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Digital signature bill hits Congress

In a move to boost e-commerce and enforce digital contracts, a bill to create standards for businesses to accept electronic signatures is introduced in both houses of Congress.

    In a move to boost e-commerce and enforce digital contracts, legislation to create federal standards for businesses to accept electronic signatures was introduced in both houses of Congress today.

    There are numerous forms of digital/electronic signatures, which raises a swarm of legal and liability issues. E-signatures range from the equivalent to hand-signed paper documents to certified IDs similar to a passport or driver's license. The most talked-about digital signatures are secured by encryption and attached to email messages and other digital documents and handed out by a "certificate authority" that takes steps to verify a person's true identity.

    The Millennium Digital Commerce, introduced today by Sen. Spencer Abraham (R-Michigan) and Rep. Anna Eshoo (D-California), aims to start clearing up these murky waters by establishing the legality of digital signatures exchanged during commercial transactions.

    "This legislation ensures that state and federal regulations do not interrupt the rapid growth of e-commerce," Eshoo said in a statement. "This legislation would establish a national uniform legal framework for e-commerce."

    The Millennium Digital Commerce Act builds on Abraham's Government Paperwork Elimination Act, which was signed into law last year to mandate that U.S. agencies accept forms signed with digital signatures.

    Under a broad definition, the new bill would make commercial contracts signed with electronic signatures legally binding.

    "This is not about the government anymore. This is about contract law between private parties and it reaches any agreement that uses an e-signature," said Alan Davidson, staff counsel at the Center for Democracy and Technology.

    The bill defines "electronic signature" as "a signature in electronic form, attached to or logically associated with an electronic record?any symbol, sound, or process executed or adopted by a person or entity, with intent to authenticate or accept a record."

    The legislation also would authorize a federal study to determine if government agencies imposing any barriers to electronic transactions. And in some instances, the new bill could override state efforts, but leaves room for interpretation.

    "Each jurisdiction that enacts such laws should have the right to determine the need for any exceptions to protect consumers and maintain consistency with existing related bodies of law within a particular jurisdiction," the bill states.

    Like any proposal, the bill's potential impact still is vague, and it doesn't address complicated issues such as when exactly a consumer is entering into a contract over email, for example.

    Still, some observers say the bill is good first step.

    "There are three reasons to pass electronic signature legislation: to resolve the questions of its legality; to address whether you can trust messages signed with digital signature; and thirdly to specify the rules for using them," said Thomas Smedinghoff, an attorney with McBride Baker & Coles who also is chairman of the electronic commerce division for the American Bar Association.

    "This legislation really only addresses the first issue of legality--which is taking the first step," he added. "One benefit is that it provides a universal definition of what is an electronic signature, and in the proper way, that its basically any electronic symbol made with the intent to authenticate a record."