[Ecommerce] John Gregory comments on UNCITRAL proposal for treaty on electronic
contracts
James Love
james.love@cptech.org
Tue Feb 18 18:23:01 2003
----- Original Message --------
Subject: [eglobal-list] UNCITRAL discussion points on "virtual goods"
Date: Tue, 18 Feb 2003 17:58:31 -0500
From: Gregory, John D. (JUS) <John.D.Gregory@jus.gov.on.ca>
To: 'eglobal-list@rh.edu' <eglobal-list@rh.edu>
The conference call to be held on Wednesday 19 February 2003 on "virtual
goods" in the proposed UNCITRAL convention on electronic contracts (as
arranged by Bill Luddy with the resources of Hal Burman - or his
employer) will work from the attached document.
This document is an excerpt of a longer review of the issues presented
by the current draft of the e-contract convention (as it appeared in
WP.95). Those who want the longer version can ask me for it. (It was
circulated to the members of the ABA Business Law Section Committee on
the law of Cyberspace last Friday - those folks need all the Valentine
mail they can get.)
The discussion for 19 February is found on the third and fourth pages of
this document.
Anyone on this list may feel free to comment to this list about any of
these issues, whether or not you participate in the call.
John G
<<e-contract conv - selections.doc>>
John D. Gregory
General Counsel, Policy Branch
Ministry of the Attorney General (Ontario)
720 Bay Street
Toronto ON Canada M5G 2K1
(416) 326-2503 fax (416) 326-2699
john.d.gregory@jus.gov.on.ca
..................................................................
OPINIONS ARE PERSONAL NOT OFFICIAL
....................................
UNCITRAL – Proposal for a convention on electronic contracts
Comments and questions compiled by John D. Gregory
February 2003
This text is a compendium of comments made about the current proposal of
UNCITRAL to prepare a convention on electronic contracts. Most of the
comments are taken from the reports of the UNCITAL working group
meetings, telephone conferences sponsored by the US Department of State
over the past couple of years, or from meetings of the Global e-Commerce
Policy subcommittee of the Committee on the law of cyberspace of the
Business Law Section of the American Bar Association.
The proposed convention has been discussed in two principal documents by
the UNCITRAL Secretariat, and in the reports of three meetings of the
Working Group on Electronic Commerce. These are online:
A/CN.9/WG.IV/WP.91 February 2001
http://www.uncitral.org/english/workinggroups/wg_ec/wp-91e.pdf
A/CN.9/484 Report of March 2001 meeting (para 94 – 127)
http://www.uncitral.org/english/sessions/unc/unc-34/acn-484e.pdf
A/CN.9/509 Report of March 2002 meeting
http://www.uncitral.org/english/sessions/unc/unc-35/509e.pdf
A/CN.9/WG.IV/WP.95 September 2001 [includes the current draft of the
convention] http://www.uncitral.org/english/workinggroups/wg_ec/wp-95e.pdf
A/CN.9/527 Report of October 2002 meeting (para 72 – 126)
http://www.uncitral.org/english/sessions/unc/unc-36/acn9-527-e.pdf
A new draft of the proposed convention is expected in the early spring
of 2003, in time for the next meeting of the Working Group in May 2003.
Preliminary question
Why do a convention at all? Why is it thought to be needed? The Model
Law on Electronic Commerce (“MLEC”) from 1996 clearly provides that
contracts may be entered into electronically, and that writing,
signature and originality requirements may be satisfied by electronic
records (“data messages”, in the language of UNCITRAL). The United
Nations has recommended that all member states adopt the MLEC. Regional
versions exist for Latin America and for the Commonwealth of Nations.
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In favour of convention
· In some countries, conventions rank higher than laws, so even a
country that has adopted MLEC in legislation may be subject to
conventions that do not recognize e-commerce.
· In some countries, it is easier to adopt a convention than a national
law, so having the convention available may encourage wider adoption of
the general rules.
· While the U.N. Convention on Contracts for the International Sale of
Goods (CISG) does not require writing (unless the state member has so
provided), it does not apply readily to all aspects of electronic
contracting, so a special convention could fill in the gaps or iron out
the wrinkles.
· MLEC and CISG do not resolve some common issues in e-contracting, such
as the effect of errors, or whether a trading partner agreement will work.
· The countries that have adopted the MLEC have done so inconsistently,
so international transactions still face a patchwork of legal regimes.
Only a convention can bring the appropriate degree of harmony across
borders.
· The rules of the MLEC were done as a model law at the time because
people were tentative about its solutions. Now they have proved valid
and workable and deserve more legal force behind them.
