REPORT ON ELECTRONIC SIGNATURE LAW - PDF

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					EXECUTIVE SUMMARY

The law applicable in Mississippi is such that businesses and government should
feel comfortable using electronic signatures. The dominant law is the new
federal E-SIGN legislation, which pre-empts inconsistent state law.

This Report recommends that Mississippi be flexible with its promulgation of new
law in this area. It further recommends that the State fall in line with the
mainstream electronic signature law among the 50 states and adopt the Uniform
Electronic Transactions Act (published by the National Conference of
Commissioners on Uniform State Law).

E-SIGN encourages adoption of the UETA. UETA is technology neutral and is
becoming the standard for electronic signature and commerce law among the
states. The Mississippi Legislature will need to customize some portions of the
UETA to fit with existing Mississippi law in such fields as wills and consumer
protection. The best guide for how UETA should be customized is the list of
exceptions in E-SIGN.

However, there is no urgent need today to change Mississippi law as it applies to
electronic signatures. It would be premature to make any dramatic changes yet.

This Report recommends that a specific state agency assume the lead within the
state for electronic signatures. This agency should monitor the needs of
electronic signature law, promote the use of electronic signatures, educate
people in the state about them, and make any recommendations for future
changes in law. It appears premature, however, for any state agency to set
technical standards for use of electronic signatures by state government.


INTRODUCTION

Nationwide, electronic signature laws are undergoing historic transition, and the
outcome is not fully predictable. Further, the commercial development and use
of electronic signature technologies is still in its infancy; we all still have much to
learn about these technologies, how they will be used, and whether new
technologies will emerge to compete with them.

Nevertheless, the law prevailing in Mississippi today fully supports electronic
signatures, consistent with the law applicable throughout the United States.

This Report recommends that Mississippi be flexible with future developments of
electronic signature law. The State should assure its constituents that
Mississippi law and policy enthusiastically support electronic commerce, but it is
simply not known what specific type of support is best in all cases. Technology is
rapidly evolving, and real world experience is scant. Judicial decisions on
electronic signatures are very few in number.

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Virtually all states have adopted some form of electronic signature legislation in
the past five years. See http://www.bakerinfo.com/ecommerce for a list.
Although this legislation has been inconsistent from one state to the next, the
states have recently been working together through the National Conference of
Commissioners on Uniform State Law (NCCUSL) to establish a baseline of
uniformity.

NCCUSL has published a new proposed Uniform Electronic Transactions Act
(the “UETA”), indisputably the most authoritative national statement on what
state legislation should say about electronic signatures. The official draft of
UETA is available at http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta.htm.
The official web site for publishing final acts recommended by NCCUSL is
http://www.law.upenn.edu/bll/ulc/ulc_final.htm. The UETA has not yet been
adopted in Mississippi.

Essentially, the UETA provides that a signature will not be denied legal effect
merely because it is electronic and a record will not be considered ineffective as
a writing merely because it is electronic. See Section 7 of the UETA. It
essentially defines “signature” the same as the common law, i.e., a symbol
adopted with the intent to take responsibility. For the most part, the principles in
the UETA are so general and non-controversial that the UETA faces little
opposition. It represents broad national consensus. (That said, we still have to
learn how such matters as consumer protection principles mesh with the UETA.
See the section titled “Customizing the UETA” below.)

In addition, the US Congress has enacted the Electronic Signatures in Global
and National Commerce Act (E-SIGN), S. 761, the text of which is available at
http://thomas.loc.gov. So far as e-signatures are concerned, E-SIGN tracks the
language of the UETA (with some exceptions) by saying that a legal signature is
any symbol, including an electronic symbol, adopted with the intent to take
responsibility. E-SIGN declares state law to be preempted to the extent it is
inconsistent with E-SIGN. E-SIGN is important because it replaces many state
laws to the extent they might be interpreted as disallowing electronic signatures.

