American Law Institute Approves Principles of the Law of Software Contracts

The American Law Institute ("ALI") recently approved at its 86th Annual Meeting the proposed final draft of the Principles of the Law of Software Contracts.

For those blog readers who are not familiar with the ALI, this is a legal professional organization, which is known for publishing authoritative restatements of the law. It is considered to be a professional honor to be elected to the ALI, whose membership includes judges, lawyers, and teachers from the United States and foreign countries. Membership is limited to 3000.

Why is the work of ALI important? Well, this is because the restatements are generally considered authoritative by the courts. In this case, the ALI has drafted "principles" rather than a "restatement." The Introduction to the current draft of the Principles explains this distinction as follows:

In light of the many percolating legal issues that pertain to the formation and enforcement of software agreements, an attempt to "restate" this law would be premature. . . . Instead of restating the law, a "Principles" project accounts for the case law and recommends best practices, without unduly hindering the law's adaptability to future developments. . . .[A]lthough these Principles often employ prescriptive language, 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 as they see fit.

So, given the significance of the ALI's work, software companies need to be informed about the work of the ALI in this area, since the Principles may be treated as authoritative at some point down the road if a dispute over one of their software contracts ever ends up in court.

Though the The Prinz Law Office has not been involved in the ALI drafting project, the Silicon Valley IP Licensing Blog has obtained a draft of the Principles. This blogposting is the first of a series of postings that we will make on the Principles: the plan is to share with you some of the highlights of the Principles, so that if you as a blog reader are in the software industry, you will have some understanding of the important points to be taken away from the Principles and can consider whether or not you may want to make some revisions to your standard contracts in anticipation that these Principles may be utilized by a court on your contracts down the road.

If you would like to obtain your own copy of the draft of the Principles of the Law of Software Contracts, drafts are being made available for purchase at the ALI website.