Card Associations Facing Pressure to Terminate Adult Sites

As part of the aggressive campaign to tie adult websites to sex trafficking, various anti-porn activists are pressuring the major credit card associations to stop doing business with the adult industry. A recent opinion piece published in the Washington Examiner posed the loaded question: “How can mainstream credit card companies process payments for an industry that is virtually guaranteed to profit from rape and sex trafficking?” This led to an article on CBN News claiming that “Your Credit Card Company is Likely Partnering with Porn Websites.” The proponents of this effort point to the fact that PayPal decided to stop processing payments for most adult sites in late 2019 and suggest that the major credit card companies follow suit. The public pressure campaign is accompanied by an effort to shut down a large adult site for allegedly facilitating sex trafficking and a bill designed to force online platforms to impose restrictions on underage content.

This campaign is fueled by the unproven notions that pornography contributes to sex trafficking and turns our youth into a bunch of degenerates.  Instead of proof, the activists rely on a small sampling of incidents where individuals claim “revenge porn” videos have been uploaded to large tube sites or point to the outlier sex trafficking prosecution against the GirlsDoPorn producers. With these examples in hand, some are seeking to shut down the entire adult industry which relies largely on credit card transactions. Given the vast amount of sexually-explicit content found online, it is hardly surprising that some minute portion may be created and uploaded by bad actors. However, these instances are being used to support widespread censorship of adult content by demanding denial of access to basic credit card services. While probably not surprising in the era of “Cancel Culture,” this call for financial disruption of the adult industry should be taken seriously.

Such deplatforming efforts are dangerous to free speech principles, but can be notoriously effective in suppressing controversial or unpopular expression. However, they are usually targeted at specific individuals or organizations. This recent campaign sets its sights on the entire category of erotic speech. If successful it could do lasting damage to the entire adult industry. With sale of DVD’s in steep decline, adult performers, producers, photographers, website designers, affiliates, hosts, and website operators all largely depend on the ability of the end-user to purchase content online with a credit card. If the card associations respond to the public pressure by cutting off adult businesses, the results will be devastating.

Sex workers faced a similar dilemma when their access to online platforms was decimated as a result of FOSTA/SESTA. Escort advertising sites suddenly found that credit card processors, banks, and other service providers were unwilling to continue doing business with them. Sex workers suffered the most severe collateral damage, and were forced into dangerous and often exploitative circumstances to protect their livelihood. A widespread termination of adult sites by major credit card associations would cause similar results, but on a broader scale. Performers, cam models, clip artists, and website operators, themselves, would be forced to find a new line of work, or see their income dramatically reduced. Adult sites could try accepting payment in alternate currency like bitcoin, but only a small percentage of consumers are familiar with these payment methods. Financial service providers have always had a choke-hold on the adult industry due to their indispensable role. Their prohibited content policies have become a sort of industry best practices since failure to adopt them will result in termination of merchant processing accounts. If the card associations decide to block all adult content based on alleged, unsubstantiated ties to sex trafficking, the future is bleak.

One of the biggest objections asserted in the most recent effort is the lack of age or consent verification procedures required for users to upload sexually-oriented content on video sharing sites. Activists cite to the ability of a user to upload explicit content with only an email address. However, the same policies are in place for most user-generated content platforms – whether adult or mainstream. Moreover, requiring age or identity verification for the user would not address the larger issue of whether the person depicted in the videos consented to the filming or distribution. This is seemingly an intractable issue, since there is no reliable method for an online platform to verify performer consent – at least not one that could be effectively implemented. For example, large video sharing sites could not be expected to interview every person depicted in an adult film to satisfy themselves that the individuals were aware of the nuances of the rights they were releasing by publication and distribution of the content. Any such effort would hopelessly stifle the user upload process and impose an insurmountable burden on the site operator. Picture teams of lawyers reviewing release documents, signatures, ID’s, production dates, and facial expressions of performers to discern whether valid consent was given by willing adults.

Existing federal law requires producers of adult videos to review and maintain “Section 2257” age verification documents, but does not require specific documentation of consent to filming or distribution. Such issues are typically handled in the civil courts, if a production is not supported by sufficient contractual releases. Even the age verification law was declared unconstitutional by a federal court, as a content-based restriction on speech. There is no legal support for the proposition that online platforms must investigate every adult video to confirm that the performers have consented to both the production and distribution channels. Liability is rightly imposed on the up-loader or producer, if there is a problem with consent.

