Electronic Records and Signatures

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INTELLECTUAL PROPERTY 101

Navigating E-Signature LawsPresented By Andrei D. Tsygankov, Esq.

Briefly Speak about SmartUp

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About MeB.S. in Management from Georgia TechJ.D. from Georgia State University College of LawCurrent:Partner at Founders Legal (Bekiares Eliezer LLP)General Counsel of SmartUp LegalFormer:Managing Director & In-House Counsel for a group of companies that focused on export management & distribution of goods internationally

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What Are E-Signatures?

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Earliest Instances of E-SignaturesThe first widely used system for sending signatures across large distances was finalized in 1862!The Pantelegraph sent signatures or small drawings over existing telegraph lines. Its first transmission carried a signature over 80 miles in less than two minutes!This invention came over 10 years before the telephone!

Relevant LawsUniform Electronic Transactions Act (UETA) Model law drafted by the National Conference of Commissioners on Uniform State LawsPresented for adoption by individual states in 1999http://www.uniformlaws.org/Act.aspx?title=Electronic%20Transactions%20Act

Electronic Signatures in Global and National Commerce Act (ESIGN)15 U.S.C. 7001-7031 (ESIGN)Passed into Federal Law in 2000 http://www.gpo.gov/fdsys/pkg/PLAW-106publ229/html/PLAW-106publ229.htm

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Relevant Laws

Georgias Adoption of Uniform Electronic Transactions Act (UETA) O.C.G.A. 10-12-1 et. seq.Became effective July 1, 2009http://law.justia.com/codes/georgia/2010/title-10/chapter-12/

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ESIGN ActStates must allow the use of electronic signatures if the parties involved agree to this method of signing.

Applies to TRANSACTIONS: In Interstate Commerce In Foreign CommerceWith the Federal Government

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ESIGN Act General Principles1. A signature, contract, or other record related to any transaction cannot be denied legal effect, validity or enforceability solely because it is in electronic form.

2. Transaction is defined BROADLY:Sale, lease, exchange, licensing or other disposition of personal property, goods, intangibles, services or combination thereof;Sale, lease, exchange or other disposition of any interest in real property. 15 U.S.C. 7006 (13).

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ESIGN Act General Principles

3. A contract relating to any transaction (in or affecting Interstate Commerce or Foreign Commerce) may NOT be denied legal effect, validity, or enforceability solely because: An electronic signature or electronic record was used in its formation. 15 U.S.C. 7001(a)(2).

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ESIGN Act General Principles

4. If the law requires that a contract or other record must be in writing to have legal effect, validity or enforceability, electronic form may be denied if:

Such record CANNOT be retained and accurately reproduced by all parties. 15 U.S.C. 7001(e).

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ESIGN Act General Principles

5. ESIGN does NOT require any person to use or accept electronic records or signatures. 15 U.S.C. 7001(b)(2).If parties agree to electronic signatures, then ESIGN gives them legal effect.In Business-to-Business (B2B) transactions, prior behavior among the parties can govern acceptance of electronic signatures and records.In Business-to-Consumer (B2C) transactions, Consumers must have notice, and must consent.

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ESIGN Does NOT Affect

Substantive protections of consumer protection laws. 15 U.S.C. 7001(b)(1).

Content or timing of disclosures required by law. 15 U.S.C. 7001(c)(2)(a).

Any requirement by a federal regulatory agency, self-regulatory organization, or state regulatory agency that records be filed in a specified standard. 15 U.S.C. 7004(a).

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ESIGN Does NOT Apply To(a) Any contract or record if it is governed by:

(1) A statute, regulation, or other rule of law governing the creation and execution of wills, codicils, or testamentary trusts. 15 U.S.C. 7003(a)(1).(2) A State statute, regulation, or other rule of law governing adoption, divorce, or other matters of family law. 15 U.S.C. 7003(a)(3).(3) the Uniform Commercial Code (UCC), as in effect in any State, other than sections 1107 and 1206 and Articles 2 and 2A. 15 U.S.C. 7003(a)(3).

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ESIGN Does NOT Apply To (Contd)

(b)(1) court orders or notices, or official court documents (including briefs, pleadings, and other writings) required to be executed in connection with court proceedings. 15 U.S.C. 7003(b)(1).