(Note that E-SIGN does not cover some kinds of sensitive transactions such as
wills and agreements for adoption or divorce. Neither does it cover state
government procurement. The E-SIGN law is complex and there is debate about
its precise scope; a complete summary and analysis of E-SIGN is beyond this
Report. See one interpretation of E-SIGN published by the National Governor’s
Association, posted at http://www.civics.com/content/NGA_ESIGN.PDF. State
agencies may also be interested in the US Office of Management and Budget’s
interpretation of E-SIGN as it pertains to federal agencies
http://www.civics.com/content/OMB_ESIGN_Guidance.doc.doc.)




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THE MISSISSIPPI DIGITAL SIGNATURE ACT OF 1997


One of the many state laws on electronic signatures adopted before UETA and
E-SIGN is the Mississippi Digital Signature Act of 1997 (the “1997 Act”). As it
pertains to signatures per se, the practical effect of the 1997 Act has been
eclipsed by E-SIGN.

To understand the 1997 Act, one must know what some other states were doing
when the 1997 Act was adopted. In the mid-1990s a few pioneering states,
notably Utah and Washington, adopted so-called “digital signature” legislation to
provide special support for electronic signatures based on public key
cryptography and certification authorities. This legislation aimed to promote
electronic commerce by providing a special legal infrastructure for a certain kind
of technology and a certain kind of business model.

The 1997 Act bears rough similarities to the digital signature laws in Utah and
Washington. Like the Utah and Washington laws, the 1997 Act emphasizes
support for digital signatures in particular, as compared to electronic signatures in
general. Section 5 provides, "a digital signature which has been verified by a
licensed certification authority may be used to sign a writing and shall have the
same force and effect as a written signature." The 1997 Act authorizes the
Secretary of State to act as a certification authority and to license private
certification authorities.

As it applies to digital signatures per se, the 1997 Act is sketchy. In coming
years, as practical experience accumulates, it will be wise for the legislature to
reexamine the 1997 Act. But to date experience is insufficient to warrant
reexamination.

Meanwhile, the 1997 Act does little harm. Even though the 1997 Act emphasizes
digital signatures, it in no way undermines the effectiveness of any other kind of
electronic signature. In fact, the 1997 Act defines the word “signature” in a broad
and flexible way that is in keeping with the common law definition and with UETA
and E-SIGN. Section 3(g) defines “signature” as

       any word, group of letters, name, including a trade name or
       assumed name, mark, characters or symbols made manually, by
       device, by machine or manifested by electronic or similar means,
       executed or adopted by a party with the intent to authenticate a
       writing.

With this definition, the legislature seems to be confirming acceptance for all
electronic signature, similar to UETA and E-SIGN.




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PREVAILING LAW IS ADEQUATE TODAY

There is no immediate need to change the 1997 Act or the general law of
signatures in Mississippi.

Generally speaking, the common law of Mississippi has long taken a flexible view
of signatures, consistent with UETA and E-SIGN. Under common law throughout
the United States, a signature is a symbol adopted with intent to sign. Common
law never excluded electronic symbols as legal signatures. (See generally,
Howley v. Whipple, 48 N.H. 487 (1869) (signature by telegram); Watkins v.
McDonald, 41 So. 376 (Miss. 1906) (testator signed by intentionally adopting
mark on will); Wallace v. Harrison, 65 So.2d 456 (Miss. 1953) (execution of will
by intentional mark). See also, Wright & Winn, The Law of Electronic
Commerce, Chapter 14, 3d ed. (1998).) UETA and E-SIGN repeat and confirm
the common law.

What is more, to avoid any confusion nationwide, E-SIGN generally preempts the
state law of signatures – including any law in Mississippi -- to the extent it departs
from the common law.

As a consequence of the foregoing, the law applicable in Mississippi supports all
forms of electronic signatures in a comprehensive, overlapping way. For all
practical purposes of using e-commerce in Mississippi, the law of signatures is
adequate (it is the same in Mississippi as it is throughout the rest of the United
States) and businesses can feel comfortable.



