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Legality of Electronic Signatures -- CLE Webinar 7.12.16

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Digital workflows are becoming the expected process for conducting business. They save time, increase accuracy, provide a better experience, and ultimately drive to faster resolutions and approvals. But the risks and opportunities must be understood before implementing any new technology.
See the latest trends and practices regarding the adoption, use, and verification of digital and electronic signatures for 2016 and beyond.

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Legality of Electronic Signatures -- CLE Webinar 7.12.16

  1. 1. Legality of Electronic Signatures Summer 2016 Reggie Davis General Counsel Damon Mino Director, Legal Industry DOCUSIGN CONFIDENTIAL Int_WB_Amp Your Legal NPS_06_15_NA
  2. 2. Contents 1.  Host IntroducLons 2.  What is an eSignature? 3.  eSignature Law 1.  Statutory Analysis 2.  InternaLonal Overview 3.  PracLcal ConsideraLon 4.  AuthenLcaLon & Security– How DocuSign works 5.  Conclusion
  3. 3. Your Hosts Reggie Davis •  DocuSign General Counsel •  “Impact General Counsel of the Year 2016” ‒  The Recorder •  “General Counsel of the Year - 2013” ‒  Silicon Valley Business Journal •  “Most InnovaLve Legal Team – 2012” ‒  Inside Counsel Magazine •  LiLgaLon Partner Hancock, Rothert & Bunsho` •  General Counsel, Zynga •  VP & AGC, Yahoo! Damon Miño •  DocuSign Director Legal Industry Ver?cal •  Responsible for DocuSign’s SoluLon for Law Firms •  JD, Northwestern University School of Law •  Corporate TransacLon Aforney •  In-House IP Licensing Aforney •  Ariba, 3-PAR, LinkedIn, DocuSign
  4. 4. Electronic Signatures are Everywhere, and Come in Many Forms DOCUSIGN CONFIDENTIAL An electronic signature is an “electronic sound, symbol or process, afached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” - 15 USC 7006 (ESIGN Act) Electronic signatures do not need to look like a handwri3en signature!
  5. 5. Legal Founda?on for Electronic Contracts and Signatures Common Law (contract formaLon based on offer, acceptance, consideraLon) LegislaLon •  United States (state and federal) ‒  UETA ‒  ESIGN •  InternaLonal ‒  eIADS ( EU regulaLon No 910/2014) ‒  Repeals European DirecLve 1999/93/EC ‒  Electronic TransacLons Act (UK) ‒  Uniform Electronic Commerce Act (Canada) ‒  1996 UNCITRAL Model Law on Electronic Commerce ‒  Many more (60+ countries have laws enabling electronic signatures) DOCUSIGN CONFIDENTIAL
  6. 6. Uniform Electronic Transac?ons Act (UETA) •  Dra`ed by Uniform Law Commission (responsible for UCC) in 1999 •  Response to states adopLng inconsistent laws to govern electronic records and agreements. •  Overlay statute that amends state laws or rules that require “wriLng” or “signature” •  Adopted quickly, but California adopted with a number of excepLons •  Now adopted in 47 states + DC, Puerto Rico, Virgin Islands ‒  New York, Washington, and Illinois also have laws permiqng electronic signature that aren’t based on UETA DOCUSIGN CONFIDENTIAL
  7. 7. Electronic Signatures in Global and Na?onal Commerce Act (ESIGN) •  Passed by Congress in 2000 •  Federal version of UETA •  Consumer protecLons ‒  If the consumer has a right to receive informaLon on paper, it may be provided electronically only if consumer disclosure requirements are met ‒  Improper consumer disclosure does not render the underlying contract invalid ‒  Consumer noLce requirements mirrored in some states’ implementaLon of UETA •  PreempLon of nonconforming state laws ‒  Laws conforming to the model UETA are not preempted DOCUSIGN CONFIDENTIAL
  8. 8. General Rule of Validity Central concept of UETA, ESIGN, and other state laws: A signature, contract, or other record related to any transacLon may not be denied legal effect, validity, or enforceability solely because it is in electronic form. No specific technology or process must be used, and ESIGN specifically preempts any state law that would require or give greater legal status to a parLcular technology Permissive rather than proscripLve – no one is required to do business electronically, but if the parLes choose to do so it may not be denied validity on those grounds DOCUSIGN CONFIDENTIAL
  9. 9. Interna?onal Landscape Most Civil Law countries (including most of Europe and LaLn America) follow a “two Ler” approach to electronic signature, modeled on the 1996 UNCITRAL Model law on Electronic Commerce. •  “Simple” electronic signature is admissible as evidence, and generally sufficient for commercial transacLons •  “Qualified Electronic Signature” may have extra legal weight (such as a presumpLon of authenLcity), or may be required for certain purposes, such as submiqng documents to government agencies. •  QES must use specific cryptographic technology called Public Key Infrastructure (PKI) •  The PKI process involves a digital cerLficate, which must be issued by a CerLficate Authority that is approved by the government (or issued by the government itself) DOCUSIGN CONFIDENTIAL Most Common law jurisdicLons, including the US, Canada, the UK, and Australia, follow a “minimalist” model, where electronic signatures are the legal equivalent of a handwrifen signature.
