A number of well-intentioned webmasters expound erroneous legal theories about the adult Internet business – although sometimes very articulately – on message boards. As a result, legal misinformation spreads like a virus throughout the online adult community, but that’s just one source of rampant misconceptions. New entrants into the business as well as old veterans often mistakenly believe that they can accurately discern what the law requires of them by simply observing what others are doing. Unfortunately, a large number of online businesses are not in compliance with the law, and the common adoption of the “let’s see what my competition is getting away with” strategy has created a dangerous kind of blind-leading-the-blind situation.
This is because the adult entertainment business is subject to a larger number of laws and regulations than you might think. While many of the most successful players in the business possess a sophisticated understanding of adult entertainment law, misconceptions about criminal, corporate, intellectual property, and other laws are generally the rule and not the exception. This is doubly unfortunate because lack of accurate legal information not only results in problems like lawsuits and criminal prosecutions, it also results in lost opportunities to create wealth through intellectual property exploitation, implementation of tax saving strategies, and other means.
So to help combat the problem of harmful legal myths and urban legends of the law, I have prepared a list of the10 biggest legal misconceptions about adult entertainment laws that you need to know to keep you out of jail and in the money.
1. Because the U.S. Supreme Court has enjoined the enforcement of the Child Online Protection Act (“COPA”), there’s no risk of prosecution for distributing explicit hardcore material in the free area of a website.
COPA is Congress’ second attempt at passing a law designed to prohibit the online distribution of adult materials to minors. It is true that the Supreme Court has ruled that COPA is probably unconstitutional and is therefore likely to suffer the same fate as the Communication Decency Act’s prohibition against online distribution of “indecent” material to minors. However, it is important to know that these laws are not the only arrows in the government’s anti-porn quiver. A website that provides hardcore images or video to persons that might reasonably be minors could still be prosecuted for the crime of distribution of obscene materials to minors.
In fact, the recent ruling in United States v. Extreme Associates dismissing that case may motivate the government to focus on websites with potentially obscene material available to the general public. The reason the government might adopt such a strategy point can be found in the court’s reasoning underlying the dismissal of the government’s obscenity case against Extreme Associates Inc., Robert Zicari, and Janet Romano. Specifically, the court’s ruling was predicated on the fact that the defendants did not distribute any of the allegedly obscene explicit video clips from the free portion of their website where children might have accessed them. In the Extreme Associates case, the materials were only viewable after payment of a membership with a credit card, a recognized means of complying with legal requirements to prevent minor access. The court reasoned that the screening out of minors was partially why the government could not claim that it had any legitimate interest in enforcing the obscenity laws against Extreme Associates that would justify the violation of a person’s privacy rights to view the material in their own home. Therefore, had Extreme’s materials been in front of this “credit card firewall” it is likely that the court would not have dismissed the case.
You may also want to refrain from displaying explicit materials in the publicly accessible part of your site to be less of a prosecutorial target. There is a steadily increasing outcry across the entire political and cultural spectrum for government to “do something” about the pervasive exposure of children to graphic hardcore images. Many attorneys in the business, myself included, believe that if a government crackdown occurs, it is likely to be focused, at least in part, on companies that make such images freely available to an audience that includes minors.
2. Federal record keeping and labeling laws do not apply to the Internet.
Distribution of photographic or videographic works actually depicting explicit sexual conduct is subject to the federal record keeping and labeling laws set forth at 18 U.S.C. §2257 et seq. and 28 C.F.R. 75 et seq. These regulations are often referred to as the “2257 laws” or the “2257 regulations.” These laws comprise a complex set of regulations pertaining to depictions of what the law defines as “actual sexually explicit conduct.” Violations of the regulations constitute federal felonies that can result in up to five years incarceration for the most minor lack of compliance.
Recent changes to the 2257 regulations proposed by the Department of Justice have received a lot of press recently (See, for example, my article in the September 2004 issue). A large part of the proposed changes are directed to Internet distribution of the content subject to the law. The adult entertainment press has accurately reported that the proposed changes have not been finalized and are not currently in effect. Unfortunately and perhaps because of such reporting, however, I have found that many erroneously believe that the current 2257 regulations do not apply to adult online businesses. The regulations apply to:
“(a) Whoever produces any book, magazine, periodical, film, videotape, or other matter which——
(1) contains one or more visual depictions made after November 1, 1990 of actual sexually explicit conduct . . . .” 18 U.S.C. §2257(a)(1).
