3. Information.

4. Consequential damages.

a. Deleted reference to mitigation or otherwise without substantive change. Vote: 7 - 4 (Feb. 1998).

a. Adopted the term "direct" rather than "general" damages. Vote: 8 - 1 (Feb. 1998).

a. Adopted a motion to retain the limitation to retail transactions. Vote: 7 - 4 (Feb. 1998)

b. Rejected a motion to delete "in a quantity consistent". Vote: 4 - 8 (Feb. 1998)

a. Rejected a motion to require that it be more than transitory. Vote: 0 - 10 (Feb. 1998).

1. "Access contract." Access contracts are agreements that authorize electronic access to a facility or that allow obtaining information from a facility controlled by the licensor or another party. The contract does not depend on informational property rights, but on control of an information processing system. A party's right to preclude unauthorized access to a computer is recognized in most states and in federal law. The system may be an Internet web site, a computer containing a database, or any other electronic information processing system. The term also includes contracts for the use of remote data processing, including third party E-mail systems, as well as situations where a database in the licensee's information processing system is automatically updated either by an aspect of the program in the licensee's system automatically accessing the remote system, or the remote system automatically accessing the local database and adding updated material to it.

Access contracts are a major method of information distribution. Digital technology enables a shift from distribution in physical copies to merely making information available at a remote location. The contracts often entail what some describe a "pull technology" whereby a licensee reaches into the information processing system to obtain or use relevant information or processing. An access contract requires electronic access. The term does not cover grants of a right physically to enter, for example, a building in which information is displayed or made available in books.

The definition also does not refer to chips or systems enabling access within a product such as a smart card or programs resident in the same computer. It applies to arrangements that grant permission to access remote data, processing or similar resources.

Often, the provider of access also provides contractual rights in the information systems that are accessed by the licensee. In some cases, the information is that of the access licensor, while in others, the transaction involves a three party framework. In the three-party relationship, one person provides access, while another party (the information provider) licenses information to the customer. This three party transaction involves two and, in some cases, three separate contracts. The first is between the content provider and the access provider. This may be an ordinary license to the information or an access contract itself. The second is between the access provider and the end user. This is an access contract. The third occurs if the content provider contracts directly with the end user or client. Typically, the contracts are independent.

2. "Attribution procedure." The concept of an attribution procedure derives from Article 4A and the use in that article of automated systems described there as a "security procedure." To be an attribution procedure, the procedure must be adopted by the parties or by law for the type of use involved. The effect of an attribution procedure is discussed in Sections 2B-114 to 2B-117. The benefits resulting from use of an attribution procedure only pertain to procedures that are commercially reasonable.

3. "Authenticate." The term "authenticate" replaces "signature" or "signed" in this article. It expands the traditional concept of signature. Any adoption or execution of a symbol with the intent to sign or authenticate that would be a signature under prior law, is an authentication under Article 2B. This includes, for example, use of identifiers such as a PIN number, if used with the requisite intent. In addition, however, the definition expands prior law and expressly includes acts and sounds as a means of authentication. These are potentially important in electronic commerce. Encryption and other technologically enabled acts are today used to achieve the effects associated with a traditional, written signature. The critical factor lies in the objective intent with which the party making the authentication acts.

The definition is technologically neutral. Statutes in some states give special recognition to "digital signatures" that rely on a specific encryption technology and a certification or licensing system. The procedures set out in those statutes qualify as authentication for Article 2B. The Article 2B concept is broader, however, and recognizes that technology and commercial practice constantly change and provide many different ways of achieving an authentication. This technology neutral approach is endorsed by federal government reports on electronic commerce.

Authentication can be intended to have various effects. Which effect is intended relates to a party's intent as expressed or inferred from the circumstances of use of the authentication. Absent circumstances indicating a different intent, an authentication contemplates all three of the effects listed (see Section 2B-119).

4. "Automated transaction" refers to relationships formed and effective as a contract even though one or both of the parties are represented by automated devices, such as electronic agents. This type of contracting became common with the advent of automated ordering devices using voice systems; it is widely used in electronic commerce, including in cases where sophisticated computer systems seek out resources and make transactions with other systems holding those resources, all without the direct guidance of an individual reviewing the choices made. While law could adopt a fiction that attributes to these automated activities the intent of the person selecting and using them, this Article directly recognizes that these interactions involve operations of automated systems and that they can create binding legal obligations for those who use them.

