House Telecom Subcommittee Holds Hearing on E-SIGN Act

(June 9, 1999) The House Telecommunications Subcommittee held a hearing on Wednesday morning, June 9, on HR 1714, an electronic signatures bill sponsored by Rep. Tom Bliley. While there was consensus among the members of the subcommittee and witnesses that a bill is needed, there was debate on the issue of preemption of state laws pertaining to electronic signatures.

HR 1714, the Electronic Signatures in Global and National Commerce Act (E-SIGN), provides for the acceptance of electronic records and electronic signatures in contracts affecting interstate commerce. However, it is just one of several e-signature bills currently pending in the Congress. Rep. Anna Eshoo (D-CA), who is also a member of the House Telecommunications Subcommittee, is the sponsor of HR 1320, the Millennium Digital Commerce Act. (Sen. Spencer Abraham (R-MI) is sponsoring the companion bill in the Senate, S 761.)

Rep. Tom Bliley (R-VA) is the Chairman of the House Commerce Committee, and the lead sponsor of S 1714. He stated at the hearing that "by clearing away the legal uncertainty surrounding electronic signatures and records, more businesses will use electronic signatures and consumers will feel more comfortable doing business online."

HR 1714 provides that: "With respect to any contract or agreement entered into in or affecting interstate or foreign commerce--(1) no statute, regulation, or other rule of law shall deny the legal effect of such contract or agreement on the ground that the instrument is not in writing if the instrument is an electronic record; and (2) no statute, regulation, or other rule of law shall deny the legal effect of such contract or agreement on the ground that the contract or agreement is not signed or is not affirmed by a signature if the contract or agreement is signed or affirmed by an electronic signature."

Other e-signature bills contain similar language. However, one significant difference is how the bills treat state laws governing the use of electronic signatures. The approach taken by Rep. Bliley in HR 1714 is to narrowly limit the permissible scope of any state statutes, and preempt any state laws passed more than two years after enactment of HR 1714.

Rep. Bliley

"I do want to recognize the efforts that states have been making in this area," said Rep. Bliley in his opening statement. "Today, more than forty states have enacted legislation that provides recognition of electronic signatures. My concern is that every law is different - many only allow state agencies to accept electronic signatures and some provide legal recognition only to signatures generated by a specific technology."

"It is clear that for unfettered interstate commerce to take place, we must establish a single nationwide standard. I understand that a uniform state law on electronic signatures is being developed and I believe HR 1714 recognizes this effort by allowing states to enact their own electronic signature bills that follow the principles laid out in HR 1714."

The approach taken by Rep. Eshoo and Sen. Abraham in HR 1320 and S 761 is to permit state laws not inconsistent their bills.

	Rep. Eshoo

Rep. Eshoo said in her opening statement that "both bills aim to ensure that those conducting business online and who choose to sign electronic contracts with electronic signatures will be able to do so with legal certainty. Many states have already passed legislation allowing for the acceptance of electronic signatures. Unfortunately, this has resulted in a confusing maze of state laws that hamper interstate commerce."

"The states have been working on developing a uniform, model law to create one standard for acceptance of electronic signatures in contracts -- similar to what the Uniform Commercial Code accomplished for contract law. It is expected to be completed soon and offered to the 50 state legislatures for adoption," said Rep. Eshoo.

Rep. Eshoo commented on HR 1714: "I'm concerned that the bill we are discussing today is heavy-handed in implementing a two-year deadline on states and would inappropriately give the Secretary of Commerce the ability to enjoin state laws."

Several other members of the Subcommittee expressed concern about HR 1714's preemption language, including Rep. John Dingell (D-MI), the Ranking Minority Member of the Commerce Committee. He said "we must be careful not to impose our judgments upon the states." Similarly, Rep. Barbara Cubin (R-WY) stated that "I support the intent of Chairman Bliley's legislation," but not on the subject of "states' rights." Rep. Karen McCarthy (D-MO), who previously served in the Missouri State Legislature, also expressed concern about the preemption language of the Bliley bill.

Since 1997 the National Conference of Commissioners of Uniform State Law (NCCUSL) has been working on a model Uniform Electronic Transactions Act (UETA).

The subcommittee heard from a panel of witnesses from industry, state government, and the Commerce Department.

• Andrew Pincus, General Counsel, U.S. Department of Commerce.
• Donald Upson, Secretary of Technology, Virginia.
• Daniel Greenwood, Massachusetts.
• Jeffery Skogen, Ford Motor Credit Company.
• Ari Engelberg, VP, Stamps.com.
• Christopher Curtis, Capital One.
• John Siedlarz, CEO, IriScan.

Andrew Pincus was the only witness who did not enthusiastically back e-signature legislation. He stated that "we don't think that there is evidence now that the absence of a national standard is obstructing electronic commerce." Rep. Billy Tauzin (R-LA) (web site | bio), the Chairman of the Telecommunications Subcommittee, challenged him on this. "You don't know how many consumers are refusing to use e-commerce" due to the absence of e-signature legislation.

Pincus also questioned the need for preemption of state law, and for giving the Commerce Department authority to enjoin state laws. He told Rep. Eshoo at the hearing that "we certainly didn't seek this authority, because we are not sure that preemption is necessary."

Some other witnesses, in contrast, argued for preemption. For example, Christopher Curtis, of Capital One, warned that the NCCUSL may take some time yet to complete its work, and may not even produce uniformity.

Jeffery Skogen, of Ford Motor Credit Company, said that "the lack of  uniform nationwide rules may inhibit our country's ability to influence developments beyond its borders. Therefore, it is appropriate to consider the establishment of a federal standard or uniform guidelines."

John Siedlarz, of IriScan, a company which uses electronic scans of the iris of the human eye, offered a technical change in HR 1714. He said that the bill's reference to "electronic signatures" should be changed to "electronic authentication" so as not to preclude biometric authentication technologies, such as iris scans, in electronic commerce.

Rep. Bliley stated that "I am hopeful that we will move HR 1714 through Committee and to the House floor before the end of the year."

The topic attracted considerable interest from the Members of the Subcommittee. Those who participated in all or part of the hearing included Tom Bliley (R-VA), Barbara Cubin (R-WY), John Dingell (D-MI), Robert Erlich (R-MD), Anna Eshoo (D-CA), Paul Gillmor (R-OH), Bart Gordon (D-TN), Gene Green (D-TX), Steve Largent (R-OK), Karen McCarthy (D-MO), Bobby Rush (D-IL), Tom Sawyer (D-OH), John Shimkus (R-IL), Cliff Stearns (R-FL), Billy Tauzin (R-LA).