or use, and losses or damage to data or property caused by a breach.

Except as provided in Section 807 or as limited by agreement, consequential damages may be recovered by either party. The losses must be an ordinary and predictable result of the breach and must have been foreseeable. For purposes of damages computation, the term "reason to know" should be interpreted in a manner consistent with case law under Uniform Commercial Code Article 2. For an injured party to recover for economic losses resulting from the party's special circumstances, the party in breach must have had notice of those circumstances at the time of contracting. In contrast, losses from ordinary, general requirements can often be presumed to have been within the contemplation of the other party. In addition, to be foreseeable, the losses must not result from atypical risk taking by the aggrieved party, such as in a failure reasonably to maintain back-up systems for retrieval of data.

Damage to other property (i.e., not the property that is the subject of the contract itself) may be consequential damage. If injury follows use of a computer program without discovery of a defect causing the damage, the question of "proximate" cause includes considering whether it was reasonable for the injured party to use the information without inspection that would have revealed the defect. Proximate causation may not exist where damages result from misuse or a use that violates clear warnings against the particular type of use.

12. "Conspicuous." This definition is from Uniform Commercial Code § 1-201(10) (1998 Official Text), but updated for electronic commerce. Whether a term is conspicuous is determined by the court. Section 114. The definition of "conspicuous" does not change requirements of other law that specifies the content, timing or location of disclosures or warnings. If other law requires specific content, location, or timing of disclosure, those requirements apply under Section 105 and Section 114.

A term is conspicuous if it is so positioned or presented that the attention of an ordinary person reasonably ought to have been called to it. Conspicuous terms are often contained in a record, but the concept is not so limited; it can include an oral or automated voice presentation that meets the basic standard. for electronic records, whether a term is conspicuous is gauged by the condition of the message as it would be received or first viewed by a person using a system that the parties adopted for such records, a system that the sender knows the recipient is using or, in the absence of the foregoing, an ordinary system or method of receiving or reviewing such messages. For an electronic agent, presentation of the term must be capable of invoking a response from a reasonably configured electronic agent.

As in Uniform Commercial Code Section 1-201(10) (1998 Official Text), this Act sets out several methods of making a term conspicuous. Requiring that a term be conspicuous blends a notice function (the term ought to be noticed) and a planning function (giving guidance to the party relying on the term regarding how that result can be achieved). The statutory illustrations reduce uncertainty and litigation. The illustrations are not exclusive. For cases outside their terms, the general standard governs.

The definition adapts the U.C.C. standard to cover methods relevant in electronic commerce. Paragraph (A)(ii) contemplates setting off a term or label by symbols so that conspicuous formatting can be reliably transferred electronically (font size, color and other attributes might not always be transferable). It includes a term or reference that provides: *** Disclaimer *** or <<< Disclaimer >>>. Paragraph (A)(iii) deals with hyperlinks and related Internet technologies. It contemplates a case in which a computer screen displays an image or term or a summary or reference to it, and the party using the screen, by taking an action with reference to it, is promptly transferred to a different display or location wherein the contract term is available. To be conspicuous, the image, term, summary or reference must be prominent and its use must readily enable review of the actual term. The access must be from the display and not by taking other actions such as a telephone call or driving to a store. When the term is accessed, it must be readily reviewable. The fact that an entire contract is prominently referenced does not automatically mean that a particular term in it is conspicuous.

Paragraph (B) operates independently of paragraph (A) and recognizes a procedure by which, without taking action with respect to the term or reference, the party cannot proceed. Thus, a screen that states: "There are no warranties of accuracy with respect to the information" in a manner that might not meet paragraph (A), but in a way that precludes the user from proceeding without assenting to or rejecting this condition, suffices.

13. "Consumer" and "consumer contract." A "consumer" is a human being (individual) who obtains information primarily for personal, household, or family purposes. Whether an individual is a consumer with reference to a transaction is determined at the time of contracting and the then-intended use of the information. For computer information, however, many contracts for "personal" use are not consumer contracts (e.g., stock broker personally using software to monitor client investments). The definition distinguishes profit making, professional, or business use, from non-business or family use. Only when the contract is primarily for the latter is there a consumer contract. A license of software distributed for general personal use and acquired solely for tracking household finances is a consumer contract, but if the software is acquired for use in an investment management business, the transaction is not a consumer transaction. The profit-making standard for determining whether a transaction is a consumer contract is followed in other areas of law. See, e.g., Thomas v. Sundance Properties, 726 F.2d 1417 (9^th Cir. 1984); In re Booth, 858 F.2d 1051 (5^th Cir. 1988); In re Circle Five, Inc., 75 B.R. 686 (Bankr. D. Idaho 1987); Truth in Lending Act, 15 U.S.C. § 1603 (excludes extensions of credit "primarily for business, commercial, or agricultural purposes"). A purpose stated in the agreement ordinarily determines the purpose of the transaction for purposes of this definition.

14. "Contract." This definition is from Uniform Commercial Code § 1-201(11) (1998 Official Text).

15. "Contract fee." This term includes any monetary payment under a contract, including royalties.

16. "Contractual use term." This term includes any enforceable contractual term that defines or limits access to, use or disclosure of information or informational rights. Use terms ordinarily relate only to copies and information provided under the contract. Unless otherwise expressly indicated, a contractual use term does not govern the same information lawfully obtained from other sources. For this definition, the use term must come from a contract and not simply from regulatory or property rights law. The contractual term must be enforceable to be within the definition. Thus, if trade secret or competition law precludes enforcement of a particular term dealing with non-competition, that term is not a contractual use term under this Act to the extent it is unenforceable.

In this Act, terms establishing the scope of a license are contractual use terms. They delimit the licensee's contractual rights. Under intellectual property law, however, with respect to determining whether an infringement occurs, not all contract terms are coequal. See Sun Microsystems v. Microsoft Corp., 188 F.3d 1115 (9^th Cir. 1999); Schoenberg v. Shappolsky Publishers, Inc. 971 F.2d 926 (2d Cir. 1992). The definition in this Act does not alter that distinction with reference to infringement claims. In contract law, however, breach of any contractual use term breaches the contract. Whether there is also a right of action for infringement is determined by intellectual property law.

17. "Copy." This term refers to the medium containing the information. For purposes of this Act, the medium can be tangible or electronic. The time during which information is fixed on the medium can be temporary if this fulfills the required performance. The copyright law question of when moving software within computer memory or making a transient copy is an infringement does not relate to contract law issues and is not dealt with in this Act. Stenograph v. Bossard, 46 U.S.P.Q.2d 1936 (D.C. Cir. 1998); MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993).

18. "Course of dealing." This term is from Uniform Commercial Code § 1-205 (1998 Official Text). It is restricted to a sequence of conduct between the parties prior to the agreement at issue.

19. "Course of performance." This term is from Uniform Commercial Code § 2-208 (1998 Official Text). It refers to conduct during performance of the agreement as compared to conduct prior to the agreement which is under the term "course of dealing." Both terms are part of the commercial approach under this Act to interpreting contracts in a practical manner. The parties know best what they meant by their agreement; their conduct is often the best indication of what that meaning was. A course of performance is always relevant to determine the meaning of the agreement. Uniform Commercial Code § 1-205, comment 2 (1998 Official Text).

20. "Delivery." Delivery can occur by transfer of possession of a tangible copy or by electronic transfer. In electronic transfers, information may not move from one location to another, but a copying of the information into another location or making it available in a system shared or accessible by the recipient and the party making delivery. There are many ways that transfer of possession or control might occur. For example, in an electronic delivery, a transfer of possession or control would occur when the information comes into existence in an information processing system or at an address in that system in a form capable of being processed by or perceived from a system of that type by a recipient, if the recipient uses, or otherwise has designated or holds out, that place or system for receipt of copies of the kind.

21. "Direct damages." Direct damages are compensation for losses associated with the value of the contracted for performance itself as contrasted to loss of a benefit expected from use of the performance or its results. Direct damages are measured by Sections 808(b) and 809(a). They are capped by the contracted-for price or market value for the performance as appropriate. This Act rejects cases that treat as direct damages losses that relate to anticipated benefits from use of information such as Chatlos Systems, Inc. v. National Cash Register Corp., 670 F.2d 1304 (3d Cir. 1982). Those are consequential damages. Thus, if a computer program is purchased for $1,000 and, if merchantable, would yield profits or cost-savings in business of $10,000, but it is totally defective, "direct" damages are $1,000. If recoverable, the lost profits or expected cost-savings are consequential damages.

22. "Electronic." This term is technology neutral, and encompasses forms of information-processing technology that may be developed in the future.