5. "Cancellation" corresponds to existing Section 2-106.

6. "Computer program" parallels the U.S. Copyright Act (17 U.S.C. § 101), but differs from that definition in that it adds language to implement a distinction between programs as operating instructions on the one hand, and "informational content" as information communicated to people on the other hand. In this article, "computer program" refers to the functional aspects of software, while "informational content" refers to output intended to communicate to a human being. That there is overlap in terms is inevitable. However, in cases where questions arise about what aspect of a software system provides the basic qualitative and other conditions for performance of the program, the answer lies in whether the issue address functional operations and the effect of any malfunction in those operations (program) or errors or inadequacies in communicated content (informational content). In situations where a program is provided in source code form, the fact that the source code can be read by a human does not change the fact that the transaction involves a computer program and applicable merchantability or other warranties pertaining to the functioning of that program apply.

7. "Consequential damages" corresponds to existing Article 2 but provides that consequential damages may be recovered by either party. This follows common law and acknowledges the mutuality of risk characteristic of many transactions in information and informational property rights.

The losses must be an ordinary and predictable result of the breach. See Restatement (Second) of Contracts § 351(2). In the case of economic and similar losses, they must be foreseeable or, in the case of personal injury or property damage, must proximately result from the breach. This means that, in order to recover compensation for losses resulting from the special circumstances of the aggrieved party, the party in breach must have had actual notice of those circumstances at the time of contracting. Often this means that such particular needs and circumstances must be made known at the time of contracting. In contrast, losses resulting from ordinary general requirements can often be presumed to have been within the contemplation of the other party. The determination of foreseeability requires consideration of the contractual circumstances in light of ordinary standards of damage computation.

The burden of proving loss is on the party claiming damages. As in Article 2, this Article does not require proof with absolute certainty or mathematical precision. The premise that there be a liberal administration of the remedies of this Act requires that remedies be administered in a reasonable manner. However, this does not permit recovery of losses that are speculative or highly uncertain and therefore unproven. See Section 2B-707 and Restatement (Second) of Contracts 352 ("Damages are not recoverable for loss beyond the amount that the evidence permits to be established with reasonable certainty."). No change in law on this issue is intended. See Freund v. Washington Square Press, Inc., 34 N.Y.2d 379, 357 N.Y.S.2d 857, 314 N.E.2d 419 (1974) ("[Plaintiff's] expectancy interest in the royalties ... was speculative.").

Consequential damages do not include "direct" or "incidental" damages. Consequential loss lies in damages beyond the difference in value of the performance received and the performance promised. It deals with loss of benefits anticipated as a result of the performance or detriments or with costs caused by breach and not incident to the breach itself. Thus, consequential damages include lost profits or opportunity that might result from use of information, damages to reputation, damages in the lost value of a trade secret dues to wrongful disclosure or use, damages for loss of privacy associated with a contract breach, and damages from loss of data as a result of an operational defect.

Recovery of consequential damages, of course, is limited by other principles in this Article, in common law, and by contract limits. This definition does not specifically refer to the concept of mitigation, but that concept applies under Section 2B-707(c). No change in law is intended by the deletion of "cover" from the former Article 2 definition.

8. "Conspicuous." This definition follows existing Article 2, but adds new concepts for electronic commerce. Whether a term is conspicuous is determined by the court. See Section 2B-106.

With reference to persons, the basic standard is that a term is conspicuous if it is so positioned or presented that the attention of a reasonable person can reasonably be expected to be called to it. In modern commerce, however, many transactions are automated using of electronic agents capable of independent action. These agents require a different idea of what is conspicuous; programs and devices do not "notice" text, but respond operationally. In an automated environment, presentation in a form designed to invoke or permit a response from a "reasonably configured" electronic agent suffices.