NEED TO ENACT THE UETA

The UETA covers more aspects of electronic commerce than just signatures.
For the sake of consistency with its sister states, Mississippi needs to adopt the
UETA.

The Secretary of State has previously commissioned research on the various
types of electronic signatures being used in industry. The results of that
research, updated to today, are attached to this Report as Appendix A. Since
that research was originally conducted in the summer of 1997, the types of, and
uses for, electronic signatures have grown only more diverse.

It is this diverse world for which the UETA is designed. The UETA does not
specify which technologies or business models are used to achieve particular
legal results. The UETA allows for diversity, innovation, and changing
technologies. It represents consensus among leading national authorities.
Further, the e-signature provisions of UETA are (in large part) consistent with E-
SIGN. E-SIGN appears to preempt any state signature law that is inconsistent
with it. Federal preemption of state signature law can be confusing. The best

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way to minimize that confusion in Mississippi would be for the Legislature to
adopt UETA.


CUSTOMIZING UETA

It is beyond the scope of this Report to analyze all aspects of the UETA or to
recommend precisely how the UETA should be customized for enactment in
Mississippi. But among the states that have adopted it to date, the dominant
trend is to deviate little from the draft published by NCCUSL. What is more, E-
SIGN arguably preempts state law to the extent it deviates from UETA as
published.

Notice that Section 3(b) of the UETA contemplates that certain state laws
specifically identified by the state legislature be exempted from operation of a
particular state’s enactment of the UETA. A road map for which provisions of
state law should be saved in Section 3(b) of UETA is provided by E-SIGN. The
road map is embodied in E-SIGN Section 103(a) and (b), which identifies, among
other things, laws dealing with wills, family law, cancellation of utility services,
and cancellation of insurance. The easy, mainstream way to adopt UETA today
would be for Mississippi to track the exemptions listed in Section 103(a) and (b)
of E-SIGN.

To speed the process for customizing UETA to fit existing Mississippi law,
Appendix B of this Report suggests provisions of Mississippi law to be
considered for exemption. However, Appendix B is only a rough start.
Mississippi legal experts should be consulted.

Note that political, regulatory, or legal interests within Mississippi may wish to see
the exemptions in UETA Section 3(b) deviate from Section 103(a) and (b) of E-
SIGN. The Mississippi Legislature will probably wish to allow those interests to
be heard though some form of public comment before enactment of UETA.


THE NEED FOR LEADERSHIP BY A DESIGNATED STATE AGENCY

The UETA and E-SIGN enable electronic commerce, but they do not tell anyone
how to use electronic commerce effectively.

As a practical matter, government agencies in Mississippi, whether state or local,
need guidance as to how they can best implement electronic signatures and
other electronic commerce technologies. It would be wise for the Legislature to
mandate a certain agency to provide examples, guidance, and education to other
Mississippi government entities. That same agency could be charged with
monitoring the emergence of electronic commerce and recommending further
changes to Mississippi law as necessary. Further, in an effort to promote e-
commerce within the state, the mandated agency should be directed actively to

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seek out, encourage, and sponsor e-commerce initiatives and pilot projects,
particularly in state and local government.

Use of electronic signatures is so new, however, that it would be premature for
any agency in Mississippi government to set technical standards for e-signatures
in state government. Now is the time for experimentation. No technical
standards for legal electronic signatures have yet been widely recognized in
private industry.


NOTARIES PUBLIC

Experience and authoritative guidance on the role of notaries public in electronic
commerce is virtually non-existent. Although Section 11 of the UETA suggests
that notarization of an electronic document can be achieved with any simple e-
signature made by a notary (and Section 101(g) of E-SIGN suggests the same),
the subject of electronic notarization is controversial. See “The Law of
Electronic Signatures: Finding the Balance,” The National Notary, September
1999, pp. 12-15. There are only a handful of instances of electronic notarizations
actually occurring today.

