E-Sign Bill's a Done Deal But Not Public Acceptance

By Kerry Gildea, Contributing WriterThe digital signatures legislation approved by Congress last month is a good first step to furthering e-commerce, but defining the technologies and business practices needed to ensure the easy and secure use of e-contracting will require extensive work, according to industry officials and observers.Lawmakers passed the Electronic Signatures in Global and National Commerce Act with an 87-0 Senate vote of approval and 426-4 in the House. The bill stalled for weeks as lawmakers struggled to reach consensus on how to legalize the e-signature while protecting consumers from fraud and other potential online abuse. Final passage of the bill ? and the promise of White House approval ? was lauded by the information technology community and lawmakers who pushed the legislation through. The bill was sent to the White House June 20, and President Clinton has said he will sign it into law.The bill is good news for the Internet economy and American consumers, according to Rep. Tom Bliley, R-Va., chairman of the House Commerce Committee."Electronic signatures and records will help grow the digital economy by giving American consumers greater confidence in their online business transactions," Bliley said following House passage of the bill. "This is one of the most important steps Congress can take to help foster the growth of the digital economy."The digital signature bill gives an electronic signature entered over the Internet the same legal validity and effect as a traditional signature on paper. It also provides online customers an easy way to revert to paper contracting at any point during the process."This legislation gives Americans fingertip access to business transactions, whether from a desktop computer, a personal digital assistant, an automatic teller machine or any number of other intelligent devices," said Harris Miller, Information Technology Association of America president, in a June 16 statement. "Digital signatures will help catapult consumers and businesses into the mainstream of Internet commerce like never before." While the bill has passed, additional challenges remain. Many IT experts and executives predict the bill will spur the work needed to adopt the new way of doing business online, securing transactions and winning the confidence of consumers who may be reluctant to adopt the use of e-signatures."I think it is going to be a boon to e-commerce, and ensure that digital transactions are able to be carried out. But there are still tails to go along with that, and the states will have some role in flushing it out," said Jason Mahler, vice president of general counsel and public policy at the Computer and Communications Industry Association.It is one thing to say that digital signatures are legally valid and must be accepted by the states, but another for the states to determine precisely how contracts are carried out, he said."The intent of the legislation was not to overturn contract laws in 50 states, but simply to give a baseline," Mahler said. Some states already have a head start. Utah is one of about a dozen states that has passed its own digital signature legislation. But the federal legislation means there is a uniform law in place to make e-contracting even more widespread, according to Tom Davies, senior vice president for Current Analysis, a market research firm in Sterling, Va.There are, however, more pressing near-term issues, Davies said. "First you need the legislation, then the appropriate technologies and then good business practices," he said. "That is where the work needs to be done. There is no national consensus on the technologies or models for business practices."Online buyers and sellers will have to establish practices to support e-business and decide what technologies are needed to prevent online fraud, he added.The legislation also means opportunity for IT companies that develop and sell security, encryption and authentication tools. Tommy Petrogiannis, president of Montreal-based Silanis Technology Inc., said the new challenge is to develop e-signature technology that is secure and easy to use. Silanis develops electronic approval management solutions.The legislators and businesses must realize that it takes more than legislation to encourage adoption, Petrogiannis said. "Our signature has always symbolized our word of honor, and that word has, until now, always been cast in pen on paper," he said. "Converting to a click of a computer key will have its challenges."Among the key issues barring user-adoption of e-signature technology is cultural familiarity with handwritten signatures, wariness about electronic security and adapting to new technologies, he said. "End users are suspicious of technology, especially when it replaces such a fundamental component of our social fabric," Petrogiannis said. "They need to be sure that when they're using an electronic signature, it's as secure as putting pen to paper." Silanis has developed electronic approval management software, called ApproveIt, that marries digital signature technology with the image of a person's handwritten signature."We respect the historical significance that a person's signature represents and the sense of security it gives," Petrogiannis said. "That's why ApproveIt combines both." Other e-businesses also have been preparing in advance of passage of the e-sign legislation."We've been working toward this day, not knowing if the legislation would follow," said Ben Coes, president and chief executive officer of eSprocket, a Boston online marketplace for used capital equipment. Coes rejects warnings from some consumer groups that the shift to e-signatures puts customers at risk. Instead, the technology will save consumers time and money, he said.Buyers and sellers of equipment are able to conduct discussions now through eSprocket's Negotiation Table. With this technology, a secure file is created that documents all dialogue between two companies or individuals and enables the buyer and seller to discuss terms, according to Coes. When contract terms are agreed upon, the buyer and seller are presented with a final e-contract that spells out all the agreed upon terms and conditions.The e-businesses and online sites that will do well long term are those who are prepared and have strong security in place, an issue that must be addressed whether the e-sign ever happened, Coes said."We spend hundreds of thousands of dollars to make sure our customers are protected," Coes said. "The advent of digital signatures does not change this. The companies that invest in security and encryption technology like eSprocket will continue to be safe."Other advocates for the e-signatures agree and believe the use of e-signatures will grow as people get used to the idea and see it can be safe and easy to use."E-signatures could be as secure as the Pentagon," Petrogiannis said, "but they won't be adopted if they aren't easy to use and implement."