Current UCC § 1-201(10) lists four illustrations of conspicuous terms These play an important role in commercial practice. The Article 2B definition carries forward that approach. The purpose of requiring that a term be conspicuous and defining that concept with some detail blends a notice function (the term ought to be noticed) and a planning function (giving certainty to the party relying on the term). The illustrations establish safe harbors that avoid uncertainty and litigation. Absent exceptional circumstances, a term that conforms to a safe harbor is conspicuous. The illustrations in (A) and (B), however, are not exclusive. In other cases, a court should apply the general standard.

Subsection (A)(iii) deals with hyperlink and related Internet technologies. It contemplates a case in which a computer screen displays a term or image and the party using the screen, by taking an action with reference to that term or image, is transferred to a different file or location wherein the relevant contract term is available. To be conspicuous, the image must be prominent and its use must readily enable review of the term itself. The access must be from the screen or display and not through other actions such as a telephone call or physically going to another location. When the term is accessed, it must be in a form that can be readily reviewed. The term must be referenced, not simply the contract.

Subsection (B) recognizes a procedure by which, without taking action with respect to the term, the party cannot proceed further in reference to the file or location. Thus, for example, a screen which states: "There are no warranties of accuracy with respect to the information on this site" that is displayed in a form that precludes the user from moving further in the system without expressing assent to this condition, suffices under this concept.

9. "Consumer." This definition adapts language from Article 9 which defines "consumer goods." A "consumer" is a person who obtains something for personal, household, or family purposes. Whether a party is a consumer is determined at the time of contracting. Even in an on-going relationship, changes in purpose or use after a contract becomes enforceable do not alter the standards applicable to the contract.

In information transactions, many "personal" uses are not consumer uses (e.g., a stock broker using software to personally monitor client investments). Thus, distinguishing business and consumer uses requires a more refined concept than does the Article 9 theme. The definition here distinguishes profit making, professional or business use, from non-business personal or family use. It includes as consumer use ordinary asset management for a family. This resolves an issue that has arisen in many areas where making a distinction between consumer and non-consumer "personal" use has proven difficult and subject to litigation. For example, a number of decisions focus on whether or when a purchase of stocks or limited partnership assets for investment is a consumer purchase since it is for "personal" purposes. See, e.g., Thomas v. Sundance Properties, 726 F.2d 1417 (9^th Cir. 1984); In re Manning, 126 B.R. 984 (M. D. Tenn. 1991) (Article 9 definition "not especially helpful"). Some courts emphasize the difference between acquisition for consumption (consumer) and acquisition or use "for profit-making" (not consumer). The Truth in Lending Act, for example, uses a definition much like Article 9 but contains an express exemption for business transactions. The "profit-making" test has been applied in bankruptcy cases. The Fifth Circuit commented that "[The] test for determining whether a debt should be classified as a business debt, rather than a debt acquired for personal, family or household purposes is whether it was incurred with an eye toward profit." In re Booth, 858 F.2d 1051 (5^th Cir. 1988). See also In re Circle Five, Inc., 75 B.R. 686 (Bankr. D. Idaho 1987) ("Debt used to produce income is not consumer debt primarily for a personal, family or household purposes.").

10. "Contract fee" recognizes the various forms and methods of monetary compensation encountered in information transactions. The term refers to essentially any money payment under a contract.

11. "Contractual use restriction." This term includes any enforceable restriction on use or disclosure of the information or informational property rights dealt with by a contract and created in that contract. It does not include limitations imposed by property or regulatory law, such as copyright or patent law, without contract terms. The adjective "enforceable" is intended to means that the term does not include terms invalidated under this Article or other law, including federal intellectual property law and state laws which may preclude enforcement of some restrictions on use of knowledge or information. Thus, for example, if applicable trade secret law would preclude enforcement of a particular non-disclosure term, that term is not a contractual use restriction as used in this Article to the extent of such preclusion. Similarly, state law that restricts the enforceability of a non-competition clause in a contract applies to any contract within Article 2B. This definition makes clear that a restriction that would not be enforceable under such law is not a "contractual use restriction."

12. "Copy." The definition corresponds to copyright law but does not deal with issues under that law about when a brief reproduction in computer memory is a copy for purposes of infringement law. See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); Lewis Galoob Toys, Inc. v. Nintendo of America, 964 F.2d 965 (9th Cir. 1992). In Article 2B, the term refers to particular performance questions associated with contractual events such as delivery, tender, and enabling use. For these purposes, the reproduction of the information can be either on a temporary or permanent basis.

