LEGAL BRIEFS 2

At the recent Westcoast Webmasters Conference held in Vancouver, Canada, I had the privilege of joining attorneys J.D. Obenberger and Robert Apgood on a panel updating attendees on recent legal developments in the industry.LEGAL BRIEFS 2

At the recent Westcoast Webmasters Conference held in Vancouver, Canada, I had the privilege of joining attorneys J.D. Obenberger and Robert Apgood on a panel updating attendees on recent legal developments in the industry. The presentation was designed to provide Webmasters with reports of specific events involving the U.S. Department of Justice.

J.D. Obenberger – XXXLaw.net

J.D. Obenberger initiated the seminar by updating Webmasters on a number of disturbing efforts being mounted by Attorney General Ashcroft. Unlike general warnings of pending prosecutions presented at so many conferences, Webmasters were confronted with the fact that the Justice Department is finally getting around to assaulting the online adult industry. To this end, Mr. Obenberger informed the audience that he had learned of conferences being arranged by Ashcroft to organize an attack on online pornography. Mr. Obenberger highlighted the aggressive attitude of Ashcroft by quoting from the statements of the Attorney General regarding the conferences:

As I am sure you are aware, the proliferation of obscenity, both via the Internet as well as through more traditional channels, has become a pervasive and destructive element in our society. I am committed fully to dedicating the resources necessary to combat this burgeoning problem.

To that end, I am pleased to announce an initiative aimed at developing a national obscenity strategy for aggressive federal prosecutions of such cases. On June 6-7, 2002, at the Department’s National Advocacy Center in Columbia, South Carolina, the Executive Office of U.S. Attorneys and the Criminal Division’s Child Exploitation and Obscenity Section are sponsoring an Obscenity Law Enforcement Symposium. This symposium will provide a forum to discuss the current state of the sex industry, the legal challenges in investigating and prosecuting obscenity cases, and the policies and guidelines necessary to develop our strategies in a thoughtful and deliberate way.

Mr. Obenberger reported that the conference in June did, in fact, take place with Ashcroft speaking to federal prosecutors and other attendees. The full text of Ashcroft’s speech can be found here.

Highlighting a few passages, Mr. Obenberger noted that Ashcroft described the Internet as “perhaps the most pernicious medium for obscenity” and “a conduit for child exploitation and obscenity that respects no boundaries and recognizes no jurisdictional lines.” Ashcroft pledged that “[t]o prevent such debasement, the Department of Justice is committed unequivocally to the task of prosecuting obscenity.” To this end, Mr. Obenberger noted that Ashcroft had taken two steps in support of that commitment, to wit, adding staff devoted to the prosecution of online pornography and changing a guideline that required the Justice Department to go through the local office of the Attorney General before initiating actions. These changes were made, Ashcroft asserted, “to bring the full weight of the Department of Justice to the fight against child pornography and obscenity.”

To further emphasize the pending threat, Mr. Obenberger highlighted the following quotes from Ashcroft regarding an increase in prosecutions:

Over the past year, the Department has made significant progress toward reversing an almost decade-long absence of adult obscenity prosecutions. With the recommendation of the Attorney General’s Advisory Committee, the so-called “lockout provision” of the United States Attorneys’ Manual was eliminated. Now, for the first time in many years, prosecutors from the Child Exploitation and Obscenity Section of the Justice Department have increased flexibility to initiate cases across the country. Additionally, the Child Exploitation and Obscenity Strategy [sic] has been working with our United States Attorneys to put together …a coordinated approach to the prosecution of obscenity providers. This Department is dedicated to vigorously enforcing the laws of the United States, and those who illegally distribute obscene material will be prosecuted aggressively.

Of significance, Mr. Obenberger reported that additional public pressure would be applied to individual U.S. Attorney Generals when it comes to prosecuting obscenity cases. Specifically, Mr. Obenberger noted the launching of a new Website by Morality in Media, ObscenityCrimes.org, which provides a convenient form to submit reports of allegedly obscene online material to Morality in Media, which are then forwarded to the U.S. Attorney with a request for investigation. The site is exclusively concerned with adult pornography, and those persons with information regarding child pornography are directed to another site. Interestingly, the site lists many generally acceptable areas of sexuality as obscene including “sexual intercourse” and “oral sex.” Mr. Obenberger exposed the real aim of the site: applying pressure to local U.S. Attorneys by reporting whether they have proceeded with indictments

In light of these developments, what is to be done by the adult site operator? Mr. Obenberger made the following recommendations:

· The number one priority must be to ensure that you are never in possession of even a single image containing any underage person in any situation that is even remotely sexual.

· Do not rely on borrowed or form “terms and conditions”.

· If you are an adult Webmaster, you must make sure that you have no technical violations of Section 2257 or its associated regulations. Each of them caries a maximum penalty of two years in prison.

· Finally, take a serious and thorough look at your site, and do everything in your power to ensure that it is not obscene. Consult a lawyer who knows the law of content.

Richard Chapo – AdultInternetLaw.com

After Mr. Obenberger concluded, I presented a legal view of the negative ramifications of using the term “partnership” on sites, particularly in relation to affiliate programs. Many Webmasters attract traffic to their sites by offering affiliate programs. Dangerously, many classify these efforts as “partnership programs,” typically because it “sounds right” and Webmasters are unaware of the legal ramifications. By creating a “partnership program”, most owners of adult sites do not realize that they are opening themselves up to significant exposure to lawsuits and monetary damages.