Despite the focus on the adult websites as facilitators of sex trafficking, the vast majority of underage content reports come from Facebook. Yet, activists are not calling for credits card companies to cease doing business with mainstream social media sites. The adult industry is often a convenient scapegoat to be blamed for larger social problems. In this instance, the focus is sex trafficking and revenge porn. Many of the proponents that paint themselves as “anti-trafficking” are comprised of anti-porn activists seeking to censor constitutionally protected adult entertainment. That is the goal. The First Amendment provides a necessary buffer against government censorship, however private companies make their own business decisions when it comes to online payment services. Thus far, the calls to terminate credit card services to adult sites remain isolated and hyperbolic. However, the adult industry remains susceptible to decisions made by public pressure and mob mentality, instead of logic and facts.

Lawrence G. Walters has represented adult entertainment clients for over 30 years. Nothing in this article is intended as legal advice. Mr. Walters can be reached through his website, www.firstamendment.com, or on social media @walterslawgroup.

Guidelines on Sponsored Social Media Posts

Guest Post by Bobby Desmond, Esq.

Many adult entertainment companies hire models, performers, and other so-called “influencers” to review, advertise, market, or otherwise promote their goods and services to their followers on social media. These influencers provide companies with a valuable and often relatively inexpensive method of reaching new customers.

Since these sponsored posts often impact the purchasing decisions of social media users, the Federal Trade Commission (“FTC”) requires companies to ensure that influencers follow certain guidelines whenever the company provides something of value to the influencer with the expectation that the influencer will discuss the company’s products or services on their social media. “Something of value” can mean free samples, cash, prizes, and more. There are some exceptions to this rule.

 

First, companies need not make disclosures when offering free samples to its general customer base without expecting more from those recipients. Second, companies may interview customers about their experience with their products or services and then quote those customers in their advertisements. Companies may even pay those customers for the use of their endorsements. No disclosure is necessary so long as the customer provided the quote before expecting any compensation for doing so. For example, no disclosure is necessary if a company finds a positive vlog about their product, reaches out to obtain the customers consent to share the vlog on their twitter account, obtains that consent, and then provides the customer with a thank you gift after the fact.

 

Companies must make sure their influencers are honest and not misleading. Companies should not encourage influencers who have not actually used that product or service to make sponsored posts. Companies should instruct influencers to provide only their honest opinion and to avoid any claim that the company would not be able to legally make on its own.

 

The FTC suggests that companies provide influencers with a list of examples that they cannot say and a set of instructions to prevent claims from going too far. Additionally, the FTC expects companies to make a reasonable effort in periodically reviewing their influencers’ sponsored posts and following up on any questionable practices. The FTC has explicitly stated that it is unlikely to pursue a law enforcement action for a post by a rogue influencer if the company has a reasonable training, monitoring, and compliance program in place to prevent such problems. Ultimately though, the company is responsible for its advertisements, whether they are posted by the company, a public relations firm, or an influencer.

 

Companies should also inform influencers about properly fulfilling the disclosure requirements. Disclosures must be clear and conspicuous. This requirement is generally met when the disclosure is (1) close to the claims to which they relate, (2) if text, in an easy to read font and color that stands out from the background, (3) if video, on screen long enough to be noticed, read, and understood, and (4) if audio, read at an easily understandable cadence.

 

Additional disclosures are required in certain circumstances. For example, influencers that receive only samples can fulfill the requirement by stating “Company X gave me this product to try for free.” However, if the company pays the influencer or provides some compensation in addition to the free sample, the company should instruct the influencer to make further disclosures such as “Company X paid me to try this product.” Companies should also instruct influencers to disclose whether the influencer achieved above-average results or has some connection to the company that their followers would not expect, such as an employment or familial relationship.

 

While the FTC does not generally monitor paid social media posts, followers can and do report possible violations to the FTC. The FTC then evaluates those reports on a case by case basis before deciding whether to investigate or involve law enforcement. The FTC has enforced these rules in the past, so it is important that companies become familiar with the guidelines and instruct their influencers on how to follow them.

War on Porn 4.0

You can tell it’s election season, when radical politicians start banging the drum for another war on something. Recently, four Republican Congressmen wrote a hysterical letter to the Department of Justice, demanding that Attorney General Bill Barr make obscenity prosecutions a priority again. These lawmakers sought to remind the DOJ that obscenity laws still exist, and that then-candidate Trump signed some kind of pledge to wipe out porn. Their pleas echo demands by a small, vocal contingent of politicians and activists who have sought to declare pornography a public health crisis and tried to link it to human trafficking. While this latest campaign relies on some new buzz words and sales pitches, it is based on the same faulty logic as previous failed prohibition efforts.