13. "Court" includes officers of non-judicial forums such as arbitration.

14. "Delivery" in electronic technology can occur either through a change of possession of a tangible copy or through electronic transfer. For determining whether delivery has occurred, the methodology does not alter the result.

15. "Direct damages." Direct damages are losses associated with lost value as to the contracted for performance itself, as contrasted to losses caused by intended uses of the performance or its results. Direct damages are measured by the formulae in this Article, including Section 2B-707(a) which allows the court to determine these damages in any reasonable manner.

The definition rejects cases that treat as direct damages losses that relate to anticipated advantages from the use of the information. These are consequential damages. Thus, if software is purchased for $1,000 and, if perfect, would yield profits of $10,000, but it is totally defective, "direct" damages are $1,000.

The definition also includes reliance and restitution damages in an appropriate case. When damages of this type are appropriate is determined by general law. However, to be direct damages, the recoveries must fall within the general concept of direct as contrasted to consequential or incidental damages.

16. "Electronic." While most modern information systems entail electrical technologies, the term here is open-ended. It encompasses other forms of information processing technology as may be developed in the future.

17. "Electronic agent." This includes a computer program used for the stated purposes, but is not limited to that particular technology. The term recognizes that many aspects of commerce are characterized by automated responses. The agency created here, however, is not equivalent to common law agency concepts since the "agent" is not a human actor, but an automated system. To be an electronic agent, the automated system must have been affirmatively selected, used or programmed for that purpose. This is important because a party may be bound by the operations of its agent.

18. "Electronic Message." This term parallels the UNCITRAL Model Law on Electronic Commerce. A message is distinguished from the broader term "record" by the fact that it is to be communicated to another. In many systems, communication to another person does not require that the message be transmitted or sent to any new location; the recipient and the person creating the message may share a common E-mail system or other resource and the message can be "stored" for purposes of communicating to another as indicated in the definition.

19. "Financier." This term includes both secured parties and lessors. This Article does not deal with financing informational property rights. That topic is governed under Article 9 and federal or state law pertaining to those rights. The financing arrangements here involve financing of contractual rights.

20. "Good Faith." The definition extends the duty of good faith and fair dealing to consumers. It follows revised Article 3.

21. "Incidental damages." This definition integrates the two definitions of incidental damages found in current Article 2. Incidental damages include costs of seeking or arranging cover or other mitigation, but do not extend to the actual expenditure for the mitigation itself. Thus, if a licensee must obtain a different computer program because of a breach in the contractual delivery, the telephone calls and related expenses in arranging for the cover are incidental damages. The cost of the new program license is considered in computing direct damages.

22. "Information." This definition establishes a broad construction of information. The term, "work of authorship" comes from the Copyright Act and is to be interpreted as in that statute. It includes literary works, computer programs, motion pictures, compilations, and the like. In this Article, information is the broad term; in appropriate situations more specific reference is made to particular types of information, such as computer programs and informational content.

23. "Informational content." This term refers to information whose ordinary use entails communicating the information to a human being. This is the information we read, see, hear and otherwise experience. For example, in an electronic database of images the entire information package may include the images and a program enabling display or access to the images. The functional aspects of the program are not informational content. The images are informational content. Similarly, when a licensee uses the Westlaw search program to obtain a case, the program is not informational content, but the text is.

24. "Information processing system." This definition corresponds to the UNCITRAL Model Law on Electronic Commerce.

25. "Informational property rights." This term includes, but is not limited to "intellectual property" rights. It refers to any law that gives a person a right to control another's use of information independent of contract. This Article does not create property rights; the definition here references other law to determine when such rights exist. The rights referenced here are established in other law with respect to a particular subject matter, but need not be comprehensive or exclusive as to all other persons. The term includes the areas of law in which new forms of property are being created by legislatures and courts, but does not create any rights itself. Informational property rights do not include the right to sue for defamation.

26. "License." A license is a limited or conditional transfer of information or rights in information. The limitations must be express in the contract and not merely implied in law. Most transactions involving acquisition of a copy of a copyrighted work are subject to property rights retained by the copyright owner, but a license exists only if the limitations are express in the contract itself. In an unrestricted sale of a copy, the buyer receives ownership of the copy, but if copyright law applies to the information, the ownership is subject to restrictions on use of the information derived from intellectual property law. These restrictions do not create a license.