23. "Electronic agent." This term refers to an automated means for making or performing contracts. The agent must act independently in a manner relevant to creation or performance of a contract. Mere use of a telephone or e-mail system is not use of an electronic agent. The automated system must have been selected, programmed or otherwise intentionally used for that purpose by the person that is bound by its operations. The legal relationship between the person and the automated agent is not equivalent to common law agency, but takes into account that the "agent" is not a human. However, parties that use electronic agents are ordinarily bound by the results of their operations.

24. "Electronic Message." A message is distinguished from a "record" by the fact that it is intended for communication to another person or an electronic agent; it does not merely record information. Communication of a message may entail copying it into another location or making it available in a system shared by or accessible to the recipient. In effect, it is stored or generated for purposes of communicating to another.

25. "Financial accommodation contract." A financial accommodation contract is 1) a loan in whole or in part to acquire computer information or 2) a lease of a copy of software or other computer information. The recipient of the accommodation is the licensee. If, however, the finance contract creates or provides for a security interest governed by Article 9 of the Uniform Commercial Code, the contract is not a "financial accommodation contract; the security interest is governed by Uniform Commercial Code Article 9. An agreement in which royalties for use accrue over time and are paid periodically is not a financial accommodation contract, but simply a royalty-bearing license (or assignment) of the information.

26. "Financial services transaction." This term includes a variety of financial system activities and transactions governed under federal and other state law which are excluded from this Act under section 103(d). Many of these are governed by federal law or by the Uniform Commercial Code. The phrase "monetary value represented in electronic form" includes electronic currency. The term "financial services transaction" does not include contracts to acquire software for use in banking or other financial service activities even if the product of transactions that the software is used to process is excluded.

27. "Financier." A financier is a creditor or a lessor dealing with the licensee under a financial accommodation contract. The financier may have any of several relationships to licensed computer information. In one the financier obtains rights as a licensee for purposes of transfer to the eventual licensee, which is the accommodated party. This is like a finance lease under Uniform Commercial Code Article 2A, but the focus is licensed computer information, rather than leased goods. A second kind of relationship arises where the party giving the accommodation does not obtain rights in the license as against the licensor, but obtains a contractual right to prevent the licensee's use of the information in the event of breach of the financial accommodation contract.

The licensor in the underlying license is not a financier for purposes of this Act. A licensor may obtain a security interest under Article 9 and would, with respect to that interest, have the rights of a secured party under Article 9.

28. "Good Faith." This definition expands on Uniform Commercial Code § 2-103(b) (1998 Official Text). It rejects pure "honesty in fact" as the sole standard of good faith. However, while good faith in performance is an element of all contracts covered by this Act, the obligation of good faith does not override express contract terms or the right to enforce them. See Kham & Nates Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351 (7^th Cir. 1990); Amoco Oil Co. v. Ervin, 908 P.2d 493 (Colo. 1995); Badgett v. Security State Bank, 116 Wn.2d 563, 807 P.2d 356 (1991). The primary application of the concept is that, when a party has discretion under the contract, that discretion should be exercised in a good faith manner. Davis v. Sears, Roebuck & Co., 873 F.2d 888 (6^th Cir. 1989). Good faith does not require that a party act to benefit or avoid harm to the other at the cost of rights that it fairly has under the agreement.

Good faith is not a negligence or reasonable care standard. "Observance of reasonable commercial standards of fair dealing" is concerned with the fairness of the conduct rather than the care with which an act is performed. Both fair dealing and ordinary reasonable care are judged in light of reasonable commercial standards, but those standards in each case are directed to different aspects of commercial conduct.

29. "Goods." This definition clarifies that computer information, including computer programs, are not goods for purposes of this Act. The definition does not alter the definition of goods in other law, such as the consumer protection law of this state. Some but not all of the items or transactions treated as financial services transactions in this Act are also excluded from the definition of goods. No inference is intended that those not so excluded, such as payment orders or loans, are thereby to be treated as goods.

30. "Incidental damages." This term corresponds to the same term in Uniform Commercial Code Article 2 (1998 Official Text). Incidental damages are expenses incurred after breach. They include the cost of seeking or arranging for mitigation, but not the actual expenditure for the mitigation itself, which is covered in measuring direct or consequential damages.

31. "Information." This term embraces a wide range of subject matter, but as used in this Act it is limited to transactions within the scope of the Act. "Information" is not limited to subject matter in which informational property rights exist. It includes, for example, factual data that are the subject of a contractual relationship. As used here, "data" refers to facts whether or not organized or interpreted. A "mask work" is defined in federal law; it refers to a representational technology used in creation of semiconductor products.

32. "Information processing system." This term includes computers and other information processing systems. In this Act, the term is used primarily in reference to sending and receiving notices.

33. "Informational content." This is information whose ordinary use involves communication of the information to a human being (individual). It is the information that humans read, see, hear and otherwise experience. For example, if an electronic database includes images or text and a program enabling display of or access to them, the images are informational content while the search program is not. A Westlaw search program is not informational content, but the text of the cases is. The term applies even if the person creating the informational content does not intend to reveal it to others; this is because preparation inevitably involves an intent that the information be perceivable by its creator. Informational content need not actually be communicated to an individual; it merely must be information that in ordinary use is communicated to individuals. For example, stock quotes remain informational content even if an investor uses an electronic agent to make orders and never looks at the actual quotes themselves. However, the term does not include computer program instructions that merely control interaction of a computer program with other programs or with a machine or device.

34. "Informational rights." This term includes but is not limited to "intellectual property" rights. It also includes rights created under any law that gives a person a right to control use of information independent of contract, such as may be developing with reference to privacy law. Other laws determine when such rights exist. As with traditional intellectual property law, the rights need not be exclusive as to all other persons and all uses. This Act does not modify those laws under which such rights are created and exist. The term does not include mere tort claims such as the right to sue for defamation.

35. "Knowledge." This term is from Uniform Commercial Code § 1-201(25) (1998 Official Text). It does not include constructive notice or any duty to inquire.

36. "License." A license is an agreement the terms of which entail a limited or conditional transfer of information or a grant of limited or restricted contractual rights or permissions to use information. A contract "right" is an affirmative commitment that a licensee may engage in a specific use, while a contract "permission" means simply that the licensor will not object to the use. Either can form the basis of a license. No specific formality of language is required. For purposes of this Act, the term includes consignments of copies of information but does not otherwise alter the nature of a consignment. This definition is solely for purposes of this Act and does not alter treatment under other laws, such as tax law.

A transaction is not a license merely because as a matter of law a transferor retains informational property rights that restrict the transferee's ability to use the information. The term thus does not include an unrestricted sale of a copy of a copyrighted work; an unrestricted sale of a copy does not involve express contractual terms restricting use of the information. Similarly, a "copyright notice" in a book that merely states the restrictions on use that remain after a first sale under copyright law is not a license. On the other hand, a software agreement whose terms expressly govern use of the software is a license even if the agreement also gives the licensee ownership of the copy. To be a license, the contract, whatever its form, must control the rights. A license exists if a contract grants greater rights or privileges than a first sale, if it restricts rights or privileges that might otherwise exist, or if it deals with other issues of scope of use.

Whether a contract is a license does not depend on whether the contract transfers title to a copy. Title to a copy is distinct from questions about the extent to which use of the computer information is controlled by the contract. DSC v. Pulse Communications, Inc., 170 F.3d 1354 (Fed. Cir. 1999) indicates how the issues can be treated. Restrictions in a license that are materially inconsistent with ownership of a delivered copy may result in the holder of the copy not being its owner.

Licenses are contracts. Whether the terms of a license are enforceable is determined under this Act and other applicable law, including copyright law. The requirements for an enforceable agreement must be met. The term does not include the myriad non-commercial, casual or other exchanges of information that occur in normal political or social discourse, even if there may be incidental restrictions on use of the information because they do not involve a contractual relationship or a computer information transaction.

37. "Licensor" and "Licensee." These definitions refer to the transferor and transferee in any contract covered by this Act, whether or not the contract is a license. In situations where each party supplies computer information to the other, each is a licensor as to the information it provides and a licensee as to the information it receives. Between a provider of access in an access contract and its customer, the provider is the licensor. Between the provider of access and a provider of the information to be accessed, the provider of the information is the licensor.

38. "Mass-market license" and "mass-market transaction." The term "mass market license" is new and the definition must be applied in light of its intended and limited function. That function is to describe small dollar value, routine transactions involving information that is directed to the general public when the transaction occurs in a retail market available to and used by the general public. One purpose of the definition is to avoid artificial distinctions among business and consumer transferees in an ordinary retail market. The term includes all consumer contracts and also includes some transactions between businesses if they are in a retail market. "Retail market" has its standard dictionary meaning. Mass-market transactions do not include commercial transactions between businesses using ordinary commercial methods, such as purchase orders or terms offered to businesses but not to consumers, or online and access systems focused on the business-business marketplace.

