The Year 2000 Issue
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You are probably tired of hearing about the "year 2000 computer problem" but an article by John Newberry in the June 1997 American Bar Association Journal focused some legal points which have not been commonly noted if the year 2000 problem appears. They seem worth sharing.
If one has a license to use a computer program and believes the program may have the problem, hiring someone other than the producer of the program to fix it may constitute copyright infringement. The license holder may be entitled to fix it himself or herself under the license but be prohibited from permitting an outside consultant to fixing it.
A software vendor may not be required to fix the problem depending on the language of the warranties and disclaimers that came with the program, the buyer's expectations and other factors.
If a company expects to incur significant costs in trying to deal with the year 2000 problem or foresees potential substantial liabilities to others in trying to deal with it, the liability may need to be reported in the company's financial statements and regulatory filings of financial information about the company. Failure to disclose could result in fines for company executives and possible liability to investors in the company.
The IRS has recently stated that costs of "fixing" the year 2000 problem will be expensed or capitalized and amortized if the treatment is consistent with how the taxpayer has ordinarily handled the costs of developing, purchasing or leasing software. This may not be as simple as it sounds. Persons incurring these costs need to seek proper tax guidance.
Some insurance policies may cover the cost of fixing year 2000 problems but insurance companies may start to make this a specific exclusion in policies issued or renewed in 1998 or 1999.
Some companies may seek to sell off assets which contain year 2000 problems concluding that it would be cheaper to replace them than to fix them. One purchasing assets which contain computer programs should perform proper due diligence to make certain that one is not acquiring someone else's problems and end up owning a liability instead of an asset.
Customers may be well advised to ask their principal suppliers how they are addressing the year 2000 problem and to obtain written certification that the suppliers will be able to meet their obligations to the customers.
Persons who are involved in agreements which may be affected by the year 2000 problem may find themselves involved in litigation over tort liability for such things as fraud, misrepresentation, professional malpractice or negligence.
The year 2000 problem may be overblown (only time will tell), but it is more than computers not running. It raises a number of potential legal issues.
© 1999