On the other hand, the presence or absence of a license is not affected by whether or not there has been a sale of a copy of a work such as a computer program. A license pertains to rights to use information and, if it involves the tangible copy, that tangible copy is the conduit, not the focus. A license deals with control of the information, while title to the goods deals simply with that - title to the goods.

27. "Licensor" and "Licensee." These terms refer to the transferee and transferor in any contract covered by this article, whether or not the contract is a license.

28. "Mass-market license" and "Mass-market transaction." "Mass market" implements an expansion of protections for consumers into a consumer marketplace standard even though a particular transaction does not involve a consumer licensee. As a new framework, the definition must be applied in light of its intended function. That function is to identify relatively small dollar value, routine or anonymous transactions that occur in a retail market available to the general public. The term includes all consumer transactions and some transactions involving businesses. It does not apply to ordinary commercial transactions that occur in a marketplace characterized primarily by transactions between business entities that deal directly with each other or through ordinary commercial methods of ordering and transferring commercial information.

The definition contemplates a retail marketplace where information is made available in pre-packaged form under generally similar terms to the general public. It applies only to information that is aimed at the general public as a whole, including consumers, and does not cover products directed at a limited subgroup of the general public or to information products restricted to members of an organization or to persons with a separate relationship to the information provider. Where the line will be drawn in determining the size or scope of subgroup that would qualify as a distribution directed to the general public cannot be answered in the abstract, but courts making that judgment should do so in light of the purpose of the definition itself. The intent is that the products covered here do not include specialty software, information directed to specially targeted limited audiences, purely commercial software distributed in non-retail transactions, or professional use software, but to materials that are acquired by consumers or that appeal and intend to appeal to a general public audience as a whole, including consumers, where the identity of the eventual licensee is irrelevant to the licensor.

The prototypical retail market is a department store, grocery store, gas station, shopping center, or the like. These locations are open to, and in fact attract the general public as a whole. They are also characterized by the fact that, while the retail merchants may make sales or other transactions to other businesses, the predominant transaction involves consumers. In a retail market, the vast majority of the transactions also involve relatively small quantities of particular products, non-negotiated contractual terms, and transactions to an end user rather than a purchaser who intends to resell the acquired product. The products are available to anyone who enters the retail location and can pay the applicable price.

The definition contains several exclusion that do not apply to consumer licensees, but to transactions in a retail market where the person acquiring the information is a commercial entity. A transaction for redistribution or a license for public display or performance of a copyrighted work are never mass market transactions because they involve none of the attributes of the retail marketplace. Similarly, where the information product is customized for the licensee and that licensee is not a consumer, the transaction lacks the anonymous, non-negotiated character of the mass market.

A bifurcated treatment of access (Internet) transactions occurs. Consumer transactions on Internet are mass market transactions. However, the term does not include online transactions not involving a consumer. In this new transactional environment, it is important to not regulate transactions beyond consumer issues. This gives industry room to develop while preserving consumer protections. It is consistent with the 1997 White House paper on electronic commerce.

29. "Merchant." This term comes from existing Article 2-104. The definition clarifies that a person that holds itself out as experienced in particular subject matter need not have actually engaged in prior transactions of the type involved to qualify as a merchant.

The definition otherwise follows the definition of existing Article 2. As indicated in comments to Article 2, the definition applies differently in terms of the degree of specialized expertise required to qualify for merchant status depending on the transactional issues to which a particular use of the term applies. In Article 2B, the term is used primarily as a reference to businesses with generalized knowledge of business practices, rather than solely to experts in a specific field. Section 2B-307, 2B-401 and 2B-403, however deal with liability and transactional issues where the terms should be understood to require a more focused expertise in the particular type of information involved.

30. "Non-exclusive license." This is the most common commercial license. It is characterized by the fact that the licensor grants very limited rights and does not foreclose itself from making additional licenses involving the same subject matter and general scope.

31. "Present value." This term corresponds to Article 2A-103. It contains a modification applicable to present valuation of values other than future payment obligations.