A "mass-market" transaction is characterized by 1) the market in which the transaction occurs, 2) the terms of the transaction, and 3) the type of information involved. The market is a retail market where information is made available in pre-packaged form under generally similar terms to the general public as a whole and in which the general public, including consumers, is a frequent participant. The prototypical retail context is a department store, grocery store, gas station, shopping center, or the like. It does not include transactional contexts, whether online or otherwise, that center on the business-business trade. Retail locations are open to, and in fact attract, the general public as a whole. The products are available to anyone who enters the retail location and pays the standard retail price. While retail merchants make transactions with other businesses, the predominant type of transaction involves consumers. Transactions in a retail market involve relatively small quantities, non-negotiated terms, and transfers to an end user rather than one who plans to resell or re-license the product.

The computer information must be of a type aimed at the general public as a whole, including consumers. This does not include information earmarked for a business or professional audience, a subgroup of the general public, members of an organization, or persons with a separate relationship to the information provider. For example, software provided to and usable only by members of an association or customers of a particular institution, even if otherwise within this Act, are not mass-market transactions. In determining when the term applies, courts should be guided by the purpose of the definition which is to avoid artificial distinctions among business and consumer purchasers in an ordinary retail market. The covered transactions do not include specialty information for business or professional uses, information for specially targeted limited audiences, information distributed in non-retail transactions, or professional use information. The transactions involve computer information routinely acquired by consumers or that tend to appeal to a general public audience as a whole, including consumers. Generally, this is inconsistent with substantial customization of the information for a particular end user. Customization that is routine in mass markets or that is done by the licensee after acquiring the information does not take the transaction outside the concept of a mass-market transaction.

The transaction must be with an end user. An end user is a licensee that intends to use the information or informational rights in its own business or personal affairs. An end user is not engaged in reselling, distributing, sublicensing, commercial public performances of the information, or otherwise making the information commercially available to third parties, directly or indirectly.

All consumer transactions are mass-market. For non-consumer transactions, subsection (B)(iii) expressly excludes several types of transactions commonly not associated with routine retail transactions. It excludes any transaction intended for redistribution of the information by further license, loan or sale, or for public performance of a copyrighted work. Such transactions involve no attributes of a retail market. For purposes of this Act, public performance or display does not include use by a library patron of software acquired by the library in the mass market. In online contracts, consumer contracts are mass-market transactions, but business to business transactions are not. By excluding online transactions that do not involve a consumer, the definition gives commerce room to develop without regulation while preserving consumer interests.

39. "Merchant." This definition is from Uniform Commercial Code § 2-104 (1998 Official Text). The definition covers a person that holds itself out as experienced even if the person has not actually engaged in prior transactions of the type involved. The term "merchant" has roots in the "law merchant" concept of an expert or professional in business. This status may be based upon specialized knowledge as to the information or general or specialized knowledge about business practices, or both. Which type of knowledge is sufficient for merchant status is determined by the nature of the issue to which the term is applied. In this Act, as relevant to business practices, "merchant" refers primarily to businesses with general knowledge of business practices in any field, rather than to expertise in a specific field. Section 401(a) and (e) and Section 403, however, require a more focused expertise in the particular type of information.

The reference to attributing knowledge by the employment of an agent confirms that merchant status does not always depend on the principal's knowledge. An organization is charged with the expertise of its employees. Even persons such as universities, for example, can come within the definition of merchant if they have regular purchasing departments or personnel familiar with business practices.

40. "Non-exclusive license." In a nonexclusive license, the licensor does not foreclose itself from making additional licenses involving the same subject matter and same general scope. A nonexclusive license has been described as nothing more than a promise not to sue. It does not convey property rights in the information to the licensee.

41. "Notice." This definition is from Uniform Commercial Code § 1-201(25) (1998 Official Text). Notice exists when a person has knowledge or has received notification or has reason to know of a fact. When or if notice may cease to be effective is not covered by this Act, but is governed by other law.

42. "Notify" or "give notice." This definition is from Uniform Commercial Code § 1-201(26) (1998 Official Text). This term is used when the essential event is the dispatch of the notice, not its receipt. If receipt is the relevant standard, that is stated in the statute.

43. "Party." This definition is from Uniform Commercial Code § 1-201(29) (1998 Official Text). Reference to a "party" includes a person acting through an agent.

44. "Person." This term refers to individuals (human beings) and to business or other organizations, whether or not treated in law as formal entities. It is distinguished from the narrower term, "individual," which as used in this Act, refers only to a natural human being, whether acting in a representative capacity or solely on the individual's own behalf.

45. "Published informational content." This is the type of information most closely associated with free expression. In previous technology, this type of information refers to newspapers, books, phonorecords and the like (which are outside the scope of this Act). For purposes of this definition, the information must be informational content, that is, intended to communicate to a human being, rather than simply to operate a machine. Informational content is published content when created for or distributed to a group of recipients as a whole in generally the same form. The term includes interactive content and content made publicly available in a database, even if only portions are used by individual recipients who, for example, may search the database using a computer program. The information is generally available and the end user selects from the available information. That is like the reader of a newspaper who reads part, but not all, of the newspaper. The term also includes the informational product of automated systems that supply selected portions of a larger database to individual licensees based on programmed parameters.

Published informational content does not include content tailored by individuals (human beings) acting on behalf of the licensor to meet a specific recipient's needs, nor does it apply to information provided in a special relationship of reliance. The phrase "special relationship of reliance" refers to transactions in which the provider knows that a particular licensee plans to rely on particular data provided by the licensor and that the licensee expects the licensor to tailor the information to the client's specific business or personal needs. That type of relationship arises only with respect to licensors who possess unique or specialized expertise or who are in a special position of confidence and trust with the particular licensee such that reliance is justified and the licensor has a duty to act with care. In a special relationship of reliance the information provider is specifically aware of and personally tailors information to the needs of the particular licensee as an integral part of the provider's primary business. A reliance relationship does not arise for information made generally available to a group in standard form, even if those who receive the information subscribe to the service because they believe it is relevant to their commercial or personal needs.

46. "Receive." This definition distinguishes between performances and notices. As to performances, it corresponds to Uniform Commercial Code § 2-103(1)(e) (1998 Official Text). With respect to notices, a notice is received when a message is delivered to a place designated or held out by the recipient for such notices even if the place is controlled by a third party. Arrival at an appropriate private post office box is receipt even if the addressee does not remove or read the message until later. Similarly, arrival at an appropriate electronic mail address constitutes receipt by the addressee, if that electronic mail address was held out as a place for receipt of such messages.

The definition is met by arrival at a location only if the person holds out that location or system as a place for receiving notices of the kind. Outside electronic commerce, parties often require that notice be to a particular address or person. The same is true in electronic commerce. If parties agree to send notice to a particular e-mail address, arrival at that location suffices; delivery to a different e-mail address does not.

The message must be capable of being processed by an ordinary system of the type involved. This refers to the type of system in its general, reasonably expected configuration and not to an atypical configuration known or knowable only to the party operating the system. Whether the message actually is processed is not relevant to receipt; similarly, a letter placed in a party's post office box is received even if not opened.

47. "Record." A record must be in, or capable of being retrieved in, perceivable form. Electronic text recorded in a computer memory that could be printed or displayed from that memory constitutes a record. Similarly, a tape recording of an oral conversation or a video taping of actions could be a record.

48. "Release." A release is a waiver or a nonexclusive permission not accompanied by other commercial attributes such as an ongoing obligation to pay or an obligation to provide the means to implement use of the information. A release is a form of license. The term is used in this Act to identify transactions in which the sole purpose is to permit use and applies where agreements of the type are often made on a less formal basis than a commercial license. Some releases are "quasi-contracts," enforceable on that basis. This Act does not change that law.

49. "Return." In this Act, a "return" refers to acts that restore a party to its initial position if the party rejected contract terms in a record and, as a result, the transaction will not be carried forward. See sections 112, 208, and 209. A return requires redelivery to the licensor or its agent of any computer information already delivered that would have been covered by the rejected contract terms. When the licensee declines the contract, "return" entails reimbursement of any fees paid on re-delivery of all copies of the information and documentation. The information and documentation must be re-delivered in their original condition. By consent of the licensor, the copies can be destroyed in accordance with its instructions. A right to a return under this Act applies only to computer information and does not affect goods, such as a computer that contains the software.

Return is not a remedy for breach. It is a right created by this Act or the agreement that arises if a party refuses proffered contract terms and previously committed to pay or paid the contract fee. Making a return available then allows the party a meaningful opportunity to decide to accept or reject the contract. If a party accepts contract terms, there is no right to a return, but if the computer information is defective, the aggrieved party may have a right to refuse the product and recover the contract fee and any other appropriate damages as a remedy for breach.

A return must be sought within a reasonable time. What is a reasonable time depends on the terms of the agreement or, if the agreement is silent, the commercial context. Section 114.