Because content distributed via the Web is likely to be deemed to be “other matter” it is also likely that the regulations apply to depictions of actual sexually explicit depictions on a website.
It is true that the law arguably may not impose the statute’s record-keeping requirements on websites that aggregate content originally produced by other parties. Even setting aside that ambiguity, however, the law’s other major requirements pertaining to the labeling of subject content would appear to apply as much to websites as to any other media. The labeling laws require that a label be associated with the subject content, which provides information regarding, among other things, the work’s date of production, the location of the records, and the identity of the record keeper. This requirement would appear to apply to all depictions of actual sexually explicit conduct in cyberspace. For example, proper labeling is required not only regarding the website itself, but also regarding any other content, such as TGP, video-on-demand, email, banner and pop-up content that depicts actual sexually explicit conduct.
Understanding and complying with the 2257 regulations is a very serious and very complex matter. Detailed discussion of 2257 is well beyond the scope of this article. Consequently, I strongly urge you to seek the advice of competent counsel to assist you regarding 2257 matters if you haven’t already done so. Additionally, I urge you to regularly consult reliable industry sources, such as AVN and AVN Online for news and information regarding 2257 regulations.
3. You can legally hire people to perform sex acts in photographs and motion pictures throughout the United States.
My clients and other persons seeking to enter the adult entertainment business are usually very surprised when I tell them that California is the only state in which persons can be legally hired to perform sexual acts for the purpose of creating photographic or motion picture works. They’re shocked to learn that the same explicit materials sold legally in “liberal” locations like New York, Chicago, and Las Vegas cannot be produced in those cities without the risk of prosecution for violation of state pandering or prostitution laws.
Under the laws of every state, the payment of money or other consideration for such sexual performances constitutes prostitution. Depending on the circumstances, the procurement of persons to perform in such works will constitute the crimes of pimping or pandering. So how are thousands of porn shoots legally conducted in California each year? The answer can be found in one case, People v. Freeman, 250 Cal.Rptr. 589 (Cal. 1988).
In the Freeman case, the California Supreme Court held that “in order to constitute prostitution, the money or other consideration must be paid for the purpose of sexual arousal or gratification.” 250 Cal.Rptr., at 600. The court characterized the payments made to the performers as “acting fees” and held that “there is no evidence that [ Freeman] paid the acting fees for the purposes of sexual arousal or gratification, his own or the actors.'” Id. Thus, the court held that Freeman “did not engage in either the requisite conduct nor did he have the requisite [intent] or purpose to establish procurement for purposes of prostitution.” Ibid. In fact, the court said that “even if [Freeman’s] conduct could somehow be found to come within the definition of ‘prostitution’ literally, the application of the pandering statute to the hiring of actors to perform in the production of a non-obscene motion picture would impinge unconstitutionally upon First Amendment values.” Ibid.
The California Supreme Court’s ruling paved the way for today’s multibillion-dollar international adult video industry centered in the San Fernando Valley. Unfortunately, so far no other state’s high court has adopted the California Supreme Court’s sound reasoning and the Freeman case is only legally binding law in California.
4. Offshore entities can shield a person and their business from criminal prosecution. Whoever started this myth should be shot. Many adult entertainment businesses generate a substantial amount of revenue from foreign sales. This is particularly true regarding online adult entertainment businesses. Consequently, conducting all or part of an adult entertainment business through or in association with one or more offshore entities often makes good business sense. For example, significant tax savings can often be legally realized from intelligent international corporate structuring for adult businesses with substantial offshore revenues. Additionally, offshore entity structures can be created legally in a way that increases the costs of adverse civil litigation substantially enough to deter many nuisance lawsuits.
However, while there are many potential benefits associated with offshore entity structuring, insulation from criminal prosecution isn’t one of them. If the entity is engaged in activities in the United States that are illegal, anyone culpably involved is subject to prosecution in the U.S. This means that if the company is chartered in Barbados but the boss is pulling the strings from Malibu (any similarity to a real persons is merely coincidental), the boss will be subject to U.S. criminal laws, U.S. jurisdiction, and U.S. prosecution. More to the point, as I have heard my colleague and good friend Clyde DeWitt say so often on legal panels I have shared with him, “the government is going to follow the money.” If the money trail leads to assets or persons in the U.S., no amount of clever foreign entity structuring will be able to withstand the mighty hand of the DOJ, particularly after 9-11.