In 1969, the U.S. Supreme Court ruled that people had the right to view even obscene materials in their home. That triggered the first modern War on Porn by President Johnson, who created the “President’s Commission on Obscenity and Pornography.” However, the Commission did not deliver the report that the administration expected. Instead, it found no evidence that porn played any significant role in delinquent or criminal behavior, and had no effect on character or moral attitudes regarding sex. It also determined that most Americans believed that they should be able to read or see any sexual materials they wished. Naturally, the report was rejected by Congress, the Senate, and President Nixon, who succeeded Johnson. Obscenity prosecutions against “girlie magazine” publishers and adult film producers followed, and people went to jail.

In the early 80’s, adult video tapes became readily available in corner video stores across the country. People could finally watch their adult film star of choice from the comfort of their home without venturing out to the local XXX theater. As it turns out, they liked this idea and adult video rentals kept most of the small stores in business. In response to this phenomenon, President Reagan commissioned the infamous “Meese Report” on pornography. This time, the result was predetermined, and the report documented the purported harmful effects of pornography and the alleged connections between the adult industry and “organized crime.” The report was roundly criticized as being biased, not credible, and inaccurate. Yet the issuance of the report gave birth to the next War on Porn, in which video tape distributors and retailers were targeted by the Department of Justice with draconian racketeering laws. Numerous operators were prosecuted and imprisoned for selling videos of adults having sex. These efforts largely subsided with the election of President Clinton.

Then came the “W” years, when President Bush and Attorney General Holder revived the “Obscenity Unit” in the Department of Justice and began pursuing adult DVD distributors and website publishers. This effort was fueled by the exotic theory that watching porn produces erototoxins in the brain, which triggers addiction – just like the dreaded crack cocaine. U.S. attorneys were instructed to bring obscenity prosecutions against both large and small operators, to ensure that nobody could take comfort that they were too small to fly under the radar. Those prosecutors who refused to play along were fired, according to some reports. However, the proliferation of adult content online proved to be too much even for the most zealous anti-porn censors. By 2014, this War on Porn was lost. Adult video clips thrived on the Internet – particularly with the adoption of high-speed broadband access, and the popularity of adult “tube” sites.

That leads us to today. After a period of relative calm on the obscenity front, on December 6, 2019 Congressmen Jim Banks, Mark Meadows, Brian Babin, and Congresswoman Vicky Hartzler formally demanded that the Department of Justice stop the “explosion of obscene pornography” on the internet, cable TV, hotels, and retail establishments. The letter touched off a firestorm on the internet and social media, with numerous commentators demanding that the government step in and regulate pornography. It also created a rift between moral conservatives who want to ban porn, and the libertarian wing that resists government overreach. In support of the letter, Representative Banks claimed that children are struggling with pornography “addiction,” citing a UK newspaper article which anonymously quoted a single teenager claiming to be addicted. In a feat of mental gymnastics, he also managed to conflate concepts of pornography, child pornography, obscenity, violence against women, and human trafficking:

As online obscenity and pornography consumption have increased, so too has violence towards women. Overall volume of human trafficking has increased and is now the third-largest criminal enterprise in the world. Child pornography is on the rise as one of the fastest-growing online businesses with an annual revenue over $3 billionThe United States has nearly 50% of all commercialized child pornography websites.

What any of this has to do with the adult entertainment industry is anyone’s guess; however, the industry is historically on the receiving end of any call for obscenity prosecutions. There are specific laws prohibiting child pornography, human trafficking, and domestic violence. Obscenity prosecutions are not necessary to combat any of those crimes. Statements like those made by Congressman Banks are tremendously misleading, and it is time to set the record straight.

Increased popularity of online pornography did not lead to an increase in violence against women. In fact, violent crime has decreased over the last several decades, including the rates of rape and sexual assault. Those who commit rape appear to consume less porn than the general population.

Online pornography is not uniquely addictive. Those who become addicted to watching online pornography have the same inability to self-regulate and other psychological conditions as people with other compulsions or attachment disorders.

Legal pornography does not increase human trafficking. No credible study has demonstrated such a causal link. However, previous prohibition efforts have shown that criminalizing some product or service does not stop it from existing. Prohibition simply drives the activity underground, making it more dangerous for all involved. The previous concerns with porn’s alleged connection to organized crime would likely become more prevalent if the prohibitionists were successful.

The adult entertainment industry does not produce or endorse child pornography. This should be evident from the industry’s strong efforts to eradicate underage content through support of groups like asacp.org. Neither the business owners nor their customers want any involvement with underage materials. The fact that there have been exceedingly few documented cases of underage performers in professional adult films demonstrates the successful efforts undertaken to ensure that minors are not allowed to participate in the industry.