A right to a return may arise in reference to "bundled" information products (products that include separate information products transferred as a whole for a single fee). Pricing in bundled transactions is not based on merely summing up the fees that would be required for each product if transferred in an unbundled setting; often, bundled products include information products that are provided for no or a lesser charge, even though the information might have a different price in other transactions. In some cases, there is no fee attributable to any of the bundled information products included with other products, such as a computer.

If bundled products are separately priced, a return is for the contract fee for the information product as to which the contract terms were rejected. Otherwise, a return must be of the entire bundled product and reimbursement of the entire price, if any, attributed to that entire product. For a return for a separately stated price to occur, the contract price for the particular item must be separately stated in the sense that the agreement identified an amount for the particular information. A court cannot unbundle products and estimate appropriate prices in what is often a complex commercial distribution arrangement premised on the economics of bundling multiple products. If no price is attributed in the agreement to the information products, a return does not require reimbursement of a fee since none has been charged.

50. "Scope." This definition refers to contract terms that define the central elements of a license that relate to aspects of use of the information. Scope terms define the product. The same computer information has entirely different commercial characteristics and value depending on the scope of rights licensed. For example, a license that allows use of a word processing program in a single computer is not the same product as a license to make and distribute copies of that word processing software throughout a region. Further, neither license is the same product as a license that transfers a copy but limits use to three days at home. They are all different even though the software and the copy of the information may be exactly the same and the differences can only be determined by reading the license.

51. "Send." This definition adapts Uniform Commercial Code § 1-201(38)(1998 Official Text) to cover electronic notices. In modern electronic technology sending a message does not require that the information move from one location to another. Electronic transfers often involve initiating processes that copy the information into another location or that make it available in a system shared with or accessible by the recipient. The message must be capable of being processed by the type of system involved. This refers to the type of system in its general, reasonably expected configuration and not to atypical system configurations. Of course, if the sender has knowledge of the details of the actual system to which it is sending the message, its actions may need to take that knowledge into account. The phrase "in addition" makes it clear that the electronic sending must also comply with relevant criteria for other media, such as use of a commercially reasonable carrier. The message or item sent must be directed to a location or system that is held out as a place for receiving communications of that kind.

52. "Standard form." The definition refers to forms, not standard terms. A form consists of record containing a group of terms prepared for frequent use as a contract. The definition does not cover a tailored contract comprised of "terms" selected from multiple prior agreements. The form must have been actually used without negotiation other than of the ordinarily tailored terms noted in the definition. If a standard form is offered but then negotiated or changed other than with respect to those ordinarily tailored terms, the resulting record of the contract is not a standard form. "Negotiated" for purposes of this definition means actually bargained for or about, or pointed out with an opportunity for meaningful bargaining, even if assented to without actual bargaining.

53. "Term." This definition is from Uniform Commercial Code § 1-201(42) (1998 Official Text). The word refers to a discernible element of an agreement. The word "clause" has the same meaning.

54. "Termination." This definition is from Uniform Commercial Code § 2-106 (1998 Official Text). The effect of terminating a contract is discussed in Sections 616-618.

55. "Transfer." This word, as used with respect to conveyances of contractual interests, refers to actual transfers of a contractual interest, as contrasted to agreements that merely employ another person to act on behalf of the transferor under a delegation or sublicense. Some of these transfers might be described as an assignment of the contract.

56. "Usage of trade." This term is from Uniform Commercial Code § 1-205 (1998 Official Text). This Act treats usage of trade as a factor in determining the commercial meaning of the agreement. The language used in an agreement is interpreted as meaning what it may fairly be expected to mean to parties involved in the particular commercial transaction in a given locality or in a given vocation or trade. A usage of trade must have the "regularity of observance" indicated in the text. It is not required that a usage of trade be "ancient or immemorial," "universal" or the like. Under this definition, full recognition is thus available for new uses and for uses currently observed by the majority of merchants, even though some do not. There is room also for appropriate recognition of usage agreed by merchants in trade codes.

57. Subsection b refers to a variety of provisions of the Uniform Commercial Code which contain additional definitions of terms used in this Act. Unless otherwise expressly indicated, the reference is to the Official Text as of the end of 1998.

Definitional Cross References. Section 102: "Agreement"; "Consumer"; "Computer"; "Computer information"; "Computer information transaction"; "Consumer"; "Copy"; "Electronic"; "Financial services transaction"; "Good faith"; "Goods"; "Information"; "License"; "Mass-market transaction"; "Party".

1. General Structure. This section states the scope of this Act. Subsection (a) outlines the affirmative scope. Subsections (b) and (c) establish rules for transactions where more than one subject matter is involved. Subsection (d) sets out exclusions from the Act.

2. Transactions in Computer Information. This Act deals with contracts and not property law. It governs agreements pertaining to computer information on matters addressed by contract law. The scope of this Act turns initially on the definition of "computer information transaction." Section 102(11). "Computer information transactions" are agreements that deal with the creation, modification, access to, license, or distribution of computer information. Section 102(a)(11). "Computer information" is information in a form directly capable of being processed by, or obtained from, a computer and any copy, associated documentation, or packaging. Section 102(a)(10). As stated in subsections (b) and (c), if a transaction is a computer information transaction but also involves other subject matter, this Act ordinarily applies only to the aspects of the transaction that involve "computer information."

In computer information transactions, the transferee seeks the information and contractual rights to use it. Unlike a buyer of goods, the purchaser (e.g., buyer, lessee, or licensee) of computer information has little interest in the diskette or tape originally containing the information after the information is loaded into a computer, unless the information remains on that media and nowhere else. In online use and distribution of computer information, there is often no tangible medium at all.

This Act deals with a variety of transactions central to the information economy where the contractual subject matter is computer information, whether that information entails text, images, data, programs, or other computer information. However, the mere fact that communications about a transaction, such as an application for a loan or employment, are sent or recorded in digital form does not place the transaction within this Act. Thus, a contract for airplane transportation is not a computer information transaction even though the ticket is in digital form. The subject matter is not the computer information, but the service - air transportation. A contract to create and publish a print book is not a computer information transaction even though the author chooses or is required to deliver the work product on a computer diskette. Similarly, an insurance policy prepared in digital form is not a computer information transaction; it is a contract for insurance coverage the terms of which are evidenced in digital form. A contract for a digital signature certificate is a contract for certification or identification services, not a contract whose subject matter is the computer information.

a. Contracts to Create or Develop Computer Information. This Act applies to contracts to develop, modify, or create software and other computer information, such as a computer database. Section 102(a)(11). Except as excluded in subsection (d), the Act covers all software development contracts, thus resolving conflicts in prior law.

b. Computer Programs. This Act applies to transactions involving distribution of, or grant of a right to use, a computer program. Section 102(a)(11). These transactions are within the Act whether they involve a license or an unrestricted sale of a copy of a program. The difference between a license and an unrestricted sale of a copy, however, is relevant. As reflected in this Act, a license may involve either a more substantial retention of rights or a greater transfer of rights than an unrestricted sale. Most provisions of this Act apply to all transactions within this Act, but some are limited solely to licenses. The coverage of each section is explicit in the section.

c. Access and Internet Contracts. This Act applies to access contracts. Section 102(a)(1). This includes Internet and similar systems for access to or use of computer information on a remote system. It generally includes contracts under which data, text or images are provided to licensees by access to the provider's system or location on Internet.

d. Digital Multimedia Works. This Act applies to agreements to create or distribute multimedia works. Section 102(a)(11). Multimedia works are those which, through digital technology, combine multiple forms of authorship and multiple types of information into an integrated, often interactive work. Interactivity is a characteristic of software-based products. For a discussion of what is a multimedia work, see Copyright Office Circular (Multimedia Circular).

e. Data Processing Contracts. This Act covers contracts for data processing or data analysis of computer information. Section 102(a)(1)(11)(40).

3. Transactions outside the Act. The scope of this Act is limited by the affirmative definitions of "computer information" and "computer information transaction," which exclude print and various other forms of information distribution, as well as by exclusions stated in subsection (d). As a result, the Act leaves unaffected all transactions in the traditional core businesses of non-digital information industries (e.g., print). Whether a magazine, book or newspaper publisher can contractually limit use of the information by purchasers of copies and what contract liability applies to print works is outside this Act, as are the following:

• Sales or leases of goods
• Personal services contracts (except computer information development and support agreements)
• Casual exchanges of information
• Contracts where computer information is not required
• Employment contracts
• Contracts where computer information is insignificant (de minimus)
• Computers, televisions, VCR's, DVD players, or similar goods
• Financial services transactions
• Contracts for print books, magazines, or newspapers
• Contracts for sound recordings and musical works
• Contracts for motion pictures, broadcast or cable programming [outside the mass market].

This Act does not apply to "information," but to contracts and agreements regarding computer information.

