As we roll into the second decade of the new century, XBIZ offers its annual legal outlook to provide a roadmap for the journey ahead, along with a map charting the obstacles along the way.
To create the most comprehensive view of the adult entertainment’s complicated and diverse legal landscape for 2020, XBIZ sought out the expertise of top attorneys for their advice and insights.
The days of posting a privacy policy form on your website and freely sharing or selling your users’ personal information are over.
Among the highlights is a laundry list of acronyms and action points for industry operators to be aware of and address, including the impact of the California Consumer Privacy Act (CCPA) and California’s Assembly Bill 5 (AB5); the Copyright Alternative in Small-Claims Enforcement Act (CASE) and the Fight Online Sex Trafficking Act (FOSTA). In addition, we’ll examine the so-called “War on Porn” and the battle over mandatory age and identity verification in the U.K. and around the world; intellectual property considerations; ramifications of the Federal Trade Commission versus Match.com case and more that our readers need to know.
Kicking things off is a look at two of the problems presented by the industry’s favorite state:
California Consumer Privacy Act (CCPA)
Intended to enhance online privacy rights and consumer protections for residents of California, the CCPA could have a wide-reaching impact on website operators.
Noted attorney Lawrence Walters of Walters Law Group (FirstAmendment.com) told XBIZ that any website operators doing significant business in California must evaluate compliance with CCPA.
“Several states are taking a fresh look at data privacy, including Nevada which also has a new privacy law in effect this year, and we can expect others to consider similar legislation,” said Walters. “The days of posting a privacy policy form on your website and freely sharing or selling your users’ personal information are over. Website operators should carefully review all of their procedures related to data privacy, security, and sharing to get prepared for the new era of privacy law.”
It is a serious issue, with Free Speech Coalition Executive Director Michelle L. LeBlanc calling CCPA “the sleeper legislation of 2020.”
“Most of the focus has been on AB5, but the CCPA has a potentially tremendous impact on business with consumers and California — even if they collect as little as an IP address,” LeBlanc said. “Larger companies that buy and sell traffic need to be extra careful. Think of the GDPR, but local.”
Maxine Lynn of Unzipped Media noted that as of January 1, 2020, the CCPA is in force and similar to the GDPR in Europe, provides a long list of requirements for disclosures within a privacy policy.
“The CCPA likely applies to your company if you’re ‘doing business’ in the state of California, and meet one of the following,” Lynn explained. “Earns annual gross revenues exceeding $25 million; annually buys, receives, sells or shares (for commercial purposes) the personal information of 50,000 or more consumers, households or devices; or derives 50 percent or more of its annual revenues from selling consumers’ personal information.”
“Don’t ignore this law if you’re located outside of California because while the CCPA does not expressly define the meets and bounds of ‘doing business,’ a company may be ‘doing business’ in California if, for example, it conducts online transactions with California residents, or has employees that work in California, even if there is no physical office there,” she added. “Violation of the CCPA can carry heavy penalties, and even expose you to a lawsuit by one or more private people, so get your privacy policy and procedures in compliance. Better to do it right at the outset than deal with the consequences later.”
Corey D. Silverstein of Silverstein Legal told XBIZ that most online businesses still have no idea what the CCPA is or what it requires.
“Nonetheless,” Silverstein said, “I suspect that in 2020, the state of California will begin pursuing larger/deep-pocket violators of the CCPA and as news of these pursuits makes headlines, more online business operators will take the CCPA more seriously and take the necessary steps to become compliant.”
Attorney Nick Zargarpour of Zargarpour Law Firm APC wanted to emphasize that the words “or” and “devices” make it foreseeable that a small company would have the personal information of 50,000 “devices,” since a person may log in from multiple devices.
“The CCPA requirements are different from the GDPR, so what you’ve done for the GDPR may help but is not complete,” Zargarpour explained and said that the best advice he has to offer is for all companies to make sure their consumer data are protected with the latest and greatest security protocols and software, for both your own company and your vendors. “Also, make sure you have clear notes (what is being done, when, etc.) about the work you’ve done to protect the consumer’s information.”
California Assembly Bill 5 (AB5)
Causing a wide range of concern and confusion for businesses and workers far beyond its borders, AB5 is among the year’s most problematic issues, with content creators, consultants, contract workers and more, facing a potentially life-changing situation.
“We still don’t know if or how this will be applied to adult businesses, but the penalties are incredibly steep,” the FSC’s LeBlanc said. “We’re recommending that businesses approach compliance based on their appetite for risk, and will be working with lobbyists and legislators to make sure this isn’t unfairly applied to adult businesses.”
