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March 31, 1997

Bill Gates
Microsoft Corporation
1 Microsoft Way
Redmond, WA 98052

Re: Shrinkwrap Licenses and Uniform Commercial Code Article 2B

Dear Mr. Gates:

I am writing to express my concern over the draft of Uniform Commercial Code Article 2B that Microsoft Corporation is supporting. The most vocal and strident support for this draft legislation comes from the Software Publishers Association and the Business Software Alliance, both of which include Microsoft as a member. As you know, proposed Article 2B will be of great consequence to the software industry and its customers by providing a uniform state law to control licenses of software and other information products. The draft law is unbalanced in its current form because on many issues it favors software and other industry players at the expense of software purchasers. As the industry leader I hope that your company, as well as the trade associations to which Microsoft belongs, will actively support modifications to the draft law in order to create a more balanced and fair approach.

Among Article 2B's most problematic sections is the validation of shrinkwrap licenses. In the past, software companies claimed that purchasers became bound to these licenses upon breaking the shrinkwrap container. Article 2B slightly alters this formality. When a purchaser gives a cashier payment and receives a software product, the transaction is not complete under Article 2B. During installation, the software program will request that the purchaser "consent" to the license by clicking with a mouse on an "I Agree" icon. This is the first opportunity for the purchaser to review the terms of the license because they are hidden within the software package. Shrinkwrap licenses are of questionable legality because courts have been divided on whether this kind of mechanism should be wholly enforceable.

There are also several specific problems with Article 2B's validation of shrinkwrap licenses. The license is a take it or leave it proposition, and to leave it, affirmative action is required by the purchaser who must, after buying the product and attempting to install it, pack up the software, return to the store, and obtain a refund. The burden is entirely on the purchaser. And this assumes that the purchaser will read and understand the license, which is a highly unlikely occurrence because they are often lengthy and difficult to understand. After investing significant time and money into this process, most purchasers click on "I Agree" as many times as is necessary to install the program. The effect is to have purchasers "consent" to license terms that are dictated by the industry and hidden until after the purchaser pays and leaves the store.

The form of the shrinkwrap license is objectionable because it operates against informed decisionmaking and is of questionable legality, but Article 2B goes even further by allowing the content of the licenses to be completely one-sided. Here are a few of the terms that UCC 2B validates:

Article 2B in its current form provides almost no protection to customers, especially to consumers and small businesses. It shields the worst companies from responsibility for their worst products. It must be revised with principles of fundamental fairness in mind. I look forward to hearing from you and hope that as the industry leader, you and the trade associations to which Microsoft belongs will support much needed revisions to Article 2B.


/s/Ralph Nader

P.O. Box 19312
Washington, DC 20036

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