  10. 10. Electronic Signature vs. Digital Signature An electronic signature is the product of any electronic means of signing. A digital signature is the product of a specific cryptographic process called Public Key Infrastructure •  Digital signatures are not always electronic signatures, and vice versa DOCUSIGN CONFIDENTIAL Signing with a Digital CerCficate Digital signatures are uncommon in the United States, but are the industry standard in many parts of the world.
  11. 11. eIDAS paves the way for a unified EU eSignature market LegiLmizes Cloud-based signatures by removing smartcard requirements Enforces Pan-EU Interoperability (July 1st, 2016) Mandatory AdopLon by all Member States
  12. 12. Prac?cal Issues using Electronic Signature Legal Sufficiency vs. Enforceability •  UETA and ESIGN answer the quesLon “is it a signature?” •  They do not answer the quesLon “is it your signature?” ‒  AfribuLon will be a mafer of fact, just as it is with a wet signature Evidence •  Admissible under FRE, but subject to the same rules ‒  Lorraine v. Markel American Insurance Company, 241 FRD 534 (D. Md. 2007) •  Electronic process o`en provides more evidence than a paper process ‒  Time and Date stamp, IP address, etc. DOCUSIGN CONFIDENTIAL
  13. 13. Considera?ons in Implemen?ng Electronic Signature •  Are my documents excluded from ESIGN and UETA? ‒  Can they be electronically signed/recorded under some other rule or statute? ‒  Probate law (electronic wills permifed in Ohio, lifle case law elsewhere) ‒  Court rules ‒  PorLons of the UCC •  How will our process address: ‒  ESIGN Consumer Consent (when it applies) ‒  NoLce and Delivery ‒  Signature process – intent and aNribu?on ‒  Recipient’s right to retain copies ‒  Document integrity and audit trails DOCUSIGN CONFIDENTIAL
  14. 14. What is holding us back? “We need a handwrifen signature for…” ‒  Proof in court ‒  ‘Important’ documents ‒  ‘legal’ documents DOCUSIGN CONFIDENTIAL ‒  Consumer agreements ‒  InternaLonal agreements ‒  Government audits
  15. 15. Proving a signature in court “Is this your signature, madam?” If the alleged signer denies it, how do you prove it? •  Other evidence •  Witnesses (if available) •  HandwriLng experts •  Must challenge opposing handwriLng expert DOCUSIGN CONFIDENTIAL
  16. 16. What the real courts say DOCUSIGN CONFIDENTIAL
  17. 17. DocuSign as an Example 250M+ TransacLons 900K+ Documents Signed/Day 11 Court Cases over 12+ years 0 Invalid DocuSign Signatures
  18. 18. “Because the documents were signed electronically through a company called DocuSign, plainLffs were able to show the precise moments that these documents were created, electronically delivered and signed.” Sollner v. Linton (2014 Cal. Super. Ct. July 2014)
  19. 19. Sufficiency of Electronic Signatures and Records Barwick v. GEICO (2011 Ark. 128) Arkansas Supreme Court rejected argument that electronic waiver of medical benefits was not a “signed wriLng”, ciLng the plain language of the Arkansas UETA. Electronic Signatures meet Statute of Frauds wriLng requirements •  Sha3uck v. Klotzbach, 14 Mass. L. Rep. 360 (Super. Ct., Mass., December 11, 2001); •  Rosenfeld v. Zerneck, 4 Misc. 3d 193, 776 N.Y.S.2d 458 (Sup. Ct., Kings Co. 2004) (but see Vista Developers Corp. v. VFP Realty LLC, 17 Misc. 3d 914, 847 N.Y.S.2d 416 (Sup. Ct., Queens Co. 2007) – Signed emails could be used to prove the existence of a real estate contract. DOCUSIGN CONFIDENTIAL
  20. 20. eCommerce: Clickwrap and Browsewrap Agreements DOCUSIGN CONFIDENTIAL Fteja v. Facebook Online terms held to be enforceable where: •  Terms presented in hyperlink immediately below “Sign Up” bufon •  Sign Up process involved mulLple steps The fact that Facebook did not force Fteja to review the terms was considered irrelevant Jerez v. JD Closeouts Online terms held to be unenforceable where: •  Terms of Sale were not directly referenced in the order process •  Terms were presented only on the “about us” page The court determined that the contract terms weren’t “reasonably communicated” As a general rule, clickwrap, where the user takes some affirmaLve acLon, and has reasonable noLce of the contract terms, has been enforced. Browsewrap, where the terms are available, but no acLon is required to accept or acknowledge them, are much less likely to be enforced.