Silverstein is frustrated that many people don’t realize AB5 is the codification of the California Supreme Court’s decision in the matter of Dynamex Operations West, Inc. v. Superior Court of Los Angeles.
“That landmark decision was made April 30, 2018 (and has been the law ever since) when the court ruled a standard that all workers are presumed employees versus contractors and place the burden on anybody classifying a worker as an independent contractor to establish that classification under the so-called ‘ABC test,’” Silverstein said. “2020 is going to be a very busy year for AB5 and I suspect that we are going to see everything from lawsuits challenging AB5, more lawsuits by workers against employers for misclassification and a substantial increase in worker complaints and claims for benefits to the California Labor Commissioner’s Office.”
“Meanwhile,” Silverstein added, “content producers in California will intelligently seek greener pastures and stop utilizing California models and/or relocate operators to other states.”
Copyright Alternative in Small-Claims Enforcement Act (CASE)
Intended to assist copyright owners in filing infringement claims, CASE dovetails with the long-established Digital Millennium Copyright Act (DMCA) and enables claims by rights holders as well as counterclaims by defendants, such as “fair use.”
Walters told XBIZ that while federal court litigation is an expensive option for most small copyright holders to pursue infringement, the CASE Act is the wrong approach.
“Its opt-out procedures could result in large default judgments being issued by a government agency with none of the due process protection offered in court and no opportunity to appeal,” Walters explained. “If the statute is passed, it could lead to abuse by copyright trolls without due consideration for established fair use principles.”
LeBlanc said now that the CASE Act has passed the House, the FSC is watching it closely.
“While we need to be vigilant in protecting our industry’s copyrights,” LeBlanc said, “we’re concerned that the legislation is written in a way that could lead to legal trolling and extortion, especially when it comes to adult consumers and companies.”
This close watch is justified given the current political climate.
“This is a very tricky one because the United States is headed into election season and while the measure passed the House of Representatives, it is virtually impossible to predict which U.S. Senators may utilize CASE as a part of their election/re-election campaigns,” Silverstein said. “It is noteworthy the Senate is stuck in impeachment land for the foreseeable future.”
“The Electronic Frontier Foundation (EFF), Public Knowledge and the Authors Alliance are aggressively opposing the bill,” Silverstein added. “Regardless, putting politics aside, I believe CASE has a good chance of becoming law in 2020 which may lead to a resurgence in copyright claims against website operators. On the flip-side CASE may sit and collect dust through 2020.”
Fight Online Sex Trafficking Act (FOSTA)
Causing untold economic and physical harms to sex workers and the promotion of performers, the chilling effect of FOSTA legislation is a backward leap for sexual freedom that could put people behind bars.
As Walters predicted, FOSTA has led to massive online censorship and the development of abusive content moderation procedures by platforms that ban more speech than necessary.
“In addition, the law has created a more dangerous environment for sex workers who have lost access to their harm reduction tools,” Walters revealed. “These new risks have hit the most vulnerable, disadvantaged communities the hardest.”
“We are hopeful that Woodhull’s constitutional challenge to FOSTA will ultimately be successful,” Walters added, “however, erotic speech on the internet may never be the same.”
Silverstein expects a ruling from the U.S. Court of Appeals for the District of Columbia Circuit, relative to the Woodhull Freedom Foundation’s appeal of its constitutional challenge to FOSTA.
“Based on my reading of the relevant briefs and review of the oral argument recording, I’m quite optimistic that the Court of Appeals will reverse and remand Judge Richard J. Leon’s decision to dismiss the case for lack of standing,” Silverstein explained. “Assuming that my assessment is correct, the constitutional challenge will receive a second chance and round two of this fight will commence.”
“In the meantime, so long as FOSTA remains the law, sex workers in the adult industry will continue to suffer as more platforms and websites will close up shop to avoid the potential penalties associated with FOSTA,” Silverstein added. “Additionally, social media providers will continue their aggressive crackdown on sex workers utilizing social media and fault FOSTA as one of the reasons for said crackdown.”
Fighting “The War on Porn”
America is no stranger to fighting misguided “wars” for one reason or another, including its costly and miserably failed prohibition against alcohol and the War on Drugs. Because these two efforts were so “successful” — why not give it another go? Enter the renewed “War on Porn.”
“The recent call for increased obscenity prosecutions has led to a wider demand for regulation of adult content in the U.S.,” Walters said. “While the First Amendment may protect the adult industry from some of the worst forms of censorship seen in other countries, the new effort to tie pornography to sex trafficking and domestic violence is dangerous and disingenuous.”
Walters said that the industry should stand against attacks by relying on the facts. For example, the increased popularity of online adult entertainment did not lead to an increased level of crime; in fact, violent crime is on the decrease.