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ESIGN Does NOT Apply To (Contd)

(b) (2) any notice of

(A) the cancellation or termination of utility services (including water, heat, and power). 15 U.S.C. 7003(b)(2)(a).

(B) default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual. 15 U.S.C. 7003(b)(2)(b).

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ESIGN Does NOT Apply To (Contd)

(b) (2) any notice of

(C) the cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities). 15 U.S.C. 7003(b)(2)(a).

(D) recall of a product, or material failure of a product, that risks endangering health or safety. 15 U.S.C. 7003(b)(2)(d).

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ESIGN Does NOT Apply To (Contd)

(3) any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials. 15 U.S.C. 7003(b)(3).

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UETAModel law presented to states to codify into state law Establishes that electronic signatures have the same legal authority as wet signaturesAdopted by 47 states, D.C., Puerto Rico, U.S. Virgin Islands. Exceptions:IllinoisNew YorkWashington

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UETA & Reverse Pre-EmptionStates given option to enact UETA substantially as written, or face pre-emption by ESIGN Act

If state adopted UETA in substantially Model form, the states law would prevail over ESIGN

If a states UETA provision is inconsistent with ESIGN, the Federal law would again pre-empt as to that provision.

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O.C.G.A 10-12-7 (a) A record or signature shall not be denied legal effect or enforceability solely because it is in electronic form.(b) A contract shall not be denied legal effect or enforceability solely because an electronic record was used in its formation.(c) If a law requires a record be in writing, an electronic record shall satisfy the law.(d) If a law requires a signature, an electronic signature shall satisfy the law.

Georgia UETA

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Georgia UETA

O.C.G.A 10-12-12 Contd

(a) If a law requires that a record be retained, such requirement shall be satisfied by retaining an electronic record of the information in the record which:(1) Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and(2) Remains accessible for the retention period required by law.

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Georgia UETA

O.C.G.A 10-12-12

(c) A person may satisfy subsection (a) of this Code section by using the services of another person if the requirements of that subsection are satisfied.

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Georgia UETA

O.C.G.A 10-12-12

(d) If a law requires a record to be presented or retained in its original form, or provides consequences if the record is not presented or retained in its original form, that law is satisfied by an electronic record retained in accordance with subsection (a) of this Code section.

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Georgia UETA

O.C.G.A 10-12-12 Contd

This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001, et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).

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Georgia UETA

O.C.G.A 10-12-13 Contd

Record or signature evidence not to be excluded solely on the basis of electronic format.

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Comparing UETA & ESIGNGeorgias UETA (O.C.G.A 10-12-7)

(a) A record or signature shall not be denied legal effect or enforceability solely because it is in electronic form.(b) A contract shall not be denied legal effect or enforceability solely because an electronic record was used in its formation.(c) If a law requires a record be in writing, an electronic record shall satisfy the law.(d) If a law requires a signature, an electronic signature shall satisfy the law. ESIGN (15 U.S.C. 7001(a))

(1) A signature, contract or other record relating to such transaction may not be denied legal effect, validity or enforceability solely because it is in electronic form.(2) A contract relating to such transaction may not be denied legal effect, validity or enforceability solely because an electronic signature or record was used in its formation

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UETA vs. ESIGN: Variation by PartiesGeorgias UETA Parties may privately agree to vary the effects of UETA provisions.

ESIGN Act

No specific language in place that allows parties to privately change provisions of ESIGN.

UETA vs. ESIGN: Consumer ProtectionsUETA

Very lenientEnforceability against consumers determined by actions of the parties, the context and overall circumstances.Context, actions and circumstances taken into account when determining if a consumer provided consent.

ESIGN Act

Consumers must affirmatively consent to electronic records.Consumers must be provided notice of their:Rights to hardcopy recordsRights to withdraw consent and be provided information on how to do soNeed to review and store the e-records

UETA vs. ESIGN: Signature AuthenticationUETA

Authentication of a signers signature or mark is critical. There must be proof that a signature is the mark (or the act) of a person who is supposed to sign.Extrinsic evidence may be used in proving this (for example: an IP address; exclusive access or use of an email account, etc.)

ESIGN Act

ESIGN Act does not address how or when signatures need to be authenticated or attributed to a specific signer.

UETA vs. ESIGN: Transmission & ReceiptUETA

UETA is lenient on the transmission and receipt of records. Generally,A record is sent once it leaves control of the sender.A record is received when it enters the system a recipient uses and becomes accessible to the recipient.

