Notaries sign on to digital signatures

Using electronic signatures to sign documents has the potential to change the way business has been conducted for decades.

The eSign bill signed by Bill Clinton in 2000 (using both a pen and a digital signature, of course) made digital signatures legally binding, but curiously, did not define exactly what a digital signature is. The law's intent, similar to those in other countries, was intended to allow business to be conducted in a paper-free digital environment, reducing costs and speeding the process, by taking advantage of e-mail and the Internet.

There are several digital signature technologies, the most popular ones being handwritten electronic signatures, digital certificates and thumbprints. And there are three ways to put a signature to a document: An image of a signature captured as a graphic image; "signature binding," which is a way of digitally weaving the signature into the structure of the document -- any change to the document invalidates the signature; and third, authentication, which uses biometrics to verify that the person signing is the person he says he is. Biometrics includes measuring the characteristics of the signature (pressure, timing, etc.), fingerprints, scanning the eye, reading hand profiles or measuring any other physical property unique to an individual. An image of a signature does not provide any proof that the person is whom he claims, but authentication does by comparing the biometric information on file in a database. Expect to see this technology used for airport security within a year. Some airports are experimenting with machines that read handprints and retina prints.

The use of digital signatures is now being used for expense reports, sales forms, stock trading applications, and point of sale transactions. Digital signatures have the potential to increase the speed of doing business and reduce the need to use fax and express mail, making use of e-mail for instant transmission and distribution.

According to experts, the legalization of the electronic signature is the key event that will drive companies to completely automate many of their laborious processes. Even with sluggish IT spending by the Fortune 1000, companies such as Prudential Financial (NYSE: PRU), Ford Motor (NYSE: F) and Charles Schwab (NYSE: SCH) have taken recent steps to completely automating their business transactions, enabled by the eSign law. For example, a Prudential agent can now take an insurance application in a client's home and record the client's digital signature. This initiates the policy, the billing and provides a record of the policy on the spot.

Most recently the move to digital signature technology has impacted the notary process and the notary laws. Last week the National Notary Association (NNA) and Interlink Electronics (Nasdaq: LINK) announced the Electronic Notary Journal of Official Acts, "Enjoa" -- an electronic record-keeping system that allows the country's 4.5 million notaries to capture and store electronic signatures, thumbprints and facial images of the document signer to better ensure the integrity of business transactions and the notary process. The product, being sold by the NNA for $400, consists of software that runs on a Windows PC and a hardware peripheral that connects to the computer's USB port. The peripheral, designed and manufactured by Interlink of Camarillo, Calif., is a signature pad with a thumbprint sensor. It works much like the signature tablets often used at the checkout registers in retail stores. The addition of a fingerprint sensor is similar to the accessories available for PCs and the built-in sensor in the latest iPAQ PDAs.

In a conversation with E. Michael Thoben, chairman, CEO and president of Interlink, he noted the increasing impact of handwritten electronics signatures upon network and enterprise information processing.

"The passage of the eSign Act, along with similar legislation in Europe, laid the legal groundwork for what has become a worldwide transition from paper to digital documents," Thoben said. "Driven by the substantial cost and time saving of digital document processing, this transition is being enabled in part by the handwritten electronic signature -- a signature technology first introduced by Interlink in 1999.

"Interlink's collaboration with the National Notary Association, and the Enjoa product we developed for them, represent a significant step in the creation of a standard for the signing of documents in the 21st century."

Milt Valera, president of the NNA of Chatsworth, Calif., sees this as an opportunity to improve and expand the notary process, and reduce the potential for abuses, such as a notary being coerced to sign or make changes to the records. Record keeping will be improved and past transactions can more easily be retrieved.

Prior to Enjoa the notary system had relied on the notaries keeping their own records using log books with hand recorded information that are eventually turned over to state agencies, making it unwieldy and sometimes impossible to retrieve past transactions. Valera expects to see sales of a few thousand Enjoa units in California to the 160,000 notaries this year, and is looking for wide adoption to the country's 4.5 million notaries. He considers the adoption of this technology to be one of the major advances in the entire history of the notary process.

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