4. Mixed Transactions. A computer information transaction may involve computer information and other subject matter and thus present a question of whether all or any part of the transaction is governed by this Act, common law, or an article of the Uniform Commercial Code such as Article 2 or Article 2A. The circumstance that a contract is governed by more than one source of contract law is common in modern commerce. For example:

• A contract to produce a motion picture may at least be governed by the common law of services, common law relating to information, federal and labor law, copyright law, and state regulatory law.
• A contract to buy a toaster may be governed by Article 2, common law of contract, consumer law, and various federal or state regulations.
• A contract to develop a multimedia product may be governed by common law of services, common law relating to information contracts, common law on licensing, copyright law, and other intellectual property law.

Since virtually all contracts of all types involve "mixed" law, the issue is not whether multiple sources of contract law apply, but to what extent this Act applies in lieu of another law. Subsections (b) and (c) decide the question based on the issue presented, the type of transaction, and applicable commercial policies.

a. Computer Information and U.C.C. Subject Matter. If a transaction includes computer information and subject matter governed by an article of the Uniform Commercial Code, the general rule is that, in the absence of contrary agreement under Section 104, the rules of the Uniform Commercial Code apply to its subject matter and the provisions of this Act apply to its subject matter. That principle is stated in subsection (b)(1), subsection (c), and subsection (d)(6). For example, under subsection (d)(6), Uniform Commercial Code Article 8, and not this Act, deals with investment securities, while Articles 4 and 4A, and not this Act, deal with payments, checks, and funds transfers. Subsection (c) provides that, if there is a conflict between a provision of this Act and Article 9 of the Uniform Commercial Code, Article 9 prevails. This resolution in favor of Article 9 is consistent with that in other Articles of the Uniform Commercial Code and other state law statutes. It preserves uniformity in Article 9's application across a wide variety of personal property financing transactions.

b. Computer Information and Goods Generally. One context in which the relation between this Act and an article of the Uniform Commercial Code arises involves transactions that include goods and computer information. "Goods" is defined for purposes of this Act in Section 102. Generally the terms do not overlap since computer information and informational rights are not goods. See, e.g., United States v. Stafford, 136 F.3d 1109 (7^th Cir. 1998); Fink v. DeClassis 745 F.Supp. 509, 515 (N.D. Ill. 1990) (trademarks, tradenames, advertising, artwork, customer lists, sales records, unfulfilled sales orders, goodwill and licenses are not "goods"). If there is a diskette, the diskette is a tangible object but the information on the diskette does not become goods simply because it is contained on a tangible medium, any more than the information in a book is governed by the law of goods because the book binding and paper may be Article 2 goods. See, e.g., Winter v. G.P. Putnam's Sons, 938 F.2d 1033 (9th Cir. 1991); Grappo v. Alitalia Linee Aeree Italiane, S.p.A., 56 F.3d 427 (2d Cir. 1995); Gilmer v Buena Vista Home Video, Inc., 939 F Supp 665 (W.D. Ark. 1996); Architectonics, Inc. v. Control Systems, Inc., 935 F Supp 425 (S.D.N.Y. 1996); Cardozo v. True, 342 So.2d 1053 (Fla. Dist.Ct.App.1977).

If a transaction involves goods and computer information (e.g., a computer and software), the general rule is that Article 2 or Article 2A applies to the aspect of the transaction pertaining to the sale or lease of goods, but this Act applies to the computer information and aspects of the agreement relating to the creation, modification, access to, or transfer of it. Section 103(b)(1). Some courts describe this as a "gravamen of the action" standard. The law applicable to an issue depends on whether the issue pertains to goods or to computer information. Each body of law governs as to its own subject matter. A similar distinction has long existed in copyright law between ownership of a copy and ownership of the copyright. See, e.g., 17 U.S.C. § 202; DSC Communications Corp. v. Pulse Communications, Inc., 170 F.3d 1354 (Fed. Cir. 1999).

c. Computer Information and Goods: Exceptions to General Rule. There are exceptions to the gravamen test. This Act treats the medium that carries the computer information as part of the computer information and within this Act, whether the medium is a tangible object or electronic. This Act applies to the copy, documentation, and packaging of computer information; these are within the definition of computer information itself. Section 102. They are mere incidents of the transfer of the information.

In contrast, in some cases, this Act excludes coverage of a copy of a computer program if the copy is embedded in and sold or leased as part of goods, such as a copy of a computer program that controls engine timing in a car. Subsection (b)(1) outlines how courts should approach cases where a computer program is embedded in and inseparable from goods that are sold or leased as goods. A similar issue is addressed in Uniform Commercial Code Article 9 (1999 Official Text), but the resolution there deals with issues about creating and perfecting security interests under that statute and is not pertinent to general contract law; it is not adopted here.

For contract law, the appropriate rules center on the nature of the goods containing the copy and on the importance of the program and access to it in the transaction in those goods.

First: This Act applies to the computer program and the copy of it if the goods in which the copy is embedded is a computer or a computer peripheral. A commercial choice to distribute a program in embedded form, rather than in a form requiring loading the program into a computer or peripheral does not change the applicability of this Act. For example, the software for a medical imaging device that relies on software capabilities would be within this Act, whether the software is embedded in the imaging device or loaded into it after purchase. Of course, this Act does not apply to the computer; it only applies to the program (and copy) and other computer information.

Second: If a copy of a computer program is sold or leased as part of goods other than a computer or peripheral, this Act applies to the program (and the 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. This standard looks at materiality in an objective sense, centered on transactions of the type, rather than on the subjective goals or intent of the particular parties. Furthermore, materiality focuses on the particular goods in which the program is embedded, rather than the overall transaction as a whole. The test deals with ordinary transactions in goods of the type. Thus, the fact that a program is contained in and sold or leased as a part of goods that are a small part of a billion dollar transaction involving many other assets does not take it out of this Act if, as to the particular goods or system containing the program, access to the program is material.

In determining whether use of the program is a material purpose in obtaining the goods, courts should examine the commercial context. One relevant issue involves between whom the pertinent part of a transaction occurs. Some transactions entail three parties and two agreements. If goods are sold by a vendor but the buyer must obtain a license from a publisher, as to the license between the publisher and licensee, the computer information is clearly material. Beyond that, factors pertaining to whether access to or use of the program is material include the extent to which the computer program's capabilities are a material appeal of the product, the extent to which negotiation focused on that capability, the extent to which the agreement made the program's capacity a separate focus, and the extent to which the program is or could commercially be made available separate and apart from the goods. Materiality is ordinarily clear if the program is separately licensed as part of the transaction. A separately licensed program for a digital camera that enables the camera to link to a computer is within this Act. On the other hand, the mere fact that ordinary functions of ordinary goods rely on a program embedded in the goods does not indicate that program is governed by this Act. The braking functions of an automobile may be controlled by embedded programs, but in a retail transaction, obtaining the automobile's functionality rather than the program is the purpose of the transaction; this Act would not apply to a copy of brake software contained in and sold as part of a car. Upstream contracts to develop or supply the program to the manufacturer are within this Act. A sale of an ordinary television set that uses a computer program to preset choices of channels is not within this Act.

d. Computer Information and Subject Matter not within the U.C.C. If a computer information transaction involves subject matter that is not governed by the U.C.C. or by this Act, subsection[s] (b)(2) [and(3)] states [state] how to determine the extent of applicability of this Act. The general rule adopts the gravamen of the action standard in which this Act ordinarily applies only to its own subject matter, but not to aspects involving the other subject matter unless the computer information is the primary purpose of the agreement. This Act never applies to subject matter excluded under subsection (d) unless, pursuant to Section 104 or otherwise, the parties agree to coverage by this Act for such subject matter.

[(1). Motion Picture Rights Contracts. Subsection (b)(2) provides a different rule applicable to some agreements to create or obtain rights to create a motion picture. Subsection (f) defines "motion picture" for purposes of this Act. Contracting practices in this part of that industry follow established, unique patterns. Under subsection (b)(2), if the dominant character of an agreement is to create or to obtain rights to create a motion picture and that part of the agreement is excluded under subsection (d), this Act does not apply to any part of the agreement. Thus, if an agreement is for rights to make a motion picture from the book Tractor Monster, but also includes rights to create a Tractor Monster computer game, this Act does not apply to the agreement at all if the dominant character of the agreement is one for creating or obtaining rights to create the motion picture. The rule here applies only to the extent that the motion picture aspect of the transaction is excluded under subsection (d)(2)(A).

As used here, "dominant character" does not mean merely a material or primary part. It requires more than in the "predominant purpose" test applied by some courts in relation to goods and services. The term refers to the character of the agreement. The motion picture rights must clearly be the focus of the agreement for both parties; it is not sufficient merely that their value exceeds the value of other aspects of the agreement. Whether motion picture rights are the dominant character is determined by an objective analysis of the circumstances of the transaction and transactions of the particular type. The dominance of motion picture rights must be clear and other rights secondary such that the transaction would not reasonably be viewed as other than as for motion picture rights.

