FOR ADULT WEBMASTERS

Adult Internet is under fire. United States Attorney General John Ashcroft recently told Congress that he was "concerned about obscenity and . . . concerned about obscenity as it relates to our children," promising that Justice Department prosecutors would help state officials imprison "sex site operators." Celebrities and owners of famous trademarks with increasing frequency are seeking six- and seven-figure damage awards, injunctions and attorneys fees against adult Web sites. The Federal Trade Commission is increasingly targeting webmasters for unfair trade practices, such as mousetraps. At the same time, many adult Web sites fail to protect their own copyrights, giving pirates free reign to rip off their content with impunity.

Unfortunately, too many adult webmasters do not find out about legal time bombs in their sites until it is too late. Be sure that you have none ticking. Keep your ear to the ground so that you know what is out there, by reading AVN® Online and FirstAmendment.com. The following is a reminder of some of the hot-button legal issues with which adult webmasters should be in touch.

COPA AND AGE VERIFICATION

A credit-card barrier to adult materials on the Net was first required by the CDA (which gave birth to the AVS industry) and now by COPA. To date, both have been held unconstitutional; but the COPA case may come before the United States Supreme Court for a second time, and could be upheld. This would open the door to enforcement against webmasters without sufficient age verification methods on their sites. Can customers access adult material on your site without first supplying some form of password?

OBSCENITY LAWS

The federal government did not attempt to enforce federal obscenity laws in any meaningful way during the Clinton Administration. However, President Bush's Attorney General, John Ashcroft, has a track record as a religious conservative and is being strongly lobbied by the Religious Right to bring obscenity prosecutions, all amidst a flurry of complaints from the general public about unrestricted access by minors to adult Web sites. Informed sources predict that a first wave of federal obscenity prosecutions will target those adult Web sites that do not restrict access to adults.

Current United States Sentencing Guidelines require federal judges to impose on anyone convicted of a federal obscenity violation a sentence that includes over a year of actual imprisonment - no probation. The recently-passed PROTECT Act prevents judges from departing from the sentencing guidelines in obscenity cases.

Whether material is "obscene" is primarily a function of the standards of the local community into which it is introduced. Does your site comply with the standards of every community that can access it?

18 U.S.C. § 2257

Effective since July 3, 1995, the so-called "labeling and record-keeping act" generally requires that images of sexual activity published anywhere have associated with them a disclosure concerning the place where proof-of-age and other records can be made available to the Department of Justice or its designated agent. The regulations promulgated by the Department of Justice precisely specify how the records must be kept and indexed, as well as the exact terms of the required disclosure statement. If you fail to comply with even one of the many requirements, you are guilty of a 5 year federal felony, under the new PROTECT Act. Like obscenity prosecutions, prosecutions for violations of § 2257 - which have been rampant over the Net - were not brought during the Clinton Administration but are expected under Attorney General Ashcroft. The Justice Department must now report to Congress regarding the number of inspections conducted under Section 2257, and how many prosecutions resulted. That is expected to light a fire under federal investigators to initiate criminal charges against webmasters. Do you comply?

BUSINESS ISSUES

One partner is personally liable for all of the business debts incurred by any other partner. Unless you actually live in Nevada, a Nevada corporation may cost you more in taxes than a corporation in your own state. Is your fictitious name registered?

The question of form of business entity should first be addressed to your CPA, who probably can save you more in taxes than you pay for the fee. The time to attack tax issues is not April 14th. Tax savings can be achieved most effectively by planning ahead. For example, if you file a Subchapter-S election late, your income might be taxed twice before you can spend it.

If you fail to adhere to proper corporate formalities, you could lose the most important advantage of operating as a corporation - limited liability. The same if you buy groceries with corporate checks.

If you are paying an independent contractor to perform services for you, such as site design, are you sure that person is not an employee, subject to withholding, workers compensation insurance and other employee benefits? Aside from the drastic penalties for mis-classifying employees as independent contractors, there also is a risk that you might not own the copyrights to the site that was designed for you.

YOUR TRADEMARKS

The name of your business and its trademarks are what separates you in the public eye from all of the others. Such subtleties as using the symbol in connection with an unregistered trademark can do much to protect your name. A domain name may or may not be your trademark.

PROTECTING YOUR COPYRIGHTS

Failure to timely take advantage of the registration and deposit procedure at the United States Copyright Office can leave your site without any effective legal weaponry against pirates. And if you omit the notice (the little © symbol), matters could be even worse. Did you know your entire website can and should be copyrighted? Specific time periods apply to copyright registrations, and missing a copyright deadline can result in the forfeiture of significant legal protections afforded your content. Get some advice regarding the best way to protect your copyrights before it's too late.

VIOLATIONS OF RIGHTS
OF PEOPLE AND COMPANIES

Celebrity sites and hidden cams, of course, almost always stand to land you on the wrong end of a lawsuit. And if you say something negative about someone, be sure you can prove that it is true. If you do not properly acquire your photographs, you are violating both the publicity rights of the subjects and the copyright interests of the photographers. Is your content really "Web legal"? And if you find that it is not, can your content supplier stand behind you?

If your photos include in them famous trademarks, such as a model with an identifiable can of soda in her hand, or wearing a shirt displaying a logo from an athletic-shoe manufacturer, or sitting in an identifiable sports car, you stand to be accused of "diluting" or "tarnishing" another's trademark. Large corporations find it very disquieting to have their trademarks associated with adult entertainment.

UNFAIR BUSINESS PRACTICES

The Federal Trade Commission and many state agencies can sue you for engaging in unfair business practices, as can your competitors and customers. What is "unfair" can be anything that a judge thinks is unfair, even where you are in strict technical compliance with every law. Deceptive advertising is always an unfair business practice.

Advertising a "hidden cam" site almost always risks unfair-business-practice allegations. If the models consent being photographed, it can be deceptive advertising. If the cameras are really hidden, you stand to be accused of unfairly competing with those that properly pay for model releases.

TERMS AND CONDITIONS

Your terms and conditions constitute your contract with your customers, but may be worthless unless you properly require customers to affirmatively accept them. They serve a variety of needs, and should serve to protect you. However, if they protect you too much, they may constitute an actionable unfair business practice.

Some terms and conditions are most unwise, the paradigm being one requiring the customer to promise that he is not a law-enforcement officer. With that, the webmaster is advertising to the World that he knows he is doing something illegal. Stealing terms and conditions from another website can cause more problems than it solves, since those terms are copyrighted. The best practice is to hire an attorney to prepare a specific set of Terms & Conditions that best protect your unique website operations.

This pamphlet was written by Clyde DeWitt and Lawrence G. Walters, who have devoted their practice to representing the adult entertainment industry for over 3 decades, combined. They regularly lecture both to groups of those involved in various components of the adult media industry, as well as their attorneys.

© 2001 Weston, Garrou & DeWitt