Critics doubt value of Md.'s new software legislation; Model law's unlikely to lure many firms, say many experts; High technology

THE BALTIMORE SUN

As state lawmakers groped their way to last week's passage of a far-reaching bill on computer software licensing, Montgomery County Del. Peter Franchot predicted that "Maryland is poised to become the e-commerce capital of the world."

But don't look for big software companies to move here just because of the new legislation -- especially when the measure's merits are disputed.

"They've been sold a bill of goods that this will bring jobs," said Skip Lockwood, director of 4CITE, a Washington-based coalition of business and nonprofit groups opposed to the legislation.

With Gov. Parris N. Glendening expected to sign it into law, Maryland will become the first state in the country to adopt the Uniform Computer Information Transactions Act, a sweeping update of commercial law governing software sold in stores and over the Internet. It was drafted as model legislation for adoption by all 50 states.

Its supporters say the bill is the centerpiece of a package of eight technology-promoting measures pushed through the 90-day General Assembly session by Glendening and legislative leaders. Four bills supported by the leadership dealing with online pornography, hacking and unsolicited e-mail failed to pass.

The legislation will ensure that software makers can get paid for their creations, supporters say, by upholding the terms of those license agreements that computer users must click on before installing programs.

"The crown jewel of e-commerce is your ability to protect your intellectual property," said Del. Kumar Barve, the Montgomery County Democrat who steered the software licensing bill through the House.

"We now have very clearly laid out what the rules of the road are," Barve said.

But corporate relocation experts say businesses look for more tangible attractions than a new digital rulebook.

One such expert is Lewis Bolan, president of Bolan Smart Associates, a Washington commercial development consulting group that has studied the national market for high-tech office space.

When companies consider site relocations or expansions, Bolan said, they rarely consider the merits of a state's laws and regulations unless they are extremely restrictive to their business.

That's not to say that legislation can't help a specific industry in a particular state, he added. For example, Maryland's laws on real estate investment trusts have helped engender a thriving REIT industry, while securities laws in Massachusetts have fueled a boom in mutual fund management outfits.

But when it comes to attracting high-tech companies, said Bolan, the quality of an area's labor force is the chief concern today.

"It's the absolute No. 1 concern by a long shot," said Bolan. "Companies want to know that when they arrive there will be people with the skills they need."

According to industry experts, Maryland lags behind other states, including Virginia and North Carolina, in the size of its trained information-technology work force.

The Maryland Department of Business and Economic Development estimates as many as 20,000 information technology jobs go unfilled annually in the state.

To close that gap, the state is spending about $10 million a year to boost enrollment in IT studies at eight state colleges and universities, with the goal of adding 1,500 new IT graduates a year by 2004.

Jeffery Eisenach, president of the Progress & Freedom Foundation, a Washington think tank, also doubts the new software legislation will spur the technology industry in Maryland.

"IT and other technology companies are usually more interested in things like broadband availability, traffic congestion and other quality-of-life issues that could make it or break it when it comes to attracting and retaining skilled workers," said Eisenach.

He finds the legislation questionable because it doesn't seem to address any pressing problem or issue that is restricting expansion or innovation in the technology sector. "The real question I have is what problem is this supposed to solve?" Eisenach said.

The General Assembly did add consumer protections to the legislation. The bill will allow a refund to customers who find their software doesn't work as advertised -- a guarantee not offered in many license agreements.

The bill also prohibits "self-help," where software makers use the Internet to disable a customer's computer if they believe that the customer has violated the license. With such protections, Delegate Franchot said, "I guarantee that our bill will be a template for states around the country."

But some industries -- also major software consumers -- have expressed concern about whether the legislation will protect them. Companies that rely on computer databases worry that the law may impede their ability to tailor software to their needs or to seek redress for defective programs. Among the critics are Caterpillar Inc., the Nationwide insurance company and Marriott International Inc., the hotel operator based in Bethesda.

Cem Kaner, a lawyer and software industry consultant in Santa Clara, Calif., who has lobbied against the model legislation nationwide, said Maryland legislators in their zeal to attract cyber-business may do just the opposite.

The legislation may serve to drive out small software development companies, Kaner argued, particularly those working on "open source" programs in which the source codes are widely shared as a way to ensure defects are spotted and corrected, and improvements added quickly.

"At the most it might get one of the big companies to open a small tech-support department in your state," he said.

Virginia, the only other state to have passed the legislation, doesn't plan to enact it until 2001, and then not until a committee of technical and legal experts have studied it for modifications. Critics suggest that Maryland's haste may backfire if potentially embarrassing and costly glitches crop up.

Supporters say such criticism is based on misinterpretation of the legislation, especially as it was amended by state lawmakers.

"It's very important for all the states to have some uniform laws," said Dyan Brasington, president of the High Technology Council of Maryland. That way, she added, "companies can feel good about doing business and have the same laws applicable state by state."

None of the fledgling companies on her council voiced concern about the bill, she noted.

"Laws are like anything else," Brasington said. "If they are written poorly or they become unenforceable, you go back in and fix them. But I think it's a real good start."

Supporters argue that the state's quick adoption of the bill establishes its reputation as an eager cultivator of high-tech companies. "That world can be comfortable with the culture we're developing." said House Speaker Casper R. Taylor Jr.

The bill does provide for a legislative oversight committee to monitor the legislation and propose changes if need be. "I think that joint oversight committee is going to be one of the busiest committees in Annapolis," predicted 4CITE's Lockwood.

Other lgislation

Here are the other technology bills passed by the General Assembly: Uniform Electronic Transactions Act: an update of the commercial code, it legitimizes online agreements, making contracts approved with "digital signatures" just as enforceable as paper deals.

Helping start-ups: Maryland Science, Engineering and Technology Development Co. (TEDCO) got $7 million in operating and capital funds and a legislative mandate to assist growing technology companies.

Computer piracy: Strengthens state law prohibiting unauthorized access or tampering with someone else's computer; makes violation a felony subject to up to 10 years in prison and up to $10,000 in fines.

eMaryland: Establishes an e-commerce board of advisers made up of corporate CEOs; also sets up an "application service provider" consortium at University of Maryland, College Park, to promote Internet technology deployment.

Electronic government: Requires state government to put public information and services online, with a goal of 50 percent by 2002 and reach 80 percent by 2004.

Public records privacy: Sets guidelines for ensuring that information and data collected electronically by the state do not invade privacy.

Internet Technology Board: Increases the size and scope of the state's chief advisory panel on technology issues.

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