Putting adults in prison for making movies that other adults want to watch has always struck this author as outrageous, and antithetical to fundamental free speech protections. In the last round of obscenity prosecutions, the government suffered some embarrassing defeats. But juries in obscenity cases can be unpredictable, and the Miller obscenity test is far from clear. Unlike most other crimes, the defendant in an obscenity case does not know if he or she is actually guilty until the jury returns a verdict. The courts are split on whether local or nationwide standards should be used to evaluate online content. As a result of the uncertainty created by an obscenity prosecution, some producers and distributors have paid a heavy price for providing adult entertainment to the consuming public.

Using precious law enforcement resources to pursue this effort will do nothing to combat child pornography, human trafficking, or violence against women (or men). At most, some random lives will be ruined, and some videos may be taken off the market. Certain facets of the adult industry could be forced underground or overseas. However, there will be no appreciable impact on the production or distribution of erotic content.

The new War on Porn is different, as it tries to appeal to a broader segment of society than previous efforts, which were focused on morality and shaming. This newly-branded campaign is targeted at those who want to save victims and achieve social justice. Members of the adult entertainment community must be armed with the facts and defend their rights to sexual expression. If state or federal prosecutors decide to dust off outdated obscenity statutes and challenge the adult industry once again, they will likely find that freedom does not die without a fight.

Adult Content Production and Sex Trafficking Laws

For years, opponents of the adult entertainment industry have attempted to link pornography to sex trafficking.  In 2015, the National Center on Sexual Exploitation (formerly known as “Morality in Media”) hosted a symposium which pushed the narrative that pornography increases the demand for sex trafficking, child exploitation, and violence against women. The following year, the Department of Justice commissioned a study which concluded that consuming adult entertainment causes people to be dismissive of sex trafficking concerns. Since then, substantial federal funds have been allocated to bringing more sex trafficking prosecutions at the local, state, and federal levels. Those who claim to be victims of sex trafficking can sue the perpetrators, and any websites involved (thanks to FOSTA), under state and federal law.

It has become increasingly clear that sex trafficking laws will be used against adult entertainment businesses. The first federal sex trafficking charges against an adult content producer have already been filed. Most content producers and performers react to this concern with disbelief. They have nothing to do with sex trafficking, so how could these laws ever be applied to their business?

Understanding this issue starts with the definitions used in federal statutes. For purposes of this discussion, sex trafficking occurs when someone recruits, entices, solicits, transports, or advertises an adult for a commercial sex act through force, fraud or coercion. The law also punishes anyone who attempts or conspires to engage in these activities, or who benefits financially from participating in a venture where such activities occur. The defendant need not intend that sex trafficking occur, if the defendant acts with reckless indifference. The punishment is severe: 15 years to life in prison. Unlike other crimes where the defendant is presumed to be entitled to a bond pending trial, the law presumes that accused sex traffickers should be detained until trial.

Sex trafficking laws can apply to those who are willingly recruited to engage in commercial sex acts. The elements of “force, fraud, or coercion” have been interpreted quite broadly by the courts. Actual force is not necessary. A threat of force is sufficient. Any scheme or plan which causes a victim to believe that physical restraint or serious harm might occur will meet the test. Creating a climate of fear is enough to prove coercion. “Fraud” is a notoriously broad concept which can include any form of deception, such as false promises of fame and fortune. With that in mind, consider the following scenarios:

  • An amateur clip producer occasionally includes her live-in boyfriend in boy/girl clips. The boyfriend loses his regular job and can no longer contribute to paying rent. The content producer tells him that he must perform in more clips to supplement their income or move out. Is this “coercion”?
  • A webcam model promises performers that she can make them famous in the adult industry, but they must participate in some of her cam shows to help launch their careers. The performers agree and participate, but never become famous. Is this “fraud”?
  • A professional video producer hires security guards on the set. A performer decides that she wants to stop filming and leave, but the security guards are stationed near the exits. Is this “force” through threat of physical restraint?

It is not difficult to imagine many circumstances where the facts can be manipulated to fit within the ambit of sex trafficking statutes. Those in charge of making these decisions may be politically opposed to adult entertainment or hold the belief that pornography fuels sex trafficking. In the case of a civil lawsuit, the plaintiff stands to benefit financially by making the claim.

