"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
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A Content Producer’s Legal Checklist: Five Things That Can Help Maximize Content Value and Profitability

FEBRUARY 2012

Online adult entertainment companies are producing their own content more than ever before. Low production costs and an international pool of relatively inexpensive professional and amateur talent have practically eliminated any meaningful economic barrier to entry into the adult content production business. As a consequence, nowadays it seems like almost every adult website is creating some, if not all, of its own content.

 

The following is a checklist of 5 things every adult content producer should do to maximally protect and exploit their rights in the adult content they create.

 

1. Properly acquire the rights in the content produced.

 

From a legal perspective, adult content creation, ownership and exploitation is principally about the creation, acquisition and exploitation of a set of rights called “copyrights” that are associated with the content. Copyrights are exclusionary entitlements created by a government and provided to the owner of the rights. For example, in the U.S., an owner of the copyright in a work possesses a limited monopoly granted by the federal government that entitles the owner to control the duplication, distribution, performance, and creation of derivative works of the copyrighted work.

 

If you are, or desire to completely own the content you create, you will need to acquire all the copyrights in and to the subject material. To understand how this is done, a little understanding is required regarding how copyrights in content are created and who the original owners of the copyrights in the content are.

 

Under United States copyright law, copyrights are created the moment the work is “fixed in a tangible medium of expression”. This means, for example, that the moment a photograph is taken or a scene is recorded on tape, the resulting work has been “fixed in a tangible medium” (e.g., on film, tape or in digital memory). From that moment, the work is subject to copyright protection.

 

The copyrights associated with newly created adult content are usually owned by one or more creators or “authors” of the content. The reason why this is not always the case is because copyrights in certain types of works can, in some circumstances, be initially vested in another party if the work to be created will be a “work for hire” subject to a properly drafted and timely executed work for hire agreement. Just which works can be works for hire and how and when work for hire agreements function are topics that, unfortunately, exceed the scope of our discussion in this article.

 

Because the original creator(s) of content are usually its owner(s), producers who want to own all the rights in content produced for them by others in non-work for hire situations must determine who the work’s authors are and then acquire all their rights, usually via a written assignment of such rights.

 

To accomplish the first step of determining from whom rights must be acquired, producers are well advised to be aware of the fact that there may be many authors of the subject adult content. For example, a videographer that shoots an adult scene and the person or persons performing in the scene will all likely be co-authors, and therefore, joint owners, of copyrights in the resulting content work. Additionally, if the scene is scripted by a writer, he or she will also be a co-author, as will be the scene’s director and editor(s). If music is a part of the content produced, all composers and performers of the music will also be co-authors and initial joint owners of the resulting copyrights.

 

To help our clients acquire all the required rights in content that is produced on their behalf we recommend the use of, and provide, two basic types of rights acquisition agreements. The first is the model/actor rights acquisition agreement, often, unfortunately mischaracterized and, even worse, mis-drafted as just a “model release”. The second form, commonly used in mainstream entertainment projects but unfortunately, and sometimes tragically, under-used in association with the adult entertainment projects, is the rights assignment agreement to be executed by persons providing “behind the camera” creative contributions, including videographers, photographers, directors, editors, composers, musicians, script writers, web designers, etc.

 

Finally, rights acquisition documents, such as the initial forms discussed above, should be as comprehensive as possible regarding the scope of allowed use of the content with future technology. The agreement should include, for example, a clause that makes it clear that all rights of every kind in and to the subject work(s) are being assigned to the producer. It should also make clear that the producer will have the unlimited right to exploit the content by any and all means throughout the Universe in all media “now known and hereinafter invented”.

 

It is also important to understand that new technologies can create the need for new rights. So acquiring future-created rights in the assignment documents to the maximum extent possible is also highly desirable. This is why for the last twenty years I have included the assignment of digital actor or “synthespian” rights and any and all future-created rights pertaining to the subject work(s) in rights assignment forms I have drafted. These provisions are designed to provide to the owner, to the maximum legally allowable extent, rights to use the content to generate avatars and other synthetically created digital beings from the content. While to some these rights seemed far-fetched in the early nineties, with the rise of computer games and massively multi-user gaming platforms, these rights have become quite valuable and are likely to become more so in the future.

 

2. Register the copyrights in your content.

 

In the United States, The Copyright Act provides some very special copyright enforcement benefits to copyright owners who promptly register the copyrights in their content with the Copyright Office. These provisions allow the copyright owner to collect what are called “statutory damages” and attorney’s fees in copyright infringement cases.

 

These are powerful remedies that you will want to have regarding all of your content as they allow cost-effective enforcement of