Signature Bill Validates E-Commerce

SAN MATEO (07/03/2000) - In a roundtable discussion held here Friday, California Attorney General Bill Lockyer joined with several heads of high tech companies to access the impact of the Electronic Signatures in Global and National Commerce Act, or E-Sign, which was signed into law earlier in the day.

Issues raised in the discussion include government's role in shaping e-commerce, the security of digital signatures, and what needs to happen in the future to improve the technology behind digital signatures.

Lockyer positioned the state government's role in e-commerce as a constructive partner "trying to facilitate the new commerce."

Government is stepping up its presence, Lockyer suggested, as issues of security, Internet-based crime, and commerce rise to the forefront of the economy.

"With respect to state government, there will be a variety of e-government solutions. We will have enhanced and aggressive efforts to combat fraud to try to protect businesses, property, and consumers," Lockyer said.

"We have high tech crime problems in California, as well as in the rest of the nation... and part of our responsibility in the department of justice is to assist with federal, state, and local investigations, forensic efforts, and prosecutions as we identify issues of that sort," Lockyer said. "Theft alone is a serious problem for all aspects of our high tech industry, so we want to be more relevant in assisting the [protection] of intellectual property theft.

In addition government is responsible for tackling the digital divide, Lockyer said.

"The changes we will see in this lifetime are extraordinary, and commerce is one part of that. We want to be constructive so we don't leave people behind.

California has the most dramatic gap between rich and poor of any part of the country. We need to make sure that everyone has fair opportunity to success and our society is not destabilized by leaving too many people out of these promised lands."

Although the federal law was just signed Friday, a digital signature law was enacted in California one year ago, according to Lockyer, that is very congruent with the federal act.

"We have things that were omitted in the federal act, [such as] defining sent and received, process for correcting errors, and other things," Lockyer said.

"California laws allow for a notarized signature but that is not in the federal law."

A major implication of the digital signature act for businesses is the validity the law brings to e-commerce transactions, according to John Witchel, CEO of Red Gorilla, in San Francisco, which syndicates applications for use by Web sites.

"A deal initiated over email and concluded electronically is now something you can go to court over. A digital signature means a judge can validate that that is a binding contract," Witchel said. "Now finally we have the courts behind us and we can conduct higher volumes of transactions and trade more confidently."

Accessing the law's impact on the online mortgage industry, Henrick Johanson, the executive vice president of strategic development for Creditland, in San Francisco, said legally-binding digital signatures will bring down the cost of processing mortgages and let consumers close mortgages online in as little as five days instead of the 60-day process it can take today.

The law will also help automate the entire process of conducting commerce transactions, which until now has been held back by the legal need for manual intervention, according to high-tech executives.

"Today, you can go online, apply for mortgage, but once you fill out an application, it is goes to someone in the back room who has to handle it manually, send it to you in mail and wait to receive it back. That crates a lot of inefficiency that digital signatures are changing," Johanson said. "We can for the first time se e a compelling offering to consumers online for financial services."

According to Gilman Louie, president and CEO of In-Q-Tel, a non-profit organization in Washington that works with the CIA on issues relating to technology, the law helps streamline business processes.

"One of the challenges has been that if you want to enable everything to be digital, by putting in a manual process -- the physical signature -- you are not only slowing down commerce but you are also making your business less competitive in a marketplace in which more and more of the entire process is going electronic," Louie said.

The executives on the panel agreed that although the technology is still in its early phases, digital signatures hold the potential in the long run of being safer than paper documents.

"A paper document is only a Xerox machine away from a tamper. Dealing with encrypted keys is a much more secure process than passing around your signature on a piece of paper that could be intercepted anywhere," Louie said. "It is a myth to believe the physical medium is more secure than the digital one. The digital one needs some work on the convenience aspect and making it more accessible, but with this new legislation there will be a financial incentive for companies to go out and create those technologies.

Technological developments over the next 3 or 4 years will provide security for digital documents that is much stronger than paper documents, Louie added.

"Things like biometrics -- the ability to verify from your thumbprint and leave a digital watermark on the document -- can ensure the document hasn't been tampered with, that it authentically came from the person it said it was [from], and if someone steals something along the way when it is transmitted it can't be used against the [real author]," Louie said.

The new law avoids specific requirements about the mechanics of the process, but states what the characteristics of the transaction must be in order to consider a document legally binding. This opens up the potential to smooth out the digital signature process, according to Red Gorilla's Witchel.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about Department of JusticeIn-Q-TelRed GorillaWatermarkXerox

Show Comments