The philosophy for how electronic notarizations would function under American
law has not been articulated well enough for there to be any consensus on the
subject. It is one thing for the law to say, as Section 2(8) of the UETA does, that
a signature is just any kind of symbol adopted with intent to sign. But it is quite
another to say that the traditional signing and sealing procedures performed by
notaries will be supplanted by nothing more than simple electronic signatures.
See “A Position On Digital Signature Laws and Notarization,” published
September 2000 by the National Notary Association,
http://www.nationalnotary.org.

This Report recommends that Mississippi adopt Section 11 of the UETA as
published by NCCUSL. The reasons for adopting the section are that it would
promote uniformity between Mississippi law and the laws of other states and it
would allow pilot programs with electronic notarizations to start without the need
for special legislation.

This Report predicts that electronic notarizations will emerge most successfully
with respect to specifically defined and controlled transactions (such as land
recordings in a particular county, among specially-equipped and trained
participants), rather than generally across the full range of transactions requiring
notarizations. Widespread use of electronic notarizations will probably not arrive
quickly, except where the notarization serves primarily as a commercial tool to
confirm the identity of a person rather than to satisfy a statutory requirement that
a document be notarized.




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CONCLUSION

Electronic signatures will have a key role to play in Mississippi business and
government. Today, the law applicable to electronic signatures is essentially on
the same footing in Mississippi as it is in all other states. Mississippi law and
policy makers should monitor the development of e-signature technology and, as
appropriate, respond to that development in the measured ways suggested in
this Report. Above all, Mississippi law should be flexible and open to the various
competing e-signature technologies.


DISCLAIMER

This Report provides general information is not intended as a comprehensive
discussion of the law of electronic signatures in Mississippi. It is not legal advice
for any particular situation where a corporation, government agency or other
person wishes to rely on electronic signatures. Readers needing legal advice
should consult their own counsel.




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ATTACHMENTS

APPENDIX A – SURVEY OF TYPES AND USES OF ELECTRONIC
    SIGNATURES

APPENDIX B – PROVISIONS OF MISSISSIPPI LAW THAT ARE
    CANDIDATES FOR EXEMPTION FROM APPLICATION OF THE UETA




This Report is submitted by:
Benjamin Wright
Attorney and Author of The Law of Electronic Commerce
Dallas, Texas
Tel: (214) 403-6642
Ben_Wright@compuserve.com
http://wright.safeshopper.com




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                                  APPENDIX A

      SURVEY OF TYPES AND USES OF ELECTRONIC SIGNATURES

Broadly defined, an electronic signature is a symbol that someone adopts to
authenticate a writing. The symbol could be an autograph on a fax, the
characters of a person's name in an e-mail message, or a cryptographically
secure symbol such as a digital signature. Commentary to the Uniform
Electronic Transactions Act (UETA) even states that a mouseclick can be a legal
signature, if that is what the person making the click intends.

As the Mississippi Legislature considers legislation, it should be mindful of the
great diversity of signature methods now in use. As time passes, the number of
signature methods available is likely to increase.


Fax Signatures

It is not unusual for governments to rely on fax signatures in some kinds of
transactions. There have been judicial decisions suggesting that a fax signature
is legally effective. The best such case is British Columbian. Beatty v. First
Exploration Fund, 25 B.C.L.R.2d 377 (1988), held that an autograph on a faxed
proxy constituted a legal signature because it was a symbol adopted by the
sender with the intent to sign. Government agencies such as the Federal
Communications Commission, the US Patent and Trademark Office, and various
state courts have for years been accepting faxes as officially filed documents.
See B. Wright, The Law of Electronic Commerce (2d Edition 1995) Section 4.4.2.