Any allegation of sex trafficking is emotionally charged. There is an inclination to believe the victim. In many cases, that is the correct thing to do. However, the adult industry is now vulnerable to potential prosecutions and civil claims that are politically or financially motivated. Anti-porn advocacy groups which previously opposed adult entertainment on moral grounds have adopted the sex-trafficking rubric as a basis for their censorship efforts. We have seen numerous instances where run-of-the mill business disputes between producers and performers are starting to include claims of sex trafficking.

This is a sensitive issue. Sex trafficking is a horrific crime, and perpetrators should be punished harshly. But the scope of the problem is up for debate since accurate statistics are notoriously hard to come by, and some of the numbers are overblown. As governmental entities and advocacy groups try to conflate issues of pornography, prostitution, and sex trafficking, the industry must be on guard for misuse of these laws. Just as anti-porn advocates have previously attempted to smear the adult industry with claims of child pornography, there is an effort underway to suggest that adult content production implicates sex trafficking.

To help address these issues, both producers and performers are encouraged to adopt best practices that focus on disclosure and consent. All expectations should be identified in written agreements. Performers must be afforded an opportunity to read and understand such agreements before production. Compensation terms should be clear and unambiguous. Obviously, there is no place for threats or violence in the adult content production industry. The Free Speech Coalition has issued a statement condemning the types of activities that were alleged in the recent sex trafficking charges against adult content producers. Its Code of Ethics encourages clear written performer contracts with sufficient time to review. Some large content producers and industry groups also offer a performer Bill of Rights that focuses on respect, clarity, and consent. Efforts like these will go a long way towards eliminating the risks posed by misuse of sex trafficking laws as a weapon against the adult industry.

Nothing in this article is intended as legal advice. Lawrence Walters has represented the adult entertainment industry for over 30 years. He can be reached at firstamendment.com or @walterslawgroup.

Woodhull Panel – FOSTA & Internet Censorship

The Woodhull Freedom Foundation is the lead Plaintiff in the lawsuit challenging FOSTA. Its legal challenge started in the spring of 2018, when the organization began to struggle with its online promotion of events involving sex workers at its annual Sexual Freedom Summit. The law broadly prohibits the promotion or facilitation of consensual sex work using the Internet.  Facilitation generally means; “to make easier.”  Woodhull questioned how it could promote its 2018 Summit events involving sex worker advocacy and harm reduction, or publish the biographies of its sex worker presenters, without running afoul of the new law. Was it promoting sex work, or making sex work easier? FOSTA’s failure to define the words “promote” or “facilitate” or even “prostitution” made it difficult for any reasonable person to know where the line would be drawn. That struggle resulted in the lawsuit challenging FOSTA for violating the First and Fifth Amendments to the Constitution.

Since FOSTA was adopted, countless websites have gone dark and sexual content has been purged from large online platform providers. Sex workers now face increased danger, and law enforcement has lost its access to online information to prosecute traffickers. Woodhull, and the other Plaintiffs, have kept fighting. The appeal of the district court’s decision dismissing the case, based on lack of standing, was heard by the United States Circuit Court, D.C. Circuit, on September 20, 2019. AVN’s take on the Oral Argument can be found here.

Woodhull has continued to conduct its Summit, despite FOSTA. In 2019, it partnered with the Sex Workers Outreach Project (SWOP) in its efforts to support the sex worker community as Woodhull pursues its mission of affirming sexual freedom as a human right. The 2019 Summit included a panel specifically addressing the impacts of FOSTA – both on sex workers specifically, and Internet freedom generally. The panel included Emma Llansó, Director of the Center for Democracy and Technology’s (CDT) Free Expression Project, Ronald London, attorney with Davis Wright Tremaine, and the author, Lawrence Walters, of Walters Law Group.

The panelists are all involved in the fight against FOSTA in some form. CDT has been a staunch advocate for online freedom and helped sound the alarm bells when the FOSTA and SESTA bills were working their way through Congress. London, along with his partner Bob Corn-Revere, are counsel of record in the Woodhull v. United States, along with Walters and attorneys with the Electronic Frontier Foundation (EFF).

The FOSTA panel lasted over 90 minutes and provided a full update on how FOSTA has harmed sex workers, hampered law enforcement, and stifled online innovation. Llansó described how the FOSTA “monster” came to be, and how it dramatically changed existing federal law that provided immunity for interactive computer services which host third party content. Walters and London discussed the status of the lawsuit, and the potential outcomes. Ultimately, the case may be headed for a U.S. Supreme Court appeal.

