Publication Overview: Principles of the Law of Software Contracts

At The American Law Institute's 2009 Annual meeting, the final draft of the Principles of the Law of Software Contracts was approved.

Reporter and associate reporter for the project were, respectively, Professor Hillman from Cornell Law School, and Professor O’Rourke, from Boston University School of Law. While advisors for the project included Legal scholars, private sector lawyers, and judges.

As stated in the forward by Lance Liebman, Director of The American Law Institute, Principles of the Law of Software Contracts is valuable guidance material for four reasons:

  • First, it recommends legal principles on issues posed by new technology.
  • Second, it addresses issues that often come to state and federal judges without adequate guidance from state commercial law statutes or from federal intellectual property laws.
  • Third, it draws, by convincing analogy, on traditional legal doctrine that history has tested for efficiency and fairness.
  • Fourth, it is the result cooperative work an expert on contract/commercial law and expert on IP law.
The publication “seek[s] to clarify and unify the law of software transactions.” Such action is needed, in the eyes of the authors, because of the “current legal vacuum” in the law of software contracts. Rather than giving simply an organized restatement of the law, Principles of the Law of Software Contracts “accounts for the case law and recommends best practices.” In the words of the authors, “a ‘Principles’ project is not the law unless and until a court adopts it. Courts can apply the Principles as definitive rules, as a ‘gloss’ on the common law, U.C.C. Article 2, or other statutes, or not at all.” Nevertheless, many would agree that the process of pulling available law together while providing comments will be an important stage in the growth of software law.

Among the issues addressed in Software Principles are:

  1. What falls under the scope of software contract law and what is not included;
  2. How to classify software agreements under the law (i.e. – as a sale or as a license);
  3. The process of software contract formation;
  4. Terms of software contracts;
  5. When the contract arises;
  6. Whether contracting parties are free to broaden or narrow the protections of federal and state intellectual property law;
  7. The amount of quality protection for software users; and
  8. The range of remedies software providers may employ.

Though it remains to be seen to what extent courts will adopt the Principles of the Law of Software Contracts, the publication should be considered when drafting a software contract and is sure to be influential in the field.