What Is a Single Authoritative Copy in Electronic Records?

Today's blog post comes from Ken Moyle, DocuSign's chief legal officer. If you've used electronic signature on an electronic record, you may be wondering about an "authoritative copy." Ken addresses the question, "What is a single authoritative copy?" below:

The concept of “Authoritative Copy” comes from UCC Art. 9-105. This revision to Article 9 was intended to address the problem of electronic chattel paper. Anticipating that there may someday be a technological means for identifying or controlling an electronic “original,” the drafters of 9-105 came up with the parameters, including these requirements:

(1) a single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the person asserting control as—
(A) the person to which the transferable record was issued; or
(B) if the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred;
(3) the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
(4) copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) any revision of the authoritative copy is readily identifiable as authorized or unauthorized

ESIGN (Title II) and UETA (Section 16) create a parallel structure for the electronic equivalent of a paper promissory note, known as a “transferable record.” Since the UCC Article 3 provisions for promissory notes were not designed for use with electronic records, both laws set forth special rules for the management and retention of Transferable Records, stating that an electronic record can be treated as the equivalent of a negotiable promissory note in certain respects if:

• The electronic record contains only the same terms and conditions that are permitted
• in a promissory note governed by Article 3 of the UCC
• The electronic record is signed;
• The issuer of the record has agreed that it should be treated as a transferable record under the UETA; and
• The method used to record, register, or evidence a transfer of interests in the transferable record reliably establishes the identity of the person entitled to “control” (meaning control the transfer of) the electronic record.

The “safe harbor” for establishing control of the Transferrable Record is taken directly from UCC 9-105 above.

DocuSign has taken this concept and created a process by which a document that is brought into our system can be identified and treated as an authoritative copy in compliance with the statutory provision, thereby enabling our customers to execute and transfer negotiable instruments.