BILL ANALYSIS Ó AB 2296 Page 1 Date of Hearing: April 26, 2016 ASSEMBLY COMMITTEE ON JUDICIARY Mark Stone, Chair AB 2296 (Low) - As Amended April 19, 2016 PROPOSED CONSENT SUBJECT: Digital signatures KEY ISSUE: SHOULD THE RULES concerning ELECTRONIC SIGNATURES BE CLARIFIED SO THAT GOVERNMENT AGENCIES MAY BE ABLE TO MORE EFFECTIVELY TRANSACT BUSINESS THROUGH ELECTRONIC TRANSACTIONS? SYNOPSIS California has taken several steps to enable use of more electronic transactions in the various branches of government. Beginning in 1995, the Legislature adopted its first digital signature statute to allow public entitles to engage in electronic commerce. (AB 1577 (Bowen), Chap. 594, Stats. 1995.) Then in 1999, the Legislature enacted the Uniform Electronic Transactions Act (UETA), regulating the electronic transmission of documents and signatures more generally. (SB 820, (Sher), Chap. 428, Stats. 1999.) As a result, there are multiple rules governing what electronic or digital signatures are acceptable; and, according to the author, there is confusion about what rules apply and when. This bill, sponsored by the Secretary of State, seeks to reduce that confusion by clarifying that a AB 2296 Page 2 digital signature under the Government Code also qualifies as an electronic signature under the UETA, and that an electronic signature under the UETA does not need to comply with the requirements of a digital signature under the Government Code. This bill is supported by the League of California Cities, the California Chamber of Commerce, the California Manufacturing and Technology Association and the Computing Technology Industry Association, and it has no known opposition. SUMMARY: Clarifies the types of electronic signatures that are permissible for public agencies. Specifically, this bill: 1)Provides that a "digital signature," as defined, is considered a type of "electronic signature" under the Uniform Electronic Transactions Act. 2)Clarifies that use of a digital signature is discretionary. 3)Clarifies that regulations adopted by the Secretary of State to implement Government Code Section 16.5 apply only to the use of a "digital signature" under that statute and not to an "electronic signature" under the UETA. 4)States various legislative findings. EXISTING LAW: 1)Establishes, under the UETA, standards for conducting electronic transactions in this State, permitting but not requiring a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form. As part of AB 2296 Page 3 that, defines an "electronic signature" as an electronic sound, symbol, or process attached to, or logically associated with, an electronic record and executed or adopted by a person with the intent to sign the electronic record. (Civil Code Section 1633.1 et seq.) 2)Allows a digital signature to be used in a written communication with a public entity, but provides that use or acceptance of a digital signature is at the option of the parties. Defines "digital signature" as an electronic identifier, created by computer, intended by the party using it to have the same force and effect as a manual signature. (Government Code Section 16.5.) 3)Defines "electronic signature" for the purposes of the Code of Civil Procedure as an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (Coe of Civil Procedure Sections 17, 263.1.) FISCAL EFFECT: As currently in print this bill is keyed non-fiscal. COMMENTS: California has taken several steps to enable use of more electronic transactions in the various branches of government. Beginning in 1995, the Legislature adopted its first digital signature statute to allow public entitles to engage in electronic commerce. (AB 1577 (Bowen), Chap. 594, Stats. 1995.) Beginning in 1999, the Legislature authorized courts to adopt local rules of court permitting electronic filing and service of documents. (SB 367 (Dunn), Chap. 514, Stats. 1999.) Also in 1999, the Legislature enacted the Uniform Electronic Transactions Act, regulating the electronic transmission of documents and signatures. (SB 820, (Sher), Chap. 428, Stats. 1999.) As a result, there are multiple rules governing what electronic or digital signatures are acceptable; AB 2296 Page 4 and, according to the author, there is confusion about what rules apply and when. This bill seeks to reduce that confusion by clarifying that a digital signature under the Government Code also qualifies as an electronic signature under the UETA. Government Code Section 16.5: California enacted Government Code Section 16.5 in 1995, which authorizes use of a digital signature in communication with public agencies. (AB 1577 (Bowen), 1995.) For purposes of this bill, the relevant provision of that statute provides that a digital signature meeting specified requirements will have the same force and effect as a manual signature for written communications with a public entity. The Secretary of State was required to adopt implementing regulations. Those regulations require