When the motion picture rights comprise the dominant character of the agreement, this Act does not apply. If motion picture rights are not the dominant character of the agreement, this Act applies to the computer information (e.g., the computer game) and other law applies to the motion picture to the extent excluded under subsection (d)(2)(A). If both computer information and motion picture rights are equally important, the dominant character rule does not apply because neither subject matter comprises the sole dominant character of the agreement; this Act applies to the computer information, while other law applies to the motion picture aspect excluded under subsection (d). Where there is a third subject matter involved (e.g., services or goods), other rules of this subsection apply with respect to the coverage by this Act of the other subject matter.

If a transaction includes several agreements among different parties related to a common goal, the character of each agreement is determined with respect to the particular agreement. For example, an agreement to use encryption or imaging software in a particular project is a software license and that agreement is not affected by the coexistence of a related but separate agreement for motion picture rights. Under Section 104, of course, the parties can in all cases agree about whether the transaction is or is not governed entirely by this Act.

(2) Other Subject Matter. The gravamen test generally applies for all other subject matter. That basic rule is restated in subsection (b)(3), which also provides for an exception to that rule.]

If obtaining the computer information or informational rights is the primary purpose of the transaction, this Act applies to the entire transaction, except for subject matter excluded by subsection (d). Variations of this test have been used for years in cases involving goods and services. The test asks a court to consider whether the computer information or other subject matter (e.g., services) is the main focus. This language adopts, for mixed information and services, a variant of the predominant purpose test used under Article 2 with respect to goods and services. In this Act, however, the test only asks whether this Act should apply to other subject matter. [Also, it requires less than the test in subsection (b)(2).] In considering whether, under this test, this Act should apply to the entire transaction, a court should consider the type of transaction envisioned by the parties. While cases under Article 2 provide guidance, it is appropriate to consider additional factors when this Act is contrasted to common law. Courts should consider the extent to which the transaction as a whole corresponds to the framework of information transactions, such as: 1) the nature of any underlying intellectual property rights involved, including differences in the rights provided for different types of works, 2) the extent to which clear allocation of liability risk is a concern, and 3) the extent to which coverage by this Act of the other subject matter in the transaction will correspond to reasonable expectations of the parties as to how the legal issues should be handled.

The same test applies at various levels of use or distribution, but the results may differ at each level. For example, a courier company that licenses communications software from a software publisher is engaged in an transaction entirely within this Act. The subject matter is a license of software. If the courier company provides the software to customers to access data on the location of their packages, the primary purpose may have to do with the services the courier provides. Even then, however, if the software publisher enters into a license with the end user, as between the publisher and the end user, that license is within this Act because the primary purpose of that agreement is the software.

The rules of subsection (b) do not apply if the agreement specifies to what extent this law governs. See Section 104. If the parties elect coverage under this Act, that agreement generally governs as would an agreement that this Act should not apply at all. Agreement here, as elsewhere, can be found in the express terms of the contract as well as in the usage of trade or course of dealing between the parties, or as inferred from the commercial circumstances of the contracting.

5. Exclusions. Subsection (d) states several exclusions from this Act. They are based on a judgment that rules in this Act should not apply to the excluded subject matter unless the parties so agree, because the excluded transactions are different in type from those covered by this Act or are extensively covered by other contract law or regulations. Ordinarily, a court should not apply this Act by analogy to excluded subject matter, but should refer to other law.

a. Core Financial Functions. Subsection (d)(1) excludes core banking, payment and financial services activities. Many of these transactions are regulated by federal or state law and are largely within the scope of the U.C.C. "Financial services transaction", is defined in Section 102. Financial services transactions are similar in many ways to computer information transactions. See Section 102, comment 26. Both types of transactions include trades in symbols, albeit symbols of very different use and effect. They share some common legal issues: e.g., authenticity, data integrity, and authority. However, they will often be governed by very different rules in that, in many cases, the digital subject matter of a financial transaction is the value it represents. An appropriate book entry, for example, is a securities entitlement. UCC 8-501(b)(1) (1998 Official Text). Also, core financial services practices are mature subjects of other bodies of law, such as UCC Articles 3, 4, 4A, 5, 7, 8 and UCC Article 9. For all of these reasons it was deemed essential to exclude financial services transactions from the scope of this Act and to define financial services transaction broadly.

The exclusion under subsection (d)(1) is not an entity exclusion. Regulations such as Regulation E of the Board of Governors of the Federal Reserve System on funds transfer do not apply solely to banks but to any holder of a qualifying account. To the extent that non-banks engage in the activities indicated in the exclusion, those activities are also excluded from this Act. On the other hand, banks engage as licensors and as licensees in many computer information transactions; such transactions, if not covered by this exclusion, are within this Act. Examples include licensing computer software and contracts providing on-line shopping and access to third-party databases. Where a bank provides software to a customer to be used in part in online access, this Act would govern the software license except to the extent the issue involves questions excluded by this subsection or dealt with in an article of the U.C.C., such as Article 4A, or in preemptive federal law.

b. Core Entertainment, Cable and Broadcast. Subsection (d)(2) excludes [many] agreements relating to motion pictures and broadcast and cable programming, in addition to agreements relating to musical works, sound recordings and enhanced sound recordings. The exclusion covers contracts regarding the traditional core activities of these information industries or, in the case of enhanced sound recordings, a enhanced version of a traditional activity. It is intended to be comprehensive as to the excluded activities. The exclusion leaves contract issues to other law.

[Business practices in the excluded transactions differ substantially from practices involving computer information. However, this is not an industry exclusion. To the extent that motion picture, broadcast and other covered companies engage in software licensing or other forms of computer information transactions that are not excluded, this Act applies. Also, the exclusion does not apply to contract issues pertaining to submission of information or ideas, or to releases of informational property rights. Here, practices are similar and it is often impractical to distinguish between an idea or a release in terms of whether it is associated with one or another type of informational work. Coverage of all such transactions reflects these factors.

Also, the exclusion does not apply to mass market transactions involving audio visual programming or motion pictures. The information industries are rapidly converging and, for those engaged in computer information based transactions, the convergence is most pronounced in the mass market. Limiting the exclusion with respect to such transactions reduces the circumstances in which potentially artificial distinctions are drawn between digital information products.]

The exclusions in subsection (d)(2) include agreements to create, perform or include information in the excluded subject matter. To be within the exclusion, both parties must know that the agreement is for a particular work that entails such subject matter. For example, a license generally authorizing use of digital graphics for multiple purposes is not within the exclusion simply because a particular licensee uses the graphics in a motion picture. To be in the exclusion, the agreement must be to include the digital graphics in the motion picture, sound recording or other excluded subject matter. A license for editing or effects software that can be used for multiple purposes, is covered by this Act and not within the exclusion in subsection (d)(2) even if one of its uses is in the creation of a motion picture. Similarly, a software license for use of encryption software generally in products that are motion pictures or sound recordings is not excluded.

The terms "motion picture," "sound recording," "musical work," and "phonorecord" have the meanings associated with those terms in the Copyright Act as of the indicated date [and for "motion picture," also the meaning set out in subsection (f)]. That interpretation applies as of that date for all purposes and with reference to all sources as of that date, including final decisions of courts. The exclusion includes creation or distribution of these works in digital form. The Copyright Act and registration system makes distinctions among and between various types of works, such as audiovisual works, literary works, computer programs, motion pictures, and sound recordings. These distinctions are followed here. The exclusion additionally employs a [slightly expanded definition of "motion picture," and a] new term, "enhanced sound recording," to cover digital products that have elements beyond ordinary sound recordings [or motion pictures] (e.g., a program to allow use of the work), but which do not change the fundamental nature of the work as a sound recording [or linear motion picture].

[The term "enhanced sound recording" encompasses products such as enhanced music CD's, audio DVD's and the products commonly known as music videos. A music video qualifies as an enhanced sound recording because its dominant character consists if recorded sounds, even though it also includes visual depiction's of a performance or series of performances of a nondramatic musical work or works. For purposes of this section, a music video is to be distinguished from a motion picture featuring music, a motion picture of a musical play, opera, concert or variety show, or a documentary concerning a recording artist or other music-related subject. A music video is also to be distinguished from audio or visual programming featuring music videos, which is treated under subsection (d)(2)(A).]

