Making e-comm saferCongress expected to pass landmark digital signature legislation.


Network World, 06/19/00

WASHINGTON, D.C. - Electronic records and digital signatures don't get the kind of respect in court that paper documents with handwritten signatures do. But federal legislation, dubbed the E-Sign bill, is expected to change that and give e-commerce a big boost.

The Electronic Signatures in Global and National Commerce Act, as it's officially called, is expected to become law as early as this week. As such, electronic signatures will be as valid as their paper-based counterparts.

"We believe the act will help enable new industries in cyberspace, such as the insurance industry," says Michael Baum, vice president of practices and external affairs at VeriSign, a provider of public-key digital certificates that link a person's identity with encryption keys for signing documents and encrypting them. "Any industry that had a fear that the inherent validity of electronic signatures was uncertain can proceed."

E-Sign is good news for a company such as Quality Letters of Credit, in San Carlos, Calif., which completes complex freight-export documents and letters of credit for foreign banks on behalf of customers such as 3Com and Extreme Networks.

"We want electronic signatures more widely used," says company President David Clements. It takes up to three days to courier paper documents overseas to banks and freight forwarders. Electronic documents, signed with digital signatures, would be a vast improvement, he says.

Clements says his firm will deploy the Authentica electronic-document repository service for use by his employees in Asia, and he hopes banks will accept electronic letters of credit after the law takes effect Oct. 1.

Exactly how the new law is accepted and put into use by companies and government organizations is uncertain.

The E-Sign law doesn't define specific electronic signature technologies or security practices for electronic documents. Observers say this could lead to legal wrangling about whether electronic document handlers should be forced to adhere to certain practices, like those of traditional notaries, for example.

In addition, about 10 states have already passed digitalsignature laws, but the E-Sign law would preempt state legislation.

VeriSign's Baum, a leading authority on the law in this area, says there are bound to be debates and variations in interpretation of E-Sign on the state level. California's Secretary of State Bill Jones is sponsoring what's being called the Multi-State Digital Signature Summit on Aug. 10 in San Francisco, where the federal passage of E-Sign is likely to provide a forum for states to mull over the law's impact.

Nina Young, director of purchasing, contracts and facilities for the Orange County (Calif.) Department of Education, says the E-Sign bill won't instantly make electronic records an option for many.

Her department has started purchasing goods via a trading exchange called, but the department's rules require any purchase more than $54,900 to be a sealed bid.

Whether a bid signed and sealed through encryption technology represents a sealed bid is something education procurement specialists would expect the state government to weigh in on.

"Our preference would be to do business electronically," Young says.

A similar situation prevails at Lower Camden County Regional High School District in Atco, N.J., where the sealed bid threshold is $17,500, says Purchasing Clerk Lorraine McKeown. "It would save us a lot of postage and time to do this bidding electronically," she says.

Nevertheless, some vendors are readying new electronic-signing products they say can be used after E-Sign becomes law.

CyberSafe, for instance, is working on a signature card, based on a smart card, that will let users sign documents in brokerage and banking applications in lieu of using a logon or password.

"This CyberSafe identity card doesn't have a digital certificate on it, it's just the encryption keys, but we have an online auction, a brokerage and an e-commerce mall in pilots with this to issue it to their customers," says CyberSafe CEO Jim Cannavino.

The E-Sign bill passed the House last week with help from Rep. Tom Bliley (R-Va.), who helped tweak the legislation to suit consumer advocates and Senate critics. It's expected to pass the Senate easily and President Clinton has said he will sign it into law.

"Electronic signatures and records will help grow the digital economy by giving American consumers greater confidence in their online business transactions," Bliley says. "I am pleased we were all able to work together to craft a bill that will be good for the digital economy, and good for American consumers."

The E-Sign bill calls for the Department of Commerce to conduct a study one year after the law takes effect to determine how the law is working and how the federal government might proceed with electronic records in the future.

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Contact Senior Editor Ellen Messmer