The panel delved into the numerous myths that fueled the adoption of FOSTA, such as:

  • Criminalization of prostitution works
  • All prostitution is sexual slavery
  • Sex trafficking is fueled by a proliferation of pornography
  • Decriminalization is harmful

Each of these myths have been debunked by facts, studies, or experiences in other countries that have decriminalized prostitution. The more criminalized sex work is, the more violence and exploitation sex workers face – by police, customers, and others. Consensual sex work is very different activity from sex trafficking, and cannot be effectively treated by one-size-fits-all laws like FOSTA.  As discussed during the panel, sex trafficking is not caused by pornography, despite persistent efforts to conflate the concepts. A similar strategy has been used by censors to link illegal child pornography with constitutionally-protected adult media. Jurisdictions that have decriminalized prostitution have seen fewer negative health and safety consequences for sex workers.

The damage already caused by FOSTA highlights the importance of Woodhull’s lawsuit. London pointed out how civil claimants are already arguing that FOSTA allows website operators to be sued for any state law violations that are consistent with FOSTA’s prohibitions. This greatly expands the potential legal exposure facing Internet platforms, and results in more censorship of erotic speech. Fortunately, Woodhull has many allies in its fight. Additional Plaintiffs in the suit include The Internet Archive; Alex Andrews / SWOP Orlando, Human Rights Watch, and Eric Koszyk (a licensed massage therapist who lost his opportunity to advertise on craigslist.org due to FOSTA).  Numerous other groups have filed briefs in support of the challenge at the appellate level, including CDT, Reddit, the Free Speech Coalition, Decriminalize Sex Work, the Institute for Free Speech, and the National Coalition for Sexual Freedom. London pointed out that some groups also filed briefs in support of the Government, such as a coalition of individual states. However, their brief actually supported the Plaintiffs’ arguments since they illuminated the credible threat of prosecution by states anxiously awaiting the opportunity to broadly enforce FOSTA against website operators.

The panelists fielded many questions from the audience on how they should operate in a post-FOSTA world, and the potential results of the litigation. Some wanted to know more details about the lawsuit or potential additional challenges to FOSTA. Some were curious about new threats to banking relationships or mandatory age verification. The panelists warned that other bills, modeled after FOSTA, are currently pending which would take away even more protection for online service providers and inhibit speech in other areas. Overall, the well-attended panel offered a realistic assessment of how FOSTA changed the internet for anyone operating in the adult or sex worker industries and provided a beacon of hope for change through the courts.

The full session can be viewed here: https://youtu.be/bJ-j9KJNr0M

 

Lawrence G. Walters heads up Walters Law Group, www.firstamendment.com. The firm represents clients involved in all aspects of the adult industry. Nothing in this article is intended as legal advice.

What’s In A Name?

Adult business operators often struggle with the legal complexities of trademarks, trade names, fictitious names, and corporate names. This is particularly true for amateur performers, producers, or distributors who have operated a small business under their own personal name but want to consider doing business under a corporate or brand name. Let’s try to sort through some of the confusion.

Personal Names

Anyone can operate a business individually, using their personal name and social security number as their taxpayer identification number. This is known as a sole proprietorship. This simple business format is user-friendly but provides no legal protection from claims against the business, and offers no anonymity for the owner.  If a personal name is used as a business brand, it can be registered as a trademark. More about trademarks later. But actors, authors, sports figures, and other celebrities frequently register their personal names as trademarks, in the class of services for which the name is being used.

Fictitious Names

An individual can operate a business under a fictitious name, also known as a “d/b/a” which stands for “doing business as”. A fictitious name is also known as a “trade name”. Most states require a business to register a fictitious name before using it to engage in commerce. Registration can occur at the state or local level – sometimes both. In some states, it is a criminal offense to use a fictitious name without a registration. The idea is to protect the public by allowing people to look up the name of the actual owner of a fictitious business name. Registering a fictitious name does not provide any legal protection for the owner of the business and does not automatically grant any intellectual property rights to the name. In other words, someone else can use the same fictitious name for a separate business, and your registration will not give you any rights to stop them. Both individuals and companies can register fictitious names.  Theoretically, any stage name or website name is a fictitious name of the individual or company behind the operation, and registration of these names should be considered as an element of basic legal compliance.

Corporate Names

Setting up a corporation or limited liability company (LLC) should be considered by any business, no matter how large or small. Conducting business through a corporate entity provides some protection against claims or debts of the company. Incorporation is often viewed as a form of cheap insurance. A corporation is considered a separate legal “person” from its owner(s) and has perpetual existence. A corporation can also obtain its own taxpayer identification number, and hold bank accounts or other property in its own name. The incorporation process is not complicated, but maintaining the corporate formalities can be challenging for small business operators who are not familiar with the process. All corporate entities should have a corporate book, records of ownership, and minutes of corporate meetings. Corporations should likewise have bylaws and shareholder agreements, while LLC’s should have operating agreements. These documents will describe how the owners are compensated, how shares are issued, and how disputes are resolved. The absence of a shareholder or operating agreement can result in significant problems, such as third parties claiming to be owners. In some instances, failure to observe the corporate formalities can also result in the individual owners becoming responsible for corporate debts or liabilities.