  21. 21. ANribu?on Zulkiewski v. General American Life Under UETA (Michigan), an electronic signature may be afributed to a person by “any reasonable means”. Here, General American used a combinaLon of email and personal informaLon. Idle conjecture about impersonaLon is not enough to overcome reasonable facts supporLng afribuLon. DOCUSIGN CONFIDENTIAL Record Integrity Adams v. Quicksilver. The vendor’s system did not protect the signed record against post-execuLon alteraLon, and the post-execuLon audit trail maintained by the vendor showed that two Quicksilver employees had accessed the record a`er it was first saved and submifed for storage.
  22. 22. Original Record vs. Proof of Process DOCUSIGN CONFIDENTIAL Person v. Google, Inc. The court relied on proof of process as opposed to proof by the document itself to support defense. Bar-Ayal v. Time Warner Cable Inc. Clearly presented agreements will be enforced unless unconscionable. Court accepted a re-enactment of the agreement formation process (where the plaintiff had to click on the Accept button eight times) in order to refute the plaintiff’s claim that he never saw the agreement. Hook v. Intelius Evidence of process alone is sufficient to support a finding that the process used is standard in the industry and produces an accurate result.
  23. 23. Recent Cases Ruiz v. Moss Bros (CA Court of Appeal, December 23, 2014) •  the Court refused to enforce an employer’s arbitraLon agreement, finding that the employer did not present sufficient evidence that the electronic signature on the arbitraLon agreement was “the act” of the employee •  The decision reflected that authenLcaLon must be proven (just as it must with a paper signature), but states that the burden to do so is “not great” J.B.B. Investment Partners v. Fair (CA Court of Appeal, December 30, 2014) •  the Court held that the defendant’s typed name in an email did not consLtute an electronic signature under UETA, because there was no demonstraLon that he intended to enter an agreement electronically •  The Court acknowledged that consent to do business electronically needn’t be explicit, but it must be proved nonetheless The key lesson from these two cases is that the formaliLes mafer. Failure to keep adequate records or obtain proper consent can impact enforceability DOCUSIGN CONFIDENTIAL
  24. 24. ANribu?on DOCUSIGN CONFIDENTIAL 1. Signer Iden?ty ID Check Electronic Notary Industry-Leading Choice of Authen?ca?on Op?ons Enterprise Add-On Standard Method Access Code SMS Phone Third Party Social ID Digital Certs Primary MulLfactor add-ons Email Address Federated/ SSO DocuSign Account KBA or In Person 2. Audit Trail
  25. 25. Benefits of Electronic Signature •  Documents can be signed remotely •  Counterparts can be sent simultaneously, but tracked in a single workstream •  Electronic documents can include required fields, ensuring that key informaLon is filled in prior to compleLon •  Real Lme informaLon on status of documents •  Reduced cost and hassle by eliminaLng paper, mail, couriers, etc •  Improved client experience •  Less non-billable administraLve Lme DOCUSIGN CONFIDENTIAL
  26. 26. Ques?ons?
  27. 27. FAQ (these are the ones we hear most o`en from lawyers) •  What about notarizaLon? •  E-notary is permifed in the majority of states, but there has been very lifle adopLon •  only Virginia allows remote notary – all other states sLll require physical presence •  NotarizaLon is o`en used when not legally required. Electronic alternaLves exist that may serve the same funcLon if notary is used for policy rather than legal reasons •  Can agreements be backdated? Or signed in advance? •  Most esignature soluLons record the actual Lme a signature event occurs. Free form fields may be used to enter another date, but the audit trail will reflect the real Lme of signature •  SoluLons like “signature page escrow” can be used to collect signatures in advance •  How can we ensure the signer actually read the document? •  How do you do it now? No one can be forced to read a document, but you can increase the odds (or create befer evidence) with pracLces like requiring iniLals next to key terms •  Make sure it is at least possible to read them – for example, if documents are afached to an email, make sure the recipient has the right so`ware to open them. DOCUSIGN CONFIDENTIAL