Taking Your Strip Club Virtual

Introduction

Coronavirus lock-downs are slowly being lifted and businesses are starting to reopen, but it may still be some time before adult clubs are able to operate at full function across the nation. Reduced customer capacity mandates and the threat of a second wave of infections in the fall create additional uncertainty. Social distancing guidelines present their own unique challenges for all businesses that rely on close human contact.

In the meantime, many clubs have begun exploring options to take their adult performers into the virtual world. Strip clubs are uniquely situated to effectively and efficiently move into the online space. Club operators have relationships with dancers that are looking for a way to make money from home, and a base of clientele that are itching for some entertainment. The club has a brand, customers, and entertainers – the missing piece is an online platform on which to conduct business.

The Internet offers a variety of options for virtual strip club entertainment. Some operators seek to recreate the club environment online, complete with a DJ, music, and live stage performances. Others focus on creating live webcam platforms for individual dancers to interact with paying customers throughout the world. Yet another option is a club-branded social media platform that allows entertainers to develop their own profile and sell recorded content and other items. Regardless of the specific business model or theme, the legal issues facing online platforms are much different than many club owners are accustomed to in the brick and mortar world. This article is an introduction to those novel concerns.

Corporate Structuring

Any time a business offers a new service, it opens itself up to new legal liabilities. Any operator looking to explore online entertainment should consider creating a separate corporate entity to diversify risks. Many of the legal risks associated with website operations, like copyright infringement or federal age verification laws, are completely foreign to the brick and mortar club business. Segregating online operations from physical club operations through corporate structuring is often a wise first step.

Performer Age Verification

Federal law imposes certain record keeping requirements on producers of sexually explicit materials. These laws do not apply to live, unrecorded performances in strip clubs. Therefore, a full understanding of “Section 2257” is essential for any club operator considering online entertainment. Those who produce depictions of actual or simulated sexually explicit conduct must strictly comply with the age verification and records-keeping obligations of Section 2257. This is often accomplished by creating a Section 2257 file for each performer, with information such as legal name, all stage names, date of birth, date of first production, and other information required by federal law. This data, along with a copy of the performer’s government-issued picture ID card, must be maintained in a Section 2257 file along with all URLs depicting the performer’s content. The website must publish the physical address where these files may be inspected by the Attorney General. Some online business models are exempt from these Section 2257 requirements, depending on the operator’s role with respect to the content. Also, the law is subject to a pending legal challenge by the Free Speech Coalition which may result in invalidation of many of these legal requirements. For now, full compliance is recommended for any producers of sexually explicit content.

A separate federal law, Section 2258A, imposes certain legal obligations on website operators to report instances of child pornography to the National Center for Missing and Exploited Children (NCMEC). Failure to do so carries criminal penalties, while reporting the unlawful material provides a form of legal immunity in connection with the reported content. Online strip club operators should become familiar with this legal obligation and implement procedures to report any apparent underage content.

Online Agreements

Unlike a strip club which does not require its customers to sign a contract whenever they enter the club, commercial websites typically require users to agree to detailed user terms before accessing the site. These terms cover such things as billing procedures, user conduct, intellectual property rights, dispute resolution, etc. A separate model agreement is recommended for any entertainers who perform on the site. A model agreement will address issues such as release of rights, content ownership, compensation, performance rules, and the like. Website operators, or their attorneys, should carefully draft these online agreements and implement them properly on the site.

Copyright Infringement / DMCA Safe Harbor

Federal law imposes hefty civil damages and potential criminal penalties for copyright infringement. Numerous copyright-related issues arise from the operation of an online strip club. The parties must decide who owns the rights to the live or recorded performances, and what licenses are provided. Performers should avoid publishing infringing content during their performances such as unlicensed music, television broadcasts, and even background paintings. Decisions need to be made on who can pursue infringers if the dancers’ content is stolen by pirate websites. Importantly, some business models can take advantage of the protections offered by a federal law called the Digital Millennium Copyright Act (DMCA). If structured correctly, the site may be entitled to assert “DMCA safe harbor” in connection with any copyright infringement claims based on the performer’s content. This can provide a valuable defense to copyright infringement lawsuits in appropriate circumstances.

FOSTA/SESTA

In 2018, Congress passed a billed labeled FOSTA/SESTA in an effort to fight online sex trafficking. Since the statute is limited to online activities, many club owners have not encountered the difficulties created by this relatively new law. By way of summary, FOSTA/SESTA created a new federal prohibition on using a computer service to promote or facilitate prostitution. It also removed the previous legal immunity that many website operators relied upon to avoid liability for user-posted content. After the law was passed, many adult-oriented websites shut down, and others moved overseas. Since it can be extremely difficult for an online platform to determine whether some user-posted video or post somehow promotes or facilitates prostitution, many website operators have censored any sexually oriented content as a way to reduce legal risks. Given the serious criminal penalties associated with FOSTA/SESTA, online platforms have developed various content moderation tools and procedures to identify problematic users or posts. Legal compliance efforts in this area are critical for any virtual strip club operator.

 Privacy Policies & Data Retention

Websites often collect a lot of data on their users. This data can be both a benefit and a liability. There is no equivalent in the physical strip club space where customers can remain somewhat anonymous. As such, strip clubs that are looking to offer online entertainment services in the future must be sure that they comply with relevant data privacy laws which vary from state to state and country to country. A written privacy policy should also be published on the website.

Trademarks

While club owners are generally familiar with the importance of protecting their brand name, the issues change when the business operates in the online world. When the owner launches a website, the club is suddenly engaged in interstate commerce and promotion. A brand which may not infringe on a third party’s rights when used locally may now infringe on a trademark owner’s rights even if they’re located on opposite ends of the country. Interstate use of a brand name may have certain benefits as well, such as the ability to register a federal trademark with the USPTO. Any use of a brand name on a website platform must be carefully evaluated and protected.

Conclusion

With the state of coronavirus and associated lock-downs in flux, strip clubs will continue to innovate and bring exciting experiences to their customers. Some entertainment will move online, which generates a new set of rules and legal compliance obligations. A full understanding of this new environment can open doors to significant opportunity for both club owners and performers.

 

Lawrence G. Walters heads up Walters Law Group, and has represented adult industry clients for over 30 years. Nothing in this article is intended as legal advice. Mr. Walters can be reached through the firm’s website, www.firstamendment.com, or on social media @walterslawgroup.

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