For the purpose of the seminar, a partnership was defined as a business effort undertaken by two or more persons. On a more practical level, almost every affiliate program in the adult arena can be classified as a partnership. Such a legal relationship is extremely risky. Why? The definition of a general partnership can loosely be summarized as follows: “A business in which two or more people pursuing a business effort are each liable for all partnership liabilities regardless of the amount of involvement of an individual partner.” In short, you can be found liable for the acts of your affiliates. Do you monitor their actions?

An excellent question asked by a Webmaster at the seminar boiled down to, “So what?” In more practical terms, the question really asks what an affiliate could do to get you into trouble. Let us count the ways…

The most obvious subject that comes to mind is an affiliate that sends unsolicited commercial email, to wit, SPAM. AOL is currently pursuing over thirty cases against parties sending SPAM. AOL has developed a legal strategy that has proved successful with judgments in excess of $1,500,000. If AOL sues you and your affiliate, which party do you think will end up paying? The affiliate? Wrong. Most affiliates have little material wealth. On the other hand, you are sitting there with a site, bank account, reoccurring billing and so on. Since your affiliate program is a “partnership”, you are responsible for paying up to the full amount of any judgment.

Another area of concern is the potential liability arising from infringement situations. If an affiliate in your partnership program is infringing on the trademark or copyrights of a third party, you can arguably be found liable for the infringement! The most recent example of this situation is the Perfect 10 v. Adult Check litigation. In that case, a federal Judge ruled against Adult Check, noting Adult Check “…could be found to be a partner of the sites using the age verification service.” Upon issuing the injunction, Adult Check had no choice but to drop approximately 3,000 celebrity image sites from the AVS. Such a ruling represents a clear application of the “partnership” concept to adult revenue programs. If you are pulling traffic through a “partnership program”, you could be next.

In short, the use of partnership programs to drive traffic should be avoided at all costs. Does that mean that you should not have an affiliate program? No. It simply needs to be legally detailed in a manner that avoids any classification as a partnership.

Robert Apgood – Avant-Law.com

Robert Apgood echoed my comments in regard to partnership issues noting that many Webmasters and content providers enter into legal partnerships without knowing they are doing so. Any revenue sharing relationship in which the two parties have no written agreement will be designated a partnership, according to Mr. Apgood, with the resulting liability issues. To this extent, Mr. Apgood also noted that such relationships could potentially lead to criminal prosecutions under the theory of criminal conspiracy if certain additional elements were found. Before moving on, Mr. Apgood emphasized the importance of avoiding, directly or indirectly, the creation of a general partnership.

Mr. Apgood then turned to the misunderstood event known as a “Takedown.” This area of the law concerns the potential liability of online service providers, such as free hosts, when a third party site hosted or listed on their service is infringing on the copyright of another party. Mr. Apgood highlighted sections 17 U.S.C. 512(c) and 512(d) of the Digital Millennium Copyright Act. Specifically, he noted that Section 512(c) provides a “safe harbor” for online service providers effectively removing them from liability for the posting of material by others that infringe on copyrights. Contrary to the impressions of most people, Mr. Apgood noted that infringement liability is NOT implicated only when they operate a web site. The true liability for copyright infringement also extends to folks (such as upstream OSP’s) who facilitate access to an infringing site as well.

Mr. Apgood presented a hypothetical scenario where a web site containing infringing material is operated offshore (e.g., Brazil) and access is facilitated via a connection service in the U.S. The threat to the connection service is tangible as they are the likely targets of litigation in light of the fact that they are located in a convenient location. Mr. Apgood noted that the drafters of the DMCA considered this possibility and addressed it in section 512(d). That section provides a similar “safe harbor” for companies who “are referring or linking users to an online location containing infringing material or infringing activity…” In short, attendees were shown how they could avoid being dragged into infringement claims concerning third parties. Mr. Apgood noted, however, that most people fail to take advantage of this provision because they fail to qualify for the safe harbor provisions.

Mr. Apgood highlighted the fact that the above protections can only be taken advantage of if a Webmaster complies with the requirement for registering with the Register of Copyrights (see http://www.copyright.gov/onlinesp/format.html). Without making such a designation, Mr. Apgood noted that it is likely that the safe harbor provisions will not be made available to an OSP that would otherwise enjoy the protections.

As a final topic, Mr. Apgood and I disagreed on the inherent value of trademarks in relation to the time and cost of obtaining the same. Mr. Apgood, however, raised an excellent point regarding the use of trademarks if a dispute over domain names arises. Specifically, Mr. Apgood observed that in the context of Uniform Domain Dispute Resolution actions, holders of trademarks have almost invariably prevailed against registrants of domains that embody the marks of holders. This is particularly true when a domain holder registers the domain for the purposes of domain and business hijacking or some other effort to diminish the value of the mark on the Internet. In such a situation, the use of a trademark in prosecuting an action is clearly advantageous.

Closing Comments

As the above summary highlights, the threat-free days of the Clinton Administration have passed into history. The federal authorities are getting organized and every Adult Webmaster should review their site(s). Threats in the private sector have also arisen in light of the sloppy use of the term “partner” by Webmasters, particularly on affiliate programs, and Webmasters need to take action now. On a positive note, Mr. Apgood’s speech on procedures for protecting OSPs from third party infringement claims as well as effective use of trademark filings represents powerful tools for a Webmaster to protect their hard work in developing sites and adult businesses.

Richard Chapo is the lead attorney for AdultInternetLaw.com, based in San Diego, California. AdultInternetLaw.com provides legal services to adult businesses, focusing on business strategy, corporate and contract preparation and site reviews. He can be contacted at adultlaw@yahoo.com. This article is for general education purposes and does not address every facet of the laws surrounding the subject. Nothing in this article creates an attorney-client relationship.

LEGAL BRIEFS 2

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