Corporations also provide some level of anonymity for the owners, since corporate ownership is typically not a matter of public record. The information necessary to set up a corporation varies from state to state, with some states requiring very little public information about those involved with the business. You can select any state for incorporation, regardless of the physical location of the business. Typically, however, a corporation must appoint a registered agent who is physically located in the state of incorporation.

Your corporate name need not be your business brand name. As noted above, a corporation can register a fictitious name that represents its brand. But in some circumstances, it can also register the name as a trademark.

Trademarks

Trademark registration is an important consideration for any business. If your brand name meets certain criteria and does not conflict with the rights of third parties, you may restrict others from using the same or similar brand for your business. Protecting your brand is essential, and a trademark can often become your most valuable business asset. In the event anyone infringes on your brand name, having a registered trademark can provide an expedited path toward resolution of the dispute. Importantly, not all brand names qualify for trademark registration. Brands which are generic, or merely descriptive of the business’s products or services, typically will not be accepted for registration as trademarks. In some cases, use of a descriptive brand for a sufficient period of time will allow for trademark registration, if the mark has acquired distinctiveness in the marketplace.

Trademarks can be registered at the state level, or at the federal level with the United States Patent and Trademark Office (USPTO). In order to qualify for federal registration, the brand must be used in some form of interstate commerce. Often, businesses will wait until they are actually using a brand before applying for registration. However, the USPTO allows business owners to file a trademark application if they have a bona fide intent to use the brand in the future. Filing the application sets your priority date and allows you to prevent others from using the same or confusingly similar brand in the future, so long as you ultimately receive a trademark registration.

Trademarks can be owned by corporations or individuals. The owner of the trademark will have the power to control the use of the brand name, and the power to license that brand for use by third parties. Sexually explicit trademarks have historically been refused registration by the USPTO, but that may change depending on a decision from the U.S. Supreme Court that is expected in the near future. Many adult business operators have sought registration of explicit brand names in the hopes that the Supreme Court will clear the way for registration soon.

Conclusions

Choosing the right name and structure for your business is an important decision for any adult business operator. Your brand name represents the reputation and goodwill of your business. Some brands may conflict with the trademark rights of other operators, so careful consideration should be paid when selecting your trade name, corporate name, or trademark. After some initial legwork, you can find the perfect brand name, and protect it from infringers for the life of your business.

 

Lawrence G. Walters heads up Walters Law Group, www.firstamendment.com. Nothing in this article is intended as legal advice.

Congress Considering Deep Fakes Law

The technological ability to create convincing “deep fakes” is getting some attention in Congress. The adult entertainment industry has already struggled with deep fake porn, and the unsettled intellectual property issues generated by this type of content. On the one hand, rights holders can assert trademark, copyright, and/or publicity rights claims against producers of deep fakes. Publishers, on the other hand, can argue “fair use”, Section 230 immunity, or First Amendment protections in certain circumstances. But the recent publication of a doctored depiction of Nancy Pelosi appearing to stammer through her words, has apparently caught the eyes of some politicians who are poised to take action.

In early June, 2019, Rep. Yvette D. Clarke [D-NY] introduced H.R. 3230, the Defending Each and Every Person from False Appearances by Keeping Exploitation Subject to Accountability Act of 2019, in the House of Representatives. The DEEP FAKES Accountability Act intends to “combat the spread of disinformation through restrictions on deep-fake video alteration technology.” If passed, the bill would create both criminal and civil penalties for failing to disclose a covered deep fake and for altering disclosures. The bill would also create a private right of action for those injured by covered deep fakes. The bill was referred to the House Committee on the Judiciary, Committee on Energy and Commerce, and Committee on Homeland Security. If the bill is passed, it will take effect one year after it is enacted.

Rather than imposing restrictions on all deep fakes, the bill would impose a watermark and disclosure requirement on all deep fakes which are “advanced technological false personation records” – meaning any deep fake that a reasonable person would believe accurately depicts a living or, in more limited instances, deceased person who did not consent to the production. The bill would apply only to those productions which appear to authentically depict the speech or conduct of a person by technical means. The bill would purposefully exclude productions that utilize the skills of another person capable of physically or verbally impersonating the falsely depicted living or deceased person. The bill would also provide an exception for parodies, historical reenactments, and fictionalized programming that a reasonable person would not mistake as depicting actual events.