In fact, complex and convoluted corporate schemes can even backfire and increase a party’s chance of a criminal conviction by making an accused defendant appear to a jury as someone with something to hide. Prosecutors will often try to exploit this bias by trying to convince a jury that the defendant’s complex foreign entity structure is, in and of itself, evidence of the defendant’s attempt to hide evidence of illegal activities.
5. Explicit hardcore adult content can be directly distributed legally to mobile handsets without a credit card “firewall” or similar mechanism to exclude minors from accessing the material.
Many of the laws that pertain to the distribution of adult content via the Web also apply to distribution of adult content via mobile phones. For example, hardcore materials distributed via cell phones are subject to the obscenity laws and must also be compliant with the federal record keeping and labeling regulations. Additionally, distribution of sexual materials via telephones are subject to the federal “dial-a-porn” law, 47 U.S.C. § 223(b)(2)(A), which prohibits the use of a telephone for “any indecent communication for commercial purposes which is available to any person under 18 years of age or to any other person without that person’s consent, regardless of whether the maker of such communication placed the call.” The existence of this law is one of the main reasons why domestic mobile telephone service providers are unwilling to allow their mobile network servers to be used to distribute explicit hardcore sexual materials. The federal dial-a-porn law does contain a “safe harbor” defense if the provider of the content has notified the relevant common carrier in writing that the provider is providing sexual content and the caller is required to provide payment by a credit card before transmission of the content.
6. Employees waive their right to sue adult entertainment companies for sexual harassment or for the employer’s creation of a hostile workplace when they come to work for an adult entertainment company—because of the nature of the business, of course.
Wrong. It is, of course, obviously true that adult entertainment companies are in the business of creating, promoting, marketing and selling sexual goods and services. Consequently, many adult-entertainment company owners and executives think that the virtual necessity of almost constantly conversing about sex-related matters throughout the workday throughout the workplace obviously must preclude employees from bringing lawsuits claiming that the work environment is hostile because of sex-related discussions. It therefore comes as quite a shock when such owners are hit with such employment lawsuits.
In fact, we are noting a distinct increase in sexual harassment, hostile workplace, and other labor lawsuits of all kinds against adult entertainment companies. The best way to prevent or minimize such litigation is to be sure you have proper employee manuals, proper safety manuals, and proper procedures and protocols in place for reporting and responding to allegations of sexual harassment and hostile workplace claims. If you do not have these materials and procedures in place, we highly recommend that you engage the services of either a competent labor attorney with experience representing adult entertainment companies.
7. Registering a domain name automatically provides the registrant with trademark rights in the name, so once you register the domain name, it can be used for any purpose on the Web.
The domain name system of website location used by the Internet requires that there be databases connected to the Internet in which information is maintained regarding which domain names map to which Internet Protocol (“IP”) addresses. A domain name registry generates and maintains a database of registered names and IP associations, and makes that information available to the routing systems of the Internet. Therefore, when a party registers a domain name, they are essentially entering into a contract with a registry to perform these functions on their behalf.
Unlike the simple contract rights underlying the providing of domain name services, trademark rights are powerful intellectual property rights. Trademark ownership provides to the owner a limited but government-enforced monopoly to use specific words, phrases, logos, or symbols to identify the source of specified goods or services. When registering a domain name a party does not automatically secure trademark rights to that name. In fact, registering a domain name that includes, or is confusingly similar to a trademark owned by someone else is a very risky business. For example, if such a registration was “in bad faith,” such as for the purpose of generating type-in traffic or obtaining other benefits derived from the good will associated with the trademark, the act of such registration alone could result in liability to the trademark owner of up to $100,000 per domain name under the federal anti-cybersquatting provisions of the Lanham Act.
Additionally, using a domain name in a manner that results in actual or likely consumer confusion regarding another party’s trademark might also result in trademark infringement liability that could subject the infringer to treble damages and the payment of attorney’s fees. Finally, if the trademark qualifies as a “famous mark” under the Lanham Act, use of the trademark or service mark in an adult entertainment application might also give rise to additional claims of “dilution” or “tarnishment” of the mark.
