March 6, 2000

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Legally Binding E-Documents Move Closer To Reality
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While the legal status of digital signatures is unclear, just how many companies need the technology--or are willing to use it--is also open to debate. "There is a fallacious assumption that Internet commerce leads to 'open' commerce between unknown parties," says Gartner Group VP Victor Wheatman. In truth, he says, most business-to-business E-commerce takes place between companies that know and trust one another. "Furthermore, high-value transactions take place all the time over unsecured, unrecorded phone lines between trusted trading partners based on something called 'their word.' "

Advance Business Systems executive VP and co-owner Lois Elkin says the psychological barriers to digital signatures are generational. "As time goes by, the kids who have been brought up doing everything on computers will replace the generations brought up working on paper. The generation that tells time with digital clocks and ties their shoes with Velcro will have more acceptance of this," she says.

Even so, analysts expect steady growth in the PKI market in the next few years, and say digital signatures are likely to become a fundamental part of electronic commerce. One reason is using E-documents instead of paper could generate huge savings for businesses.

"We have about 6,000 square feet of off-site storage just for paper," says Michael Hodes, a senior partner with Hodes, Uyllman, Pessin & Katz P.A., the 43-attorney Towson, Md., law firm that signed the E-lease for copiers. "If we could get rid of all of this paperwork, it would be unbelievable."

It could also make transactions more convenient because the parties to a mortgage closing or estate settlement, for example, wouldn't have to gather in the same room. On average, EOriginal executives estimate their paperless processes could reduce companies' administrative costs by 7% to 16%.

Founded by an attorney, EOriginals trademarked the term 'Electronic Original' to describe E-documents created with its DocuGuard software and managed under its business rules for security. To create an Electronic Original, users insert a cryptographic card that encodes a user's private key into a slot on a PC. The private key combined with a public key establishes a person's identity and permits use of a digital signature, says Douglas Trotter, chief technology officer at the three-year-old Baltimore company.

Once an Electronic Original is completed and all parties have signed using the PC Card or an electronic pad attached to a PC, the E-document is routed to a special server called the Trusted Custodial Utility, which validates the signatures and adds a date and time stamp. At this point, a digital signature--a mathematical calculation of every bit in the document--is created. A digital signature is unique for every document and it electronically seals the document so it can't be altered without detection, even by the originator. This lets EOriginals establish a documented chain of custody to verify the integrity of the document and the signatures on it.

"Companies have to subscribe to our service and promise to abide by the rules and control who has access to the system. If they don't do that properly, it is not a legally binding document," Trotter says. The company says it works with customers to identify cost savings and profits resulting from its software, and charges a percentage of that number; additional fees for consulting and integraton services are assessed separately.

Robert Dulude, VP of technology consulting for CyberTrust Solutions Inc., a GTE company that specializes in PKI technology, says the industry needs national, even global, standards for electronic signatures. "A fundamental quality of the Internet is it doesn't know state or country borders," Dulude says. "If two companies use our technology, one in Nebraska and the other in Dallas, which state regulations would be in effect?"

A standard answer to that question would benefit CyberTrust customer Ruesch International Inc., a financial institution that does business worldwide. Based in Washington, D.C., the 20-year-old financial institution exchanges currency and makes about a half-million international payments, totaling $6 billion to $7 billion annually, on behalf of its 25,000 customers. When a U.S. company purchases a product from France, for example, as a Ruesch client, it can track the exchange rate, purchase francs, and pay its bill through Ruesch. Historically, these transactions took place by phone, fax, wire, and mail. When Ruesch decided to add an Internet alternative, its clients retained their high expectations for security and privacy, says Ronald Szoc, Ruesch's senior VP of technology.

After evaluating security measures, Ruesch "went the pure software digital certificate route," Szoc says. "We felt we had to go beyond the secure Internet interactions one gets with a consumer site. But we didn't want to burden clients with additional hardware."

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Photo of Hodes by Roy Karten

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