For several years, some states, lead by Iowa, Kansas, and Texas, have been
accepting UCC-1 financing statements via electronic transmission. Article 9 of
the Uniform Commercial Code requires such statements to be "signed" by the
debtor, but UCC 1-201 defines "sign" broadly to include any symbol adopted with
intent to authenticate. Given the advent of electronic financing statements, the
Permanent Editorial Board of the UCC elected to issue a formal opinion on how
the statements could be "signed.” It said:

   In an electronically transmitted financing statement …the signature
   requirement is satisfied by the signer's adoption of a symbol that is
   transmitted electronically to the filing office. The symbol may be the signer's
   name, an asterisk, or any other symbol, provided that it is adopted by the
   signer. PEB Commentary on the Uniform Commercial Code (Electronic
   Filing Under Article 9; July 16, 1996).

The board noted that proof as to the identity of the signer might come from things
other than just the signature, such as paper documents retained by the secured
party and signed in ink by the debtor.



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Electronic Text Signatures

The largest government electronic filing program relies on simple text signatures.
In its EDGAR program, the US Securities and Exchange Commission requires
public companies to electronically file "signed" documents such as annual
reports. The legal "signature" is the text characters of an authorized corporate
officer's name. Still, it is important to note that this simple signature is
supplemented by other security devices. First, EDGAR filings can only be
submitted via a closed network, with the use of a password. Second, the
company submitting an EDGAR filing must keep in its own records a paper
archive of the filing, signed in traditional ink.

A trial court in Massachusetts recently held that the text characters of a police
officer's name, typed into an electronic record, constituted the officer's signature.
Doherty v. Registry of Motor Vehicles, Suffolk, SS District Court Department, No.
97CV0050 http://www.state.ma.us/itd/legal/case.htm.

The Federal Communications Commission now accepts certain official
comments from the public via Internet. Law requires those comments to be
signed. FCC has amended it regulations to say that the "signature" on such
filings is just the typed text of the signer's name. See FCC 98-56, released April
6, 1998, amending 47 C.F.R. Section 1.52.


Digital Signatures

"Digital signatures" have received a great deal of attention from some lawyers
and legislators. (Strictly speaking, digital signatures are based on public key
cryptography, also known as asymmetric cryptosystems. Some implementations
involve certification authorities (CAs), and some do not.) Most notably, that
technology is the one supported by the famous Utah Digital Signature Act.
However, Mr. Wright has been able to find only a few electronic transactions with
government (state or federal) supported by digital signatures. To date, the actual
use of digital signatures as legal signatures is limited.

InternetWorld reports, “the Victoria, Australia, postal service issues customers
digital certificates on diskette for signing online correspondence with the
government.” See Gardner, “Look Who’s Becoming a Dot Com”, InternetWorld,
December 1, 1999, page 43.

Washington state conducted a pilot project allowing for sales tax returns to be
submitted electronically. Taxpayers were required to use digital certificates to
identify themselves. But, the taxpayers did not legally sign the returns. The
certificates were used only to grant the taxpayers access to a secure web site, in
which tax return forms could be filled out.



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Washington state also conducted a pilot project in which several state agencies
exchanged official forms signed with digital signatures. Source: E-mail
correspondence with Brad Hillis, attorney with the Washington State Department
of Information Services, October 22, 1999.

A new company named iLumin http://www.ilumin.com claims to have been
facilitating the filing of digitally signed documents with courts in Salt Lake City
since March 2000.

The federal Patent and Trademark Office has been working on a pilot program to
allow documents to be submitted with digital signatures. Start of the pilot has
been delayed.

The Commonwealth of Massachusetts, together with several partner states, ran
a pilot project for the government procurement of goods and services, where
contracts were signed with digital signatures. See http://www.emall.isa.us.

The Commonwealth of Massachusetts also ran a program that allowed banks
possessing private keys and digital certificates (from a CA) to file interest rate
information with a state banking authority. Technically, these filings are not
signed, and they do not involve digital signatures. The bank uses its private key
to gain access to a controlled location on the world wide web. While within the
location, the bank can upload its filing. The filing itself is not signed.


