ALI Stung like a Bee Posted By Daniel Kaiser, Esq. on August 21, 2009
Microsoft and Linux urged ALI to Float like a Butterfly - ALI Stung like a Bee
Citing a need for flexibility of commercial law and freedom of contract, and hoping for a lighter touch, the Linux Foundation’s and Microsoft’s recent jointly sent open letter to the American Law Institute (ALI) urged a reconsideration of the ALI’s 
pending Principles of the Law of Software Contracts. Although competitors in the market, the two software providers came together to point out that the language of the ALI’s forthcoming Principles discriminated among business models, that it would be harmful to the climate of the law surrounding software provision and for related services and support, and that its release should be delayed to allow further input from the software development and user community.
Microsoft and the Linux Foundation took issue primarily with § 3.05(b), which calls for a non-disclaimable implied warranty of no material hidden defects for all transferors that receive “money or a right to payment of a monetary obligation in exchange for the software . . .” The Linux Foundation points out the ambiguity of the concept of “free” under this language, given that providers of “free software” may yet be able to obtain payment (for example, through advertisement delivery or support services). Collectively, the authors cite inconsistencies of the ALI’s draft with the Uniform Commercial Code, general commercial law, and public policy. The authors of this open letter urge that the implied warranty of no material hidden defects should continue to be disclaimable, claiming that this “would cover individual contributors to open source projects, as most open source licenses disclaim warranties and indicate that the software code is provided ‘as is’.”
Despite the united appeals of industry players coming from opposite ends of the software licensing spectrum, in May the ALI unanimously approved the final draft of the Principles of the Law of Software Contracts. Perhaps motivated by the desire to place the risk of defective software on the party best able to manage that risk, § 3.05(b) as referenced above remains applicable in the approved draft. The membership of the ALI might argue that this section only applies in situations where the provider is aware of a material defect that is hidden from the consumer, yet software providers may well be concerned by the unpredictability of a court’s application of “hidden” or “material.”
One way or another, with the highly persuasive nature of the ALI’s Principles, courts are likely to start applying this particular release soon. You can read the Principles of the Law of Software Contracts for yourself, but don’t hold your breath for an open source version. The ALI’s website offers a download – but, of course, for a price.
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