Multimedia works are within this Act. For purposes of this Act, the term "motion picture" focuses on linear works and does not include an interactive computer game, multimedia product, or similar work, nor does it include audio-visual effects within interactive works. The term does not refer to images or visual motion within another work or within software, such as the animated help feature of a word processing program or images or motion in an interactive computer encyclopedia.

c. Compulsory Licenses. Subsection (d)(3) excludes compulsory licenses provided pursuant to the Copyright Act and similar statutes. These transactions are not voluntary contractual relationships and the contract choice principles which underlie this Act are not appropriate.

d. Employment Contracts. This Act does not deal with employee contracts; they are excluded under subsection (d)(4). A vast network of labor law and other regulatory rules apply to the relationship between an employee and employer and the intent in this Act is to leave that law unchanged. The Act does apply to contracts involving independent contractors other than freelancers in the news reporting industry.

e. Voluntary Use of Computer Information. Under Subsection (d)(5) an agreement is not brought into this Act merely because one party elects to use computer information to transmit information to the other, when not required to do so. For example, an author that contracts to submit an article to a publisher for publication in a print journal and elects to send the text by E-mail, does not thereby bring the contract into this Act. A developer allowed by agreement to deliver information in any form it chooses, including in print, does not come within this Act merely because it elects to develop the product using digital systems,

f. Form is Insignificant. This Act generally applies to its subject matter and other law governs other subject matter. However, there may be cases in which the form of the information as computer information is such a minor part of the transaction that the Act should not apply at all. Subsection (d)(5) provides a court with the basis to reach this judgment if the form of the information as computer information is insignificant. This is a narrow exception, applicable only if the form of the information, as compared to the information itself, is a trivial part of the relationship. The exception does not ask a court to compare the cost or value of the computer information to the cost or value of the overall transaction.

For the exception to apply, what must be insignificant is that the information is in the form of computer information as contrasted to another form, such as in written form. If the information could not be provided in any other form under the agreement and still fulfill the purpose of the agreement with respect to it, the form can never be insignificant, such as where the computer information is a computer operating system. This is true even if the software is provided in a transaction for goods that in cost far exceed the value of the software. To function as an operating system under the agreement, the form can never be insignificant. Similarly, if a party acquires a billion dollar robotics system involving robots and computers along with software that operates each, the fact that the price of the software is small as compared to the billion dollar total deal does not exclude coverage of this Act over the software aspect of the agreement. Rather, the form of the information as computer information in this transaction is essential to the agreement because the software must be in a form to operate the computer and robots.

Definitional cross-references: Section 102: "Agreement"; "Computer"; "Computer Information"; "Computer program"; "Conspicuous"; "Copy"; "Good faith"; "Goods"; "Information"; "Informational rights"; "Mass-market transaction"; "Party".

1. Scope of Section. This section adopts the basic rule that, generally, parties can agree to have this Act apply to an entire transaction, part of a transaction, or none of a transaction. This rule deals with applicability of this Act and not other law, including law that supplements this Act.

2. General Rule. This section acknowledges a contractual capability that is presumed to exist under general law. Express recognition of this concept here is important because the narrow subject matter scope of the Act may create uncertainty or differences in coverage that the parties should be able to avoid by agreement. The ability to contractually choose what substantive rules govern in this context allows parties to avoid large costs associated with legal uncertainty.

Subject to the stated limitations, parties can agree to apply or to preclude application of this Act to a transaction if a material part of the transaction involves either computer information or subject matter excluded under Section 103 (d)(1) or (d)(2). This section does not foreclose agreements enforceable under other law, but any agreement to opt-in or opt-out is subject to the limitations in subsections (1) - (5).

The materiality requirement should be liberally construed to enable agreements. It does not ask a court to determine what is the most significant or primary part of a transaction, but merely whether the computer information or otherwise excluded information has some significance to the part of the transaction to which the agreement applies. Materiality is not present if the computer information is a trivial or otherwise insignificant aspect of that part of an overall transaction. The materiality rule in this section applies only to choices to opt in or opt out of coverage by this Act. It does not apply to or alter the ability of parties to change the effect of any rule in this Act or other law that is variable by agreement. Similarly, it does not affect contract choice of what state's law governs under Section 109, even if that choice results in application of this Act to the transaction.

An agreement under this section may include opting into, or out of, the contract formation rules of this Act. "Contract formation" rules are those rules of this Act necessary to determine whether an enforceable agreement to opt-in or opt-out has been formed, whether an enforceable contract concerning computer information has been formed, whether actions are attributed to a person, and how terms of the agreement are adopted. The parties may choose to apply the rules of this Act to part but not all of their transaction. For example, a company providing financial services excluded from this Act may enter into an electronic agreement that enables a customer to access the company's database for the purpose of an otherwise excluded transaction (e.g., deposit or withdrawal of funds) and that opts into this Act with respect to contract formation rules. The enforceability of that agreement is determined by this Act. The same agreement may also, under this Act, indicate terms and conditions regarding computer information that is not excluded from the Act. The financial transactions themselves are excluded.

In determining whether an enforceable agreement to opt-in or opt-out was formed, a court should apply the contract formation rules of this Act. Either a material part of the agreement involves computer information within the Act or the transaction includes computer information about which the parties may be uncertain regarding the application of the Act. Thus, this Act determines whether an electronic message indicating agreement with an opt-in term is attributable to the person to whom it is sought to be attributed, and whether the other requirements for contract formation have been met.

In a mass-market transaction, a contract term to opt-in or to opt-out of the Act under subsection (3) must be conspicuous.

3. Limitations on Right. Subsections (1) through (5) place limitations on agreements to opt into or out of this Act.

a. Opt-In Agreements: General. Subsection (1) deals with agreements providing that this Act governs aspects of a transaction to which it would not otherwise apply ("opt-in agreements"). Under subsection (1), the agreement does not supplant any rule that would otherwise apply and cannot be varied by agreement or that can be varied only in a prescribed manner. The agreement thus cannot alter rights of third parties not party to the agreement. For the limitation to apply, the non-variable rule must be applicable to the transaction in the absence of the opt-in agreement. Also, the rule is subject to the provisions of Section 105(d)(1-4).

In addition, an opt-in agreement cannot alter the effect of otherwise applicable consumer protection statutes or state law dealing with rights in a copy of printed information (e.g., a book on paper) distributed in the mass market. This section does not address what state laws apply to contracts for print information; it simply leaves existing law unchanged. A consumer protection statute is a provision of a statute that applies specifically to consumers and creates a more protective rule for a consumer than exists for all other parties in similar transactions.

b. Opt-In Agreements: Embedded Programs. Subsection (4) follows the exclusion in Section 103 for some computer programs embedded in goods. If a copy of a computer program is excluded from coverage of this Act, the parties cannot use that copy to bring the goods in which the program is embedded into the Act. Thus, under Section 103(b), this Act does not apply to a car or to a copy of a computer program regulating the brakes of the car and sold or leased as part of the car. With respect to the car and program, the parties could not opt into this Act. The result would be different if an embedded program is within this Act under Section 103.

c. Opt-out Agreements. Subsection (2) concerns agreements to opt-out of coverage by this Act. An agreement to opt-out places the transaction within other contract law as to the portion of the transaction to which this Act would otherwise apply. Because of this, subsection (2) places only limited restrictions on what aspects of this Act can be altered by virtue of that type of agreement.

4. Other Limitations. In addition to the limitations stated in this section, any agreement under this Act, including an agreement to opt-in or opt-out of this Act, is subject to standards of unconscionability and fundamental public policy. It also must be performed in good faith.

Uniform Law Source: Uniform Commercial Code §§ 9-104(1)(a); 2A-104(1) (1998 Official Text).

Definitional Cross References: Section 102: "Agreement"; "Authenticate"; "Conspicuous"; "Consumer"; "Contract"; "Electronic"; "Information"; "Informational Rights"; "Record"; "Term".

1. General Principle and Scope of the Section. Subsections (a) and (b) clarify that this Act does not alter intellectual property or other fundamental information laws. Subsection (c) states a similar principle for consumer protection statutes subject to the narrow electronic commerce rules in subsection (d).

The transition from print to digital media has created new demands for information. Because digital information is so easily copied, increased attention has been focused on the formulation of rights in information in order to encourage its creation and on the development of contracting methods that enable effective development and efficient marketing of information assets. Here, as in other parts of the economy, the fundamental policy of contract law is to enforce contractual agreements. At the same time, there remains a fundamental public interest in assuring that information in the public domain is free for all to use from the public domain and in providing access to information for public purposes such as education, research, and fair comment. While the digital environment increases the risk of unfair copying, the enforcement of contracts that permit owners to limit use of information and the development of technological self-help measures have given the owners of information considerable means of enforcing exclusivity in the information they produce or collect. This is true not only against those in contractual privity with the owners, but also in some contexts against the world-at-large.

Balancing the rights of owners of information against the claims of those who want access is complex and has been the subject of considerable controversy and negotiation at both the federal level and internationally. The extent to which the resolution of these issues at the federal level ought to preempt state law is beyond the scope of this Act, the central purpose of which is to facilitate private transactions in information. Moreover, it is clear that limitations on the information property rights of owners that may exist in a copyright regime, where rights are good against third parties, may be inappropriate in a contractual setting where courts should be reluctant to set aside terms of a contract. Subsections (a) and (b) strike the balance between fundamental interests in contract freedom and fundamental public policies such as those regarding innovation, competition, and free expression. The use of these general principles will enable the courts to react to changing practices and technology; more specific prohibitions would lack flexibility and would inevitably fail to cover all relevant contingencies.