Before you register a domain name, it is always a good idea to perform a trademark search to determine whether the domain name registration and contemplated uses might constitute cybersquatting, trademark infringement and/or the dilution or tarnishment of another party’s trademark or service mark.
8. Just about everything regarding patents
In addition to my adult entertainment practice, I am also a patent attorney licensed to practice before the United States Patent and Trademark Office. As such, I am particularly sensitized to numerous misconceptions regarding the acquisition and enforcement of patents held by many adult entertainment entrepreneurs. For the sake of brevity, the following is an abridged list of what I have observed are the most common misconceptions about patents and patent law held by adult entertainment entrepreneurs.
Patent infringement can be circumvented by making small changes to the patented invention. When an inventor is awarded a patent, the patent monopoly not only extends to the description of the invention set forth in the claims section of the patent, it also covers the reasonable equivalents to each element in the claims. In patent law, this is known as the “Doctrine of Equivalents.” Therefore minor changes to the patented invention, unless such minor changes are inventive and not obvious in their own right, will not necessarily be outside the scope of the patent owner’s patent rights if they can be brought within the coverage of the patent claims via the Doctrine of Equivalents.
A working model must be built to obtain a patent. The patent law does not require an inventor to build a working model to apply for patent protection. The applicant inventor is deemed to have satisfied the patent application requirement to “reduce the invention to practice” by a “constructive reduction to practice” effectuated by merely providing a description in the application that would enable a person of ordinary skill in the art to make and use the invention.
If a party is caught infringing, they can always settle the case by negotiating a license. Under most circumstances the owner of the patent rights controls the patent monopoly. Consequently, if the owner decides not to license the patent, he cannot, under normal circumstances, be compelled to do so.
9. There is no need to seek specialized legal assistance from attorneys practicing adult entertainment law; a “regular” attorney is usually sufficient.
No other legal business in the United States is subject to as many criminal regulations or societal biases as the adult entertainment business. Most otherwise skilled corporate or intellectual property attorneys are simply not aware of the special legal, political, and social issues that confront adult entertainment companies or how these issues impact the formation and implementation of legal strategies and tactics.
If you are in need of retaining qualified adult entertainment counsel, virtually all of the most experienced practitioners are members of the First Amendment Lawyer’s Association (“FALA”). (See this issue’s resource guide on page 138 for a list of qualified attorneys.)
10. You can register the copyright in a work by mailing it to yourself.
An author of a copyrightable work such as a book, a photograph, or a video automatically obtains protection under U.S. copyright law at the moment the work is “fixed in a tangible medium of expression.” This generally means at the moment it is created and recorded in some medium such as film or videotape. Nothing else is required to own the initial copyright in a work.
However, in order to enforce a copyright owner’s copyrights in the United States, the copyright in the work must be registered with the United States Copyright Office. This only costs $30 and should be done as early as possible after the creation of the work because registration provides the copyright owner special benefits in litigation. For example, a copyright owner that has registered the copyright in work prior to the infringement of the copyright by a third party will be entitled to receive damages of up to $150,000 per willful infringement of the work without the necessity of showing either the amount of the infringer’s wrongful gains or what the copyright owner’s damages were. In the absence of such prior registration, such a showing, which is often quite costly, would be required.
Additionally, copyright registration also entitles the copyright owner to request and obtain attorney’s fees. These special benefits are not generally available if infringement was before registration (unless the registration was obtained within the first three months of first publication).
This top ten list is unfortunately not exhaustive. I could easily generate a book’s worth of material on the topic of misconceptions about the law and their unfortunate consequences. But I hope the list above will motivate you to think twice before acting on legal advice you received from a chat board, if you are not already wary of such counseling. It should also serve as a reminder that you should always make further inquiries with a competent adult entertainment attorney before assuming that any free legal advice you receive is accurate. After all, it is virtually always true that when it comes to free legal advice (aside from this article, of course), you get what you pay for.
Finally, I want to lay one more law-related myth to rest: While it is true that adult entertainment attorneys generally have great careers and are great people, we do not get laid more than the content producers.
Gregory A. Piccionelli, Esq. is a senior member of Piccionelli & Sarno, an adult entertainment law firm that also specializes in intellectual property, Internet, and traditional media matters. He can be reached at (310) 553-3375.