ESIGN Act

ESIGN Act does not address how or when a record is considered to have been sent or when it has been received.

UETA vs. ESIGN: Admissibility in CourtUETA

UETA specifically states that an electronic record and signature is not to be excluded solely on the basis of electronic format.

ESIGN Act

ESIGN Act does not provide specific rules and guidance on when e-signature and e-records are considered admissible.

UETA & ESIGN

Georgias UETA statutes leave in place all of the restrictions on electronic signatures that are included as part of the ESIGN Act, including (as described earlier in this presentation):Section 101(c) (15 U.S.C. 7001(c))Section 103(b) (15 U.S.C. 7003(b))

Written agreement in downloadable, electronic form is valid.

agreement is a written provision despite being provided to users in a downloadable electronic form. The latter point has been settled by the Electronic Signatures in Global and National Commerce Act (ESign Act)Specht v. Netscape Communications Corp. 306 F.3d 17, 2nd Cir. (N.Y. 2002)

ESIGN & UETA in Practice

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Common Hurdles: NOT validity of electronic signatures themselves, but Issues of substantive law. For example:

Did the parties have INTENT to form a contract?Did all parties have NOTICE (actual or constructive) of the the transaction terms?Did all parties give proper CONSENT to the terms?

ESIGN & UETA in Practice

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Emails with signature satisfies Statute of Frauds

Cloud Corp. v. Hasbro, Inc., 314 F.3d 289, 295-96 (7th Cir. 2002) (finding that a sender's name on an e-mail satisfies the signature requirement of the statute of frauds).

ESIGN & UETA in Practice

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Receipt of announcement email insufficient to change terms of an agreement

Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546, 559 (1st Cir. 2005) (finding that e-mail announcement regarding new dispute resolution policy was insufficient to put employee on notice that the policy was a contract that extinguished the right to access a judicial forum for resolution of federal employment discrimination claims ).

ESIGN & UETA in Practice

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Signers must have NOTICE of terms BEFORE accepting electronically

Labajo v. Best Buy, 478 F.Supp.2d 523 (SDNY 2007) (finding that consumers must be informed of terms of the transaction before signing electronically).

ESIGN & UETA in Practice

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Electronic signatures satisfy state law writing requirement

Barwick v. Govt Employee Ins. Co., Inc., No. 10-1076, 2011 Ark. LEXIS 111 (Ark.S. Ct. Mar. 31, 2011). (Affirmation of lower court finding that electronic signature meets the requirement that a rejection of no-fault coverage be in writing under state law).

ESIGN & UETA in Practice

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Third Party Agents electronic signature is validIF authority is given by principal

Long v Time Insurance Company, 572 F.Supp. 2d 907 (OH 2008) (finding that electronic signature of insurance agent is valid if done on behalf of insured, if the insured had the opportunity to review the application and authorize the signature).

ESIGN & UETA in Practice

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Contract terms by Click-Wrap agreement are valid

Metro. Reg'l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 722 F.3d 591, 600-03 (4th Cir. 2013) (finding that, by clicking yes in response to electronic terms of use agreement prior to uploading copyrighted photographs, a subscriber signed a written assignment of exclusive copyright ownership in those photographs).Bergenstock v. LegalZoom.com, Inc. 2015 WL 3866703 (finding that, clicking Agree and Place Order is valid acceptance of terms and conditions, including arbitration provision).

ESIGN & UETA in Practice

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Electronic Terms of Service are enforceable if presented to a user-signer together with a required Sign Up button Fteja v. Facebook, Inc., 841 F.Supp.2d 829 (SDNY 2012) (finding that consumers must be informed of terms of the transaction before signing electronically).

ESIGN & UETA in Practice

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Record integrity & tamper-proof storage is crucial

Adams v. Quicksilver, 210 Cal App. Unpub. LEXIS 1236 (2010) (finding that a party cannot prove, by preponderance of the evidence, that post-signature alteration of a document did not occur in a system that allowed post-signature alteration of the document).

ESIGN & UETA in Practice

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Common Hurdles: NOT validity of electronic signatures themselves, but Admission of electronic records into Evidence:

AUTHENTICATIONHEARSAY BEST EVIDENCE

ESIGN & UETA in Practice

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To meet FRE 901(a) requirements for authentication, the audit trail, signatures and documents must also be secured in...

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