32. "Published informational content." This definition identifies an important type of informational content. It is the information most closely associated with First Amendment and related public policy concerns. This is the material of newspapers, books, motions pictures and the like, which is distributed to the public and intended to communicate knowledge, sounds, or other experiences to a human being, rather than simply to operate a machine. The term includes interactive content products since, in those products, all of the information is generally available and the end user selects from the available information. This is like the reader of a newspaper focusing on part, but not all of the newspaper.

32a. "Reason to know." This definition refers to a term that is used in six sections of Article 2B. While Article 1 current defines notice and knowledge, it does not define reason to know. The definition adopted here is consistent with the usage of the term, which refers to knowledge and inferences from information actually known to the person. No constructive knowledge or duty to investigate exists under this concept.

33. "Receive." This definition, as to performances, corresponds to Article 2-103. As to notices, it updates Section 1-201(26) to reflect issues in electronic commerce and the use of electronic systems to give and receive notice.

34. "Record." This definition broadens the traditional term, "writing", and incorporates electronic records. It does not require permanent storage or anything beyond temporary recordation. The analogy is to the idea of a copy under copyright law. Fixation can be fleeting and perception can be either directly or indirectly with the aid of a machine.

35. "Refund." A refund consists of a reimbursement of fees paid on return of all copies of the information. Whether or when a refund right exists depends on the contract and the provisions of this Article. Refund is not a remedy for breach or a right of rescission. It is a right that arises when a party refuses a proffered license and has previously committed to, or paid, the contract fee. Making a refund available in such cases is essentially to allow the party presented with the license a true opportunity to accept or reject that license.

In some cases, a refund right must exist in order to obtain a manifestation of assent. See Sections 2B-111 and 2B-112. The right to refund expires if the party agrees to the license, including by manifesting assent to it. Of course, if a party accepts a license and the information is defective, the aggrieved party may have a right to restitution of the contract fee as direct damages.

Refund must be sought within a reasonable time. If a party fails to seek refund within a reasonable time, it will not be entitled to refund under this Article, but expiration of a refund right does not result in assent to the license. Affirmative agreement or assent is still required. What constitutes a reasonable time depends on the facts. However, a purchaser cannot wait several years before seeking a refund.

The definition deals with the difficult problem of administering a refund right in "bundled" products, that is products which include numerous separate items of information transferred as a whole for a single fee. If the products are subject to separate licenses, the difficulty arises in administering a refund right where one license is refused, but others are not. A refund in such situations consists of the entire bundled product in return for the entire price if the refund is sought early. Otherwise, a refund consists of an allocated portion of the overall price as is fairly or contractually attributable to the particular, returned product.

36. "Release." A release is a waiver or permission not accompanied by other commercial attributes, such as an on-going obligation to pay or an obligation to provide the means to implement use of the information.

37. "Scope." This term refers to contract provisions that define an integral part of a license. Scope provisions in a license are equivalent to defining the product. In sales or leases of goods, products are self-defining: an offered car is either a Ford or Chevrolet, it is not necessary to read use and other provisions of a contract to determine that. That is not the case for the information and services industries: In many situations in the information industries, the license and its scope is the product. The same information has entirely different characteristics as a commercial subject matter depending on what scope of rights are granted with reference to that information. For example, a license that allows use of a motion picture in a single theatre is not the same product as a license to distribute the motion picture throughout the United States. Neither license transfers the same product as a license to use a copy of the motion picture for three days in one's home. The license scope provisions define the product.

38. "Send." This definition adapts Article 2-201(38) by providing criteria relevant to electronic notices.

39. "Standard form." The definition refers to forms, not standard terms. See Restatement (Second) of Contracts 211 (referring to but not defining standard forms).

A form consists of a group of terms prepared for frequent use as a contract. Use of standard forms in modern commerce is not only widespread, but virtually ubiquitous. The definition does not cover a tailored contract comprised of "terms" selected from many different prior agreements. The record, which is a composite of terms, must itself have been prepared for repeated use. Further, the record must have been so used: if a standard form is offered but then heavily negotiated or changed, the resulting contract is not a standard form contract.

40. "Terminate." This definition conforms to Article 2-106.