All visual-only “advanced technological false personation records” must include an unobscured written statement at the bottom of the image for the duration of the visual element that the deep fake contains altered audio and visual elements and that explains the extent thereof. All audio-only “advanced technological false personation records” must likewise include at least one clearly articulated verbal statement at the beginning of the record that the deep fake contains altered audio and visual elements and explaining the extent thereof. This verbal statement requirement applies to every two minutes of audio. All audiovisual “advanced technological false personation records” must include both an unobscured written statement and at least one clearly articulated verbal statement. Finally, all “advanced technological false personation records” that include a moving visual element must contain a watermark clearly identifying the deep fake as containing altered audio or visual elements.

Software developers that reasonably believe their software may be used to produce deep fakes would be required to ensure that their software allows for the insertion of necessary watermarks and disclosures and includes terms of use that require the user to affirm their general awareness of their legal obligations under this bill.

If passed, an individual may be fined, imprisoned for up to 5 years, or both, for knowingly failing to include a required watermark or disclosure (1) with the intent to humiliate or harass by falsely, visually depicting a person engaging in sexual activity or in a state of nudity, (2) with the intent to cause violence or physical harm, incite armed or diplomatic conflict, or interfere in an official proceeding, and the deep fake did in fact pose a credible threat of doing so, (3) in the course of criminal conduct related to fraud, or (4) by a foreign power or agent, with the intent of influencing policy debates or elections.

The legislation also provides criminal penalties for  knowingly altering the deep fake to remove or obscure the watermark or disclosure with the intent to distribute the altered deep fake and with one of the four prongs listed in the paragraph above. In addition to prison time, the proposed law allows for a civil penalty of up to $150,000 per deep fake as well as appropriate injunctive relief. An individual or affiliated business entity who is falsely exhibited in a deep fake would be able to seek damages and injunctive relief against anyone that violates the disclosure requirements of anti-alteration clauses of this bill. Damages would be the greater of actual damages or $50,000 per deep fake, except the limit would increase to $100,000 per deep fake that depicts extreme or outrageous conduct by the falsely depicted person and would increase to $150,000 per deep fake containing sexually explicit visual content intended to humiliate or harass the falsely depicted person. An individual would be able to file the private action under seal if there is a reasonable likelihood that the creation of public records would result in embarrassing or harmful publication of falsified material.

The bill would also create a process by which producers of deep fakes may seek an advisory opinion from the Attorney General about the legality of their proposed deep fakes within 30 days. The Attorney General would not be able to enforce this law against any producer of deep fakes that relies on an advisory opinion in good faith. The Attorney General would also be required to issue rules governing the technical specifications of the required watermarks within one year of enactment. The Attorney General would designate a coordinator in each United States Attorney’s Office to receive reports from the public regarding potential violations by foreign states and agents as well as any violations depicting acts of an intimate or sexual nature.

In the year after the bill is passed, the Attorney General would be required to publish a report containing a plan to enforce the law, a description of foreign efforts to use deep fake technology to impact election and policy debates in the U.S. and abroad, a description of the impact of sexual deep fakes on women and marginalized communities, and official guidance to Federal prosecutors.  In addition, the bill would require the Secretary of Homeland Security to establish a “Deep Fakes Task Force” to combat the national security implications of deep fakes, research and develop technologies to detect, counter, and distinguish deep fakes from actual events, and work with the private sector on this issue.

The bill would not serve as a defense against, preempt, or limit any Federal, State, local, or territorial laws on deep fakes or related content. Producers will still be able to seek other legal remedies against those individuals that use their copyrighted content without authorization to create deep fakes. Those individuals falsely depicted in deep fakes would still be able to seek other legal remedies against those individuals that use their likeness in deep fakes including privacy, defamation, false light, and unauthorized use of likeness claims. Sites that host user generated content, potentially including deep fake material, would still be able to claim the defenses provided by Section 230 of the Communications Decency Act. However, some members of Congress have expressed their interest in amending Section 230 of the Communications Decency Act to more directly address liability for deep fakes.

Future regulation of deep fake technology is still uncertain, as Congress struggles to sort out the numerous legal and constitutional issues generated by this content. While the adult industry continues to wrestle with the problems caused by deep fake porn, politicians seem interested in nipping the issue in the bud, before a deep fake costs one of them an election.

This post was co-authored by Lawrence Walters and Bobby Desmond, of Walters Law Group. Nothing herein is intended as legal advice.