“Nonetheless, we should expect some efforts to use sex trafficking laws against adult content producers and website operators as this new war unfolds,” Walters said and noted that FOSTA allows online platforms to be sued or prosecuted for sex trafficking based on users’ activity. “The first federal sex trafficking charges against an adult content producer have already been filed. Producers and distributors should educate themselves on how they might be vulnerable to claims based on abuse of sex trafficking statutes.”
LeBlanc noticed that over the past several years, state legislatures have ramped up their cases against porn and conservative groups have marshaled their resources for war.
“What they’ve lacked is an attorney general willing to pull the trigger. William Barr has long been an opponent of our industry, and President Trump has signed a pledge to enforce obscenity statutes. The only thing that has been missing so far is an opportune time,” LeBlanc said and noted that anti-porn enforcement has historically been used to energize evangelicals and a conservative base.
LeBlanc revealed that the FSC has spoken out about these issues in the press, with arguments against censorship that should resonate no matter where someone is in the political spectrum.
“After all, this is as much about government overreach as it is sexual repression,” LeBlanc explained. “This year, we’re building a fact-based, online resource center to help journalists, legislators and everyday people separate fact from fiction — so that when the fight comes, we’re prepared.”
Noted attorney Paul Cambria of Lipsitz Green Scime Cambria LLP, told XBIZ that unlike in the heyday of federal obscenity prosecutions, now adults are very familiar with adult material and the fact that it is readily available, and in addition, adults are no longer shy about the fact that it is widely viewed.
“This [growing public acceptance] leads to a much more liberal community standard and a very difficult time on the part of prosecutors to achieve a conviction,” Cambria explained. “That being said adult material that depicts activity that is not part of the mainstream (an expanding category for sure) will receive the most scrutiny and pose the most exposure.”
Citing a storied case from current headlines, Silverstein recommended that everyone carefully follow the ongoing criminal prosecution of the operators of GirlsDoPorn.
“The indictments against Michael Pratt, Matthew Wolfe, Andre Garcia and Valorie Moses under 18 U.S. Code 1591 (sex trafficking of children or by force, fraud or coercion) are a first of their kind against porn producers,” Silverstein said. “The allegations against the operators are grotesque and include unacceptable behavior by content producers.”
“Nonetheless, this case should have every single content producer going back to the drawing board with their attorneys to revisit their content production process, including model recruitment and legal documenting,” Silverstein added. “Also, The Social Media war against porn and sex workers will continue to gain momentum in 2020 as I expect that more platforms will increase censorship and banning of accounts.”
The FSC’s Jeffrey Douglas told XBIZ that “The War on Porn is Going Nowhere,” despite recent publicity arising from the incitement of professional censorship groups, and that the likelihood of measurable Federal resources being allocated to obscenity prosecutions is extremely low, so there will be no Federal war on porn, for several reasons.
“First, the actual soldiers required for such a war are all ‘conscientious objectors.’ The F.B.I. agents involved in the handful of prosecutions of the last decade were decidedly unenthusiastic and often humiliated during trials. Informal conversations with many of the involved ‘special agents’ reveal that these cases are rightfully viewed as embarrassing and career burdens, if not career-enders,” Douglas said. “Spending 40 hours per week watching porn does not carry much standing among peers handling terrorism, kidnapping or multimillion-dollar white-collar investigations.”
Likewise, Douglas noted, Assistant U.S. Attorneys almost universally hate these cases.
“The first anti-pornography unit, the Child Exploitation and Obscenity Section (CEOS), has handled almost exclusively child pornography cases for the last 20 years. The lawyers in that office are not well regarded by their peers (for good reason),” Douglas said. “Child pornography cases are generally easy, will rarely go to trial and CEOS lawyers are viewed as ideological extremists. Yet even those lawyers have expressed reluctance to pursue adult obscenity cases.”
Douglas finds it most revealing that at the end of the Bush administration, an Anti-Obscenity Task Force was foisted on the Department of Justice by Senator Orrin Hatch and a few others. The head of that Task Force could not find a single Assistant U.S. Attorney that was willing to accept a permanent assignment.
“The Task Force had to settle for temporary reassignments and the quality of the lawyering was an extreme embarrassment. In the Phoenix prosecution of JM Productions/Five Star Video, the Government lost its lead defendant when the Task Force lawyer could not figure out how to get a UPS shipping document admitted into evidence,” Douglas revealed. “Everyone else was dismissed or acquitted, except a bankrupt corporation and the local U.S. Attorney Office was openly contemptuous of the Task Force. In the Washington, D.C., prosecution of Evil Angel, the prosecution self-immolated, with both F.B.I. agents and Task Force attorneys disgracing themselves, and the entire case dismissed.”