Other Signature Technologies

The Internal Revenue Service once conducted an experiment in which it
accepted voice signatures on tax returns. 58 Fed. Reg., Jan. 13, 1993, 4079.

The Internal Revenue Service has conducted two pilots allowing documents to
be signed with signature dynamics. Signature dynamics measures the way that
a person writes his autograph by hand on a digitizer pad connected to a PC.
Software then uses cryptography to bind those measurements to an electronic
document. One example of signature dynamics software is PenOp
http://www.penop.com.

Signature dynamics is also being used in the courts in Gwinnett County, Georgia.
Police officers and judges exchange signed legal documents by writing their
autographs by hand on digitizer pads connected to computers. See Fry, "When
the Pen May be Mightier Than the Keyboard," Wall Street Journal, Aug. 6, 1998,
at B7, col. 1 (southwest ed.).

The courts of Pima County, Arizona, are experimenting with a system that
effectively makes a mouse click and some identifying text a signature on a court
filing. See, Cotter and Messing, "Electronic Court Filing in the Pima County
Small Claims Court," 38 Jurimetrics 397-406 (1998).

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                                   APPENDIX B

                     PROVISIONS OF MISSISSIPPI LAW
                  THAT ARE CANDIDATES FOR EXEMPTION
                     FROM APPLICATION OF THE UETA

This Appendix B lists a number of Mississippi statutes as possible candidates for
exemption from application of the UETA when it is adopted by Mississippi. This
list is not comprehensive or definitive. It is only a rough start. It is intended to
help Mississippi law experts begin the process of customizing the UETA for
enactment in Mississippi. It uses Section 103 of E-SIGN as a guide.

References are to West’s Annotated Mississippi Code.


Within Title 75, Regulation of Trade, Commerce and Investments
Title 75, Chapter 1 General Provisions, except
       75-1-107 Waiver or Renunciation of Claim
       75-1-206 Statute of Frauds on Miscellaneous Personal Property
Title 75, Chapter 3 Negotiable Instruments
Title 75, Chapter 4 Bank Deposits and Collections
Title 75, Chapter 4A Funds Transfers
Title 75, Chapter 5 Letters of Credit
Title 75, Chapter 8 Investment Securities
Title 75, Chapter 9 Secured Transactions

Within Title 83 Insurance
Title 83, Chapter 9 Accident, Health and Medicare Supplement Insurance
       83-9-5 (2)(e) Notice of claim


Within Title 89, Real and Personal Property
Title 89, Chapter 7 Landlord and Tenant
       89-7-23 Notice to Quit
       89-7-33 Service
       89-7-69 Notice of sale of goods; replevin
Title 89, Chapter 8 Residential Landlord and Tenant Act
       – consider exempting entire chapter
       89-8-13 Right to terminate tenancy; notice
       89-8-15 Repair of defects

Within Title 91, Trusts and Estates
Title 91, Chapter 5 Wills and Testaments
       91-5-1 Execution of a will and testament
       91-5-11 Testamentary additions to trust




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Title 91, Chapter 7 Executors and Administrators
       91-7-7 Proving due execution
Title 91, Chapter 9 Trusts and Trustees
       91-9-1 Declarations of trust or confidence
       91-9-3 Grants, assignments, and transfers

Within Title 93, Domestic Relations
Title 93, Chapter 5 Divorce and Alimony
       93-5-2 Child custody
Title 93, Chapter 13 Guardian and Conservators
       93-13-17 Guardian’s Bond


Note: This Report’s general inclination is to save only particular sections, rather
than entire chapters, because other sections within the chapters cover
administrative matters that could be automated. It may make sense, however, to
exempt all of Title 89, Chapter 8. Subject matter experts should be consulted.




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