E-Sigs Get Widespread Endorsement

No one, including the U.S. government, seems to believe that the government should force Internet companies to use electronic signatures for Internet transactions. But look for the feds and the states to offer private industry strong encouragement to get that transition fully underway.

At Wednesday’s House Commerce Committee hearing on H.R. 1714, the Electronic Signatures in Global and National Commerce Act, representatives of the states and the private sector primarily focused on fine-tuning the bill’s language.

H.R. 1714 essentially gives the government’s official endorsement to using electronic signatures to make online transactions legally binding contracts. The bill would leave it up to individual businesses, however, to determine which signature technology they want to use and when, if at all, to start using such signatures across the board.

The Commonwealth of Virginia, for example, is developing “a model of government facilitation of responsible industry and citizenry empowerment,” according to Virginia Secretary of Technology Donald Upson. Virginia, Upson claims, is the Internet capital of the world, the birthplace of the Internet and home to almost half the Internet backbone and nearly half of all online service subscribers, thanks in large part to Virginia being the state where Internet giant America Online is based.

The Commonwealth of Massachusetts also generally agrees with the bill’s laissez faire federal and state government approach, Daniel Greenwood, Deputy General Counsel of Massachusetts’ Information Technology Division said. However, he cautioned Congress not to step on states’ rights when it comes to state laws governing records, signatures and contracts. “States are far more agile than the federal government in responding quickly to changing market conditions,” Greenwood said. “As such, states serve as important laboratories of innovation in the realm of public policy and law.”

While praising the various state efforts to enact electronic signature laws, Commerce Committee Chairman Tom Bliley (R-Virginia), the bill’s author, and Rep. Billy Tauzin (R-Louisiana) argued truly effective guidelines could only come from a federal law governing all U.S. commerce. The “patchwork” of regulations from 44 different states “makes interstate commerce very difficult, if not impossible,” Tauzin said. Acknowledging the states are already working together to make their laws more uniform, Tauzin argued that, “even under optimistic assumptions, adoption by all fifty states will take three to five years. Now that may not seem like a long time, but in the fast-changing world of electronic commerce that is near eternity.”

Commercial Motivation

With only government encouragement, rather than mandates, what is to spur the adoption of this new security blanket? “Competition for ‘consumer satisfaction,’ which is at the heart of every business plan,” Virginia’s Upson says. “As the profit motive drives companies to compete to provide better customer experience, it also sets off a race for better protections than traditional regulations would be likely to achieve.”

The use of electronic signatures is a “no-brainer” for successful Internet business, one private sector witness agreed. “Electronic signatures are a fundamental building block for electronic commerce itself, and they are the key to the widespread use and acceptance of electronic commerce,” Ford Motor Credit Co. Internet Market Manager Jefery Skogen told the panel.

Which Technology?

While most at the hearing embraced the idea of open standards, Stamps.com Vice President of Strategic Web Development Ari Engelberg, urged the committee to make the bill’s language more specific. “In its current form,” he said, “H.R.1714 leaves open a prospect for abuse. While HR1714 aims to achieve vendor-neutrality, in the world of e-commerce not all algorithms are created equal.”

Engelberg called for H.R.1714 to include the encryption and digital signature algorithm standards that have already been developed by the federal government to provide a base level of protection. “If companies are allowed to choose any ‘reasonable’ method [as the current draft of the bill states], they may choose one that is weak enough to be attacked and exploited to falsify contract acceptance.”

Taking Engelberg’s request one step further, IriScan Inc. President John Siedlarz urged the committee “not to rule out the use of sound biometric authentication solutions that have been specifically designed to accomplish the purpose of this bill.” IriScan has developed a method of identifying individuals by their eye patterns, and Siedlarz noted other technologies such as electronic fingerprint scanning may also be effective.