Douglas noted that there are other legal obstacles to Federal prosecutions, inherent in the constitutional protections of free expression, and the Supreme Court definition of obscenity remains essentially unchanged since 1973.
“The transformation of marketing and delivery of sexually explicit material through the web is inconsistent with the 1973 definition of obscenity, so the federal government has carefully avoided prosecuting any websites without a purchase of a tangible product, like a DVD,” Douglas noted. “This reflects a fear of any more appellate court rulings, like that in the Ninth Circuit case of U.S. v. Kilbride, where it was ruled the entire website had to be evaluated for obscenity, rather than just the parts offensive to the Government.”
“When you think about the amount of content on a typical adult website,” Douglas added, “the possibility that the entirety would be deemed obscene, as well as the time required for the jury to review an entire website, makes prosecutions extraordinarily challenging.”
“Although Postal Inspectors, with the lowest status of all Federal law enforcement, have often been passionate about obscenity investigations, without enthusiastic lawyers willing to commit a substantial amount of time and sacrifice career advancement, it is unlikely that prosecutions will occur,” Douglas concluded. “The current White House tenant signed a promise to enforce obscenity laws aggressively against internet companies, but like many passionate assurances, promises are cheap. A major Federal commitment to prosecuting adult websites is likely right around the time Mexico pays for the $20 million per mile border wall.”
Age Verification Around the World
Years of delays and misinformation have led to a level of complacency among many adult site operators when it comes to accepting (and implementing) age verification requirements before allowing access to their sites. It is an understandable position given the technical and practical limitations of AV technology, but it is an attitude that avoids what many see as inevitable — mandatory AV.
LeBlanc said that while the U.K.’s Digital Economy Act seems dead, numerous other countries are considering similar legislation.
“Like the DEA, we have to make sure that any regulation takes into consideration the rights of adults and the freedom of the internet,” LeBlanc said. “We support efforts to limit adult content to adults, but we know all too well the privacy risks and collateral damage poorly drafted regulations can cause.”
Lynn told XBIZ that AV efforts are not going away.
“Members of the age verification industry are actually taking legal action currently in hopes of a court decision that will require the government to implement the relevant provisions of the Digital Economy Act (DEA),” Lynn said. “In addition, Australia and Poland have announced that they are considering requiring AV.”
Lynn noted that October 17, 2019, during a debate in the U.K.’s House of Commons, it was discussed that a more “robust and effective” plan would be developed and put into place than would have been provided under the DEA.
“They discussed the need for a plan that included facets dealing with porn on social media websites. The possibility of using facial recognition technology was also brought up. This could be an even more significant impingement on free speech and expression than we expected previously with the DEA,” Lynn explained. “Exactly what AV technology will be necessary, and how it will affect privacy, will be critical aspects to understanding what effect this will have on the life of the adult industry. Keep a close watch.”
Silverstein agreed that for the time being, the U.K.’s Digital Economy Act of 2017 is dead.
“However, within the past few weeks, a group of age verification technology providers has launched a legal challenge seeking financial damages for their investments into age verification products and seeking the U.K. government to reverse its decision to kill age verification,” Silverstein revealed. “There is virtually no chance that this case will be resolved in 2020 — it’s going to take a lot of time. Otherwise, I don’t foresee that 2020 will be a very noise-producing year in age verification.”
Intellectual Property Considerations
The adult industry has always been on the leading edge of creativity and innovation, but it hasn’t always been the best at protecting the fruits of its labors. This is where securing your intellectual property — such as copyrights, trademarks and more — comes into play.
Walters said that IP is the adult industry’s stock in trade.
“Whether it is content that is subject to copyright protection or the brand name of a company, IP is the most valuable business asset,” Walters explained. “Adult businesses should protect themselves from infringement through preparation. The time to think about registering and protecting IP assets is before a dispute arises.”
Focusing on the basics, Lynn advised owners to remember to file on their trademarks.
“Thanks to the landmark U.S. Supreme Court case of Iancu v. Brunetti last year, trademarks that are ‘sexually-explicit’ are now protectable at the U.S. Patent & Trademark Office. This is important because registered trademarks are significantly more enforceable than unregistered ones,” Lynn explained. “You also don’t want someone to swoop in and grab your mark before you do. Accordingly, keep this top of mind.”
Lynn pointed to a 2019 decision by the U.S. Supreme Court in the case of Fourth Estate v. Wall-Street.com, where the court determined that the copyright law requires an issued registration as a prerequisite to bringing an infringement suit in federal court — a pending application will not suffice.