2. Federal Law: Preemption. Subsection (a) restates a rule that would apply in any event under federal law. If federal law invalidates a state contract law or contract term, federal law controls. See, e.g., Everex Systems, Inc. v. Cadtrak Corp., 89 F.3d 673 (9^th Cir. 1996) (patent license not transferable); Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1984) (copyright license not transferable); ; SOS, Inc. v. Payday, Inc., 886 F.2d 1084 (9^th Cir. 1989). Subsection (a) refers to preemption, but doctrines grounded in copyright misuse and other federal law may preclude enforcement of some contract terms in some cases. Except for rules that directly regulate specific contract terms, no general preemption of contracting arises under copyright or patent law. See National Car Rental System, Inc. v. Computer Associates Int'l, Inc., 991 F2d 426 (8th Cir. 1993); ProCD Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). Case law will continue to develop in this area. As state law, this Act does not address that issue. No effort is or feasibly can be made in this Act to define whether or to what extent preemption may occur.

3. Public Policy Invalidation. Contract terms may be unenforceable because of federal preemption under subsection (a) of this section or because they are unconscionable under section 111. In addition, subsection (b) sets out the legal principle that, in certain circumstances, terms may be unenforceable because they violate a fundamental public policy that clearly overrides the policy favoring enforcement of private transactions as between the parties. The principle that courts may invalidate a term of a contract on public policy grounds is recognized at common law and in the Restatement (Second) of Contracts § 178 et. seq. See, e.g., Livingston v. Tapscott, 585 So. 2d 839 (Ala. 1991); Occidental Sav. & Loan Ass'n v. Venco Partnership, 293 N.W.2d 843 (Neb. 1980).

Fundamental state policies are most commonly stated by the legislature. In the absence of a legislative declaration of a particular policy, courts should be reluctant to override a contract term. In evaluating a claim that a term violates fundamental public policy, courts should consider various factors, including the extent to which enforcement or invalidation of the term will adversely affect the interests of each party to the transaction or the public, the interest in protecting expectations arising from the contract, the purpose of the challenged term, the extent to which enforcement or invalidation will adversely affect other fundamental public interests, the strength and consistency of judicial decisions applying similar policies in similar contexts, the nature of any express legislative or regulatory policies, and the values of certainty of enforcement and uniformity in interpreting contractual provisions. Where parties have negotiated terms in their agreement, courts should be even more reluctant to set aside terms of the agreement. In applying these factors, courts should consider the position taken in the Restatement (Second) of Contracts § 178, comment b ("Enforcement will be denied only if the factors that argue against enforcement clearly outweigh the law's traditional interest in protecting the expectations of the parties, its abhorrence of any unjust enrichment, and any public interest in enforcement of the particular term."). In light of the national and international integration of the digital economy, courts should be reluctant to invalidate terms based on purely local policies.

The offsetting public policies most likely to be applicable to transactions within this Act are those relating to innovation, competition, fair comment and fair use. Innovation policy recognizes the need for a balance between protecting property interests in information to encourage its creation and the importance of a rich public domain upon which most innovation ultimately depends. Competition policy prevents unreasonable restraints on publicly available information in order to protect competition. Rights of free expression may include the right of persons to comment, whether positively or negatively, on the character or quality of information in the marketplace. Free expression and the public interest in supporting public domain use of published information also underlie fair use as a restraint on information property rights. Fair use doctrine is established by Congress in the Copyright Act. Its application and the policy of fair use is one for consideration and determination there. However, to the extent that Congress has established policies on fair use those can taken into consideration under this section.

In practice, enforcing private contracts is most often consistent with these policies, largely because contracts reflect a purchased allocation of risks and benefits and define the commercial marketplace in which much information is disseminated and acquired. Thus, a wide variety of contract terms restricting the use of information by one of the contracting parties present no significant concerns. For example, contract restrictions on libelous or obscene language in an on-line chat room promote interests in free expression and association. Such restrictions are enforced to a much broader degree if they arise out of contractual arrangements than if they are imposed by governmental regulation. However, there remains the possibility that contractual terms, particularly those arising from a context without negotiation, may be impermissible if they violate fundamental public policy.

Contracting parties may have greater freedom contractually to restrict the use of confidential information than information that is otherwise publicly available. While a term that prohibits a person from criticizing the quality of software may raise public policy concerns if included in a shrink-wrap license for software distributed in the mass market, a similar provision included in an agreement between a developer and a company applicable to experimental or early version software not yet perfected for the marketplace would not raise similar concerns. Trade secret law allows information to be transferred subject to considerable contractual limitations on disclosure which facilitates the exploitation and commercial application of new technology. On the other hand, trade secret law does not prohibit reverse engineering of lawfully acquired goods available on the open market. Striking the appropriate balance depends on a variety of contextual factors that can only be assessed on a case-by-case basis with an eye to national policies.

A term or contract that results from an agreement between commercial parties should be presumed to be valid and a heavy burden of proof should be imposed on the party seeking to escape the terms of the agreement under subsection (b). This Act and general contract law also recognize the commercial necessity of enforcing standard-form agreements mass market transactions. The terms of such forms may not be available to the licensee prior to the payment of the price and typically are not subject to affirmative negotiations. In such circumstances, courts must be more vigilant in assuring that limitations on use of the informational subject matter of the license are not invalid under fundamental public policy.

Under the general principle in subsection (b), courts also may look to federal copyright and patent laws for guidance on what types of limitations on the rights of owners of information ordinarily seem appropriate, recognizing, however, that private parties ordinarily have sound commercial reasons for contracting for limitations on use and that enforcing private ordering arrangements in itself reflects a fundamental public policy enacted throughout the Uniform Commercial Code and common law.

With reference to contract law policies that regulate the bargain of the parties, this Act makes express public policy choices. Contract law issues such as contract formation, creation and disclaimer of warranties, measuring and limiting damages, basic contractual obligations, contractual background rules, the effect of contractual choice, risk of loss, and the like, including the right of parties to alter the effect of the terms of this Act by their agreement should not be invalidated under subsection (b) of this section. This subsection deals with policies that implicate the broader public interest and the balance between enforcing private transactions and the need to protect the public domain of information.

The court, if it finds a particular term unenforceable under this section, may enforce the remainder of the contract if it is possible to do so. In considering this issue the court should consider the factors described in Restatement (Second) of Contracts § 184.

This treatment of consumer statutes acknowledges the important and independent role of state consumer protection statutes and the diversity that exists nationally in those statutes. A statute or a provision thereof can be fairly described as a consumer protection statute only if it contains protections or rights specifically earmarked for consumers and that give consumers greater protection than other parties in similar transactions. Consumer protection statutory rules may be embodied in other statutes, such as the Uniform Commercial Code.

This Act deals with general contract and commercial law principles. It does not promulgate a consumer protection code, although the Act does contain numerous consumer protections. Historically, consumer protection statutes have been developed on a state-by-state basis. This Act, as a general commercial statute, does not override these judgments. With the exception of the limited procedural rules in subsection (d), a state's consumer protection statutes trump this Act. Thus, a consumer protection statute that regulates advertising, mandates disclosure of the licensor's main business office, requires disclosure of a term in specified content, manner, typeface or the like, provides for recovery of treble damages for particular types of breach, or limits disclaimers of warranty in a consumer contract, is not altered by this Act. Similarly, this Act does not alter the scope of coverage of any existing consumer statute since that scope is determined by the consumer statute itself. If the statute can reasonably be interpreted as applying to computer information transactions, it would be within this subsection (c).

5. State Law: Electronic Commerce Issues. Subsection (d) provides for limited displacement of other state law on several electronic commerce issues, shifting those requirements to standards consistent with the electronic commerce treatment in this Act. This approach parallels digital signature laws and electronic signature legislation, and it is appropriate and necessary to facilitate the cost savings and expanded access to information that electronic commerce offers. The rules apply to transactions within this Act, whether by agreement or otherwise, and to agreements under Section 104. For computer information transactions generally, this Act supplants other law as to contract issues. For consumer transactions, substantive statutes inconsistent with or in addition to those of this Act, such as statutes regulating the content, timing, and manner of a disclosure or warning, are preserved. As to four stated electronic commerce rules, this Act selectively replaces limited procedural rules but does not otherwise alter the substance of the consumer law. A state may, however, review its consumer laws and specifically preserve any limitations it desires from the operation of subsection (d).

Subsection (d)(1) allows an electronic record to suffice for a writing required in a transaction within this Act. This does not alter the form or content required under consumer law. It assumes that the form and presentation of material and disclosures in the record otherwise meets the substantive requirements of the relevant other statute. For example, a consumer protection stat