Against convention
· Countries that want to promote, or just remove legal barriers to,
e-commerce can adopt the MLEC. If the convention says the same thing as
the MLEC, it is superfluous. If it says different things than the MLEC,
it is confusing.
· We should have a single body of law that applies to transactions in
all media, paper and electronic. Having a convention for e-contracts
works against this principle.
· If CISG is opened, there is a risk that people will want to modify it
as well, say by extending it to services. This could cause serious
delay and also cause confusion since some countries will in the future
have the “old” CISG and some the “new”. (Response: this happens
elsewhere – carriage of goods, limitations periods – and businesses
figure it out.)
· Technically, the working group on e-commerce at UNCITRAL is not
responsible for developing amendments to CISG (Response: UNCITRAL could
provide that authority as required.)
· If new topics need to be covered relating to e-contracts, a new Model
Law is the better vehicle. The MLEC has been very successful in this field.
· In the alternative, new topics could be the subject of opt-in private
systems of rules, like the various rule sets of the International
Chamber of Commerce (but: does that require a prior contract – on paper?
– between the parties, choosing the ICC supplementary rules?)
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(b) Virtual goods / digital goods
It has been suggested that the convention not apply to “virtual goods”
or digital goods. (See WP.91 para 20 – 29.) The current draft of
Article 2(b) excludes “contracts granting limited use of intellectual
property rights.” There is no clear definition of what these may be or
what their exclusion would involve. The next meeting of the Working
Group will discuss these issues for a limited time – perhaps one day –
with some expert presentations.
It seems likely that the exclusion will focus on intangible goods –
music, software, movies, possibly text – that may be contained in a
tangible medium but where the tangible medium is not the real subject of
the transaction. It is also possible to discuss “smart goods”, which
are tangible goods in which intangible goods – usually software – are
embedded. Vigorous discussions are possible, or inevitable, about when
the embedded part changes the nature of the good in which it is
embedded, or when the rights of the transferor of the embedded part
should be separated from the rights of the transferor of the tangible
good or limit the rights of the transferee of the tangible good. (Such
discussions have taken place, without consensus, in the United States in
developing the Uniform Computer Information Transactions Act – UCITA –
and in revising Article 2 of the Uniform Commercial Code on sales.
Revised Article 9 of the UCC deals with smart goods but not with the
intellectual property aspects.)
Some (but not all possible) pertinent questions:
· Can the goods that are the topic of this discussion be defined clearly
enough to be dealt with definitively, whether by inclusion, exclusion,
or special provision?
· Are embedded goods to be treated in the same way as totally
digital/virtual goods?
· Is the essence of the problem that the intangible goods are subject to
rules of intellectual property (as the current draft in WP.95 suggests)?
(but books are subject to copyright and yet are currently sold
internationally – subject often to national distribution rights.)
· Is the problem that intellectual property is the creature of national
law, and though subject to conventions, those conventions are not
comprehensive nor
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universally ratified? The result could be that it is hard to harmonize
rules about selling such goods when local laws will necessarily apply in
a way that counters the harmonization of the convention. (Again: books
may be less problematic because the conventions that apply to them are
nearly universally implemented.)
· Is the problem that the transferors (or creators) of the intangible
goods want to retain control over future use and disposition of them,
which involves a different kind of transaction than a sale (namely –
usually – a licence)?
· Not all legal systems – not even all common law systems – distinguish
between a sale and a licence. Does that make this topic easier or
harder to deal with?
· Is consensus likely, given the controversy in the United States about
UCITA and other intellectual property issues? Or is it premature to try
at UNCITRAL? Does it make a difference if consumer transactions are
excluded from the convention?
· Can questions of formation of contract apply to contracts for this
kind of goods, even if provisions as to remedies might be more
difficult? Or does formation necessarily involve e.g. formation with
shrinkwrap or click-through terms? Or allegations of a three-way
contract among producer of digital good, seller of hard medium, and
buyer? Should one wait and see how the market develops, or how the full
draft convention works, to judge its impact on these considerations?
· If one wants to exclude this subject, how can one do it? Exclude by
goods or by content (i.e. intellectual property) or by type of
transaction (licence, by name or by description – retaining control)?
· Can any help be derived from the current work of the World Trade
Organization on characterizing downloadable goods as “goods” or
“services” for purposes of trade agreements?
--
James Love, Director, Consumer Project on Technology
http://www.cptech.org, mailto:james.love@cptech.org
tel. +1.202.387.8030, mobile +1.202.361.3040