“The decision stated, however that once the registration issues, the copyright owner can recover damages for infringement that occurred both after and before the registration. This means that one must wait until a registration issues to sue, but will then be able to recoup damage from during the waiting period (as well as after),” Lynn explained. “The effect of the decision is that it is advisable for companies, performers, or whoever else is entitled to copyright in the content, to file with the Copyright Office as soon as possible.”
Lynn revealed that it currently takes an average of seven months or more for an application to issue into a registration.
“That’s a painfully long time to have to wait to bring suit in the case of piracy,” Lynn added. “Though technically, you’ll be able to collect damage from the time of application, the success of actually collecting such damages, in many cases where the defendant is insolvent or offshore, might be tenuous. So, file early…”
Silverstein noted that in December 2016, the U.S. Copyright Office changed its rules related to the registration of a DMCA designated agent.
“Among other things, all new registrations automatically expire after three years, so December 1, 2019, marked the first day in a rolling period that online renewal may be required,” Silverstein said. “Unfortunately, far too many website operators are still not properly registering their DMCA designated agent with the U.S. Copyright office and many will also neglect to renew, leaving them potentially unable to utilize the ‘Safe Harbor’ defense, so all service providers should be paying close attention.”
The Ramifications of FTC Versus Match.com
Veteran operators will remember when the U.S. Federal Trade Commission was taking a cold, hard look at the industry’s use of the word “free” — but the FTC’s concerns go far beyond that.
For several years now, Silverstein has warned operators that dating sites remain an easy target and at the top of the hit list for the FTC as a result of many utilizing “fake” profiles and other so-called “deceptive and unfair practices.”
“Most FTC actions result in some type of agreed-upon resolution and I don’t see this case being any different. However, I doubt that we will see the resolution for this case happening in 2020 as these cases take a long time,” Silverstein explained. “In the meantime, all website operators need to have legal counsel review their practices relative to ‘fake’ profiles because this practice is no longer limited to dating sites and there has been a substantial increase in the use of ‘fake’ profiles for social media operators and influencers.”
Politics in Practice: A U.S. Election Year
It is impossible to cover 2020 from a legal perspective without mentioning the upcoming U.S. Presidential election and the focus on freedoms that it will bring to the forefront — and along with those freedoms, a renewed focus on the restrictions that polite society should insist upon.
Walters noted that as politicians increasingly put the adult industry into the spotlight, performers, producers, and distributors should become politically active.
“Politicians make decisions that directly affect the profitability and sustainability of this industry,” Walters said and explained that the level of involvement will be different for everybody’s business. “Whether that means joining a trade group, donating to candidates, supporting a cause or running for office, everyone has the ability to impact their own future. The many voices of the adult industry should be heard before politicians take action.”
A Few Last Notes...
While this report contains the chief highlights of 2020’s legal landscape, there are numerous nuances that go beyond its scope — including some of these considerations:
The FSC’s LeBlanc noted that we’re used to thinking of censorship and other legal issues in terms of government and court battles, but the fight of the adult industry is increasingly in the private sector, like social media or banking, where we have far fewer rights.
“As the trade organization of the adult industry, FSC will fight to make sure our voice is heard not only in Sacramento and D.C. but in the corporate suites of Twitter and Facebook and PayPal,” LeBlanc explained. “We cannot allow our businesses to be systematically shut out and prevented from the same accommodations given to other legal businesses.”
For her part, Unzipped Media’s Maxine Lynn wants to remind creatives to protect their tech.
“Patents protect technological innovations. As the pleasure products industry gets more crowded, patents are going to become very important,” Lynn said. “Once a device is published or put on sale, patenting can become more complicated, since, in many jurisdictions around the world, the confidentiality of the invention is a requirement prior to filing a patent application.”
“Check in with a patent lawyer before you start advertising or selling novel sextech devices,” Lynn concluded. “It will pay off in the long run.”
Finally, Corey Silverstein wants to remind industry stakeholders to give back to the community, such as he did when he recently became a proud board member of Pineapple Support.
“The adult entertainment industry for far too long has neglected mental health as a priority,” Silverstein said. “Pineapple Support needs everyone’s support and I encourage you to become involved with and support Pineapple Support. Pineapple Support has already helped countless members of the adult entertainment industry with numerous types of mental health and other support issues.”
Clearly, adult’s legal landscape broadly encompasses many factors in 2020 that will impact the industry for many years to come. While no article or presentation can replace the specific legal advice that you need to operate profitably and safely, this report, along with XBIZ’s annual legal panels in Los Angeles, Miami and Berlin, should put you on the right path.