that the digital signature must be created under a technology that the Secretary of State finds acceptable and has approved. There are two such technologies today -- Signature Dynamic, which uses a specialized touchpad to record signatures and, according to the Secretary of State, is not widely used; and public key cryptography, which must be issued with a certificate by a third-party on the Secretary of State's "Approved List of Certificate Authorities." Those are the only two approved methods to create a digital signature under Section 16.5. The rules under Section 16.5 are purely voluntary -- no public entity is required to use them -- but if the government entity relies on those rules, the digital signature must be created through a method approved by the Secretary of State. Uniform Electronic Transactions Act: Four years later, the Legislature passed the more comprehensive UETA, which established uniform standards for conducting electronic transactions in California. (SB 820 (Sher), 1999.) UETA set out a voluntary system of rules and procedures for the sending and receiving of electronic records and signatures, the formation of contracts using electronic records, the making and retention of electronic records and signatures, and the procedures governing changes and errors in electronically AB 2296 Page 5 transmitted records. It also established the validity of transactions formed, transmitted and recorded electronically, and it established the admissibility of electronic records in a legal proceeding. Of particular relevance for this bill, UETA defines "electronic signature" as "an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record." (Civil Code Section 1633.2 (h).) Unlike Government Code Section 16.5, UETA does not dictate any particular method of creation for that electronic signature. Confusion in the Marketplace: According to the author this bill is necessary because there is confusion among the stakeholders about what types of signatures are required for electronic transactions: The definition of "digital signature" in Section 16.5 of the Government Code, and the definition of "electronic signature" in the UETA are similar, and neither statute includes any cross-reference to the other. Although both provisions of law allow an agency to choose whether or not to convert from using a wet signature, some agencies interpret the law as allowing an agency to choose only a "digital signature" solution subject to Secretary of State regulations, even if an "electronic signature" technology is preferred. In addition, some public agencies appear to conclude that they can contract with a signature solution provider only if that provider is on the Secretary of State's approved list. However, . . . a provider would not be on this list, only the associated certificate authority. This lack of clarity in the law creates a barrier to public agencies utilizing fully digital transactions that require a AB 2296 Page 6 signature. The confusion is limiting the signature solutions agencies adopt, or leading them to retain paper-based processes to avoid noncompliance. As a result, the benefits of digital transactions and online services -- efficiency, cost savings, convenience, and paper reduction - are not being fully realized. This bill seeks to eliminate any confusion between the two code sections in several ways. First, this bill provides relevant cross-references in the Government Code and the UETA. Second, it clarifies that a digital signature under Government Code Section 16.5 qualifies as an electronic signature under the UETA. Third, it clarifies that a public entity can elect to transaction business using a digital signature, but is not compelled to do so. Finally the bill provides that the Secretary of State's regulations under Government Code Section 16.5, which limit the types of electronic signature allowed under that code section, do not apply to an electronic signature under the UETA. These multiple clarifications are designed to eliminate all confusion and make clear that an electronic signature under the UETA can be a digital signature under the Government Code, but does not need to comply with those requirements. ARGUMENTS IN SUPPORT: Supporters write that the bill will "remove a barrier to California public agencies' use of fully digital transactions by clarifying which electronic signature technologies are legally permissible. As a result, the bill would enable government to provide services to the public and transact business with increased efficiency, cost savings, convenience, and paper reduction." AB 2296 Page 7 REGISTERED SUPPORT / OPPOSITION: Support California Secretary of State Alex Padilla (sponsor) California Chamber of Commerce California Manufacturing and Technology Association Computing Technology Industry Association League of California Cities Opposition None on file Analysis Prepared by:Leora Gershenzon / JUD. / (916) 319-2334 AB 2296 Page 8