by
Stewart Baker
sbaker@steptoe.com

Michael D. Hintze
mhintze@steptoe.com

November, 1997

Representatives Richard Baker (R-LA) and David Dreier (R-CA) recently introduced H.R. 2937, the Electronic Financial Services Efficiency Act of 1997.

A principal focus of the bill is to establish that electronic authentication or digital signatures will have the same legal effect as paper-based written signatures. In setting out what types of electronic authentication are recognized as valid, the bill is largely technologically neutral. Any method will qualify if it (1) reliably (and in a way that is verifiable) identifies the person making, sending or originating a document or communication, and (2) reliably establishes that the document or communication has not been altered.

The bill also establishes the "National Association of Certification Authorities" under the oversight of the Secretary of the Treasury -- essentially a mandatory registration/licensing of any person or entity the provides "electronic authentication services" in the United States. Given the bill's relatively broad definition of "authentication," the scope of this registration requirement is somewhat uncertain. Additionally, the Association is to establish the "Electronic Authentication Standards Review Committee" which is to "establish, develop, and refine criteria to be applied to the emerging electronic authentication industry."

Many in industry may find these licensing requirements needlessly burdensome. There does not appear to be an exception for authentication used in closed systems or for circumstances where high-trust or regulated certificates may be unnecessary. Also, there does not appear to be any explicit preemption of state registration requirements. Thus, CAs could find themselves subject to 51 different registration requirements in the U.S. alone.

This bill obviously is not going to make significant progress this year. But we can expect to see this and other similar proposals early next year. If you would like a copy of the legislation, please contact us.

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For further information please contact L. Benjamin Ederington on Tel: +202-429-6411, fax: 202-429-3902 or E-mail: bedering@steptoe.com.