Sign on the (digital) line.

Thanks to a bill passed in Congress, digital encryption may soon be accepted as the legal equivalent of a handwritten signature.

June 26, 2000|By Michael James | Michael James,SUN STAFF

Throughout much of recorded history, kings, noblemen and merchants signed their names with a quill pen and an official seal. Ships sailed to the New World, wars were declared, fortunes were made and lost as the result of signatures written on paper.

Now, at the brink of the 21st century, ink, paper and wax seals have a new competitor - cryptography and the digital signature.

A cyber-signature bill approved in Congress last week, dubbed the E-Sign Act, paves the way for consumers, businesses and government officials to close home mortgages, contracts and multimillion-dollar deals with a mouse click. A handful of states already allow "electronic" loans and mortgages - meaning you can buy a house or car without putting pen to paper.

The industry is moving ahead with the next evolutionary step, "smartcards" and "PC tokens" that put digital signatures on portable devices that fit in your wallet. "The impact of this is much more enormous than people think," said Stephen Bisbee, president of a Baltimore company called eOriginal, which holds a patent on a process to create, sign and transfer documents electronically. "It's truly enabling e-commerce. ... Up to now, our whole legal infrastructure has been built on paper."

Eighteen states, including Maryland, have enacted some form of legislation giving electronic signatures the same legal weight as their penned counterparts. President Clinton, endorsing the E-Sign Act, said it "will help create new rules of the road for America's high-tech economy."

So how do ones and zeros in a computer replace pen and ink? By replacing your scrawl with a mathematical formula that works on the same cryptographic principles that spies and code-breakers have used for the past century. It's no surprise, then, that many companies developing the technology are populated by former employees of the National Security Agency, the government's secretive code-maker and code-breaker.

"We have a number of ex-NSA people," acknowledged Bob Pratt, a director of product marketing for Verisign, a Mountain View, Calif., company that pioneered digital signature technology. "A lot of mathematicians have found a new calling. Because of the Internet and security issues, encryption has become a valuable commercial commodity."

A digital signature assures the recipient of an electronic document that the sender is who he or she appears to be. It's a data file transmitted with the document that contains encrypted information that can be used to prove that you and the document are authentic. It doesn't take much imagination to realize that using this scheme to transmit documents can save countless hours and millions of dollars and entire forests.

Take, for instance, a typical house sale and mortgage. Real estate agents and banks send scores of documents to buyers and sellers, who are expected to sign them and mail them back to be signed by the bank - and that's only the opening act for an arduous, paper-filled closing that requires dozens of additional signatures.

With digital signatures, the process can be completed in hours or days instead of weeks - with e-mail taking the place of paper documents. Once signed electronically, these can't be changed without garbling the digital signature's encryption, thereby preserving each message in an indelible electronic archive.

"This is all about taking the things we do today, like contracts and agreements, and creating a secure framework to do the same things in cyberspace," said Sue Pontius, head of Spyrus (a wordplay on Spies R Us), which manufacturers smartcards for government agencies and businesses. "It's almost like `Star Trek' beaming us into space to do this Internet thing, and we need security when we're there."

Companies such as Texas Instruments are using the technology to speed up international purchases. For instance, a company overseas that wants to sell $10 million worth of computer chips no longer has to wait for documents to arrive bearing handwritten signatures of the purchaser. An e-mail with a digital signature will be proof enough -theoretically.

But critics warn that the technology is incomplete and argue for a careful approach to electronic signing. Among their concerns: identity thieves who steal encryption keys, e-mail servers that crash before critical signatures arrive, and consumers who have no way to prove that they did or didn't send digital signatures.

"It is an amazing technology, but calling cryptology a `signature' is colossally misleading," said Jane Winn, a professor at Southern Methodist University and author of a recent book titled "The Law of Electronic Commerce."

"This is supposed to be the greatest thing since sliced bread, but it's really an emperor with no clothes," Winn said. "It's a product that's not complete yet. Somebody who sends their digital signature could claim that their cleaning lady actually sent it, or that their card was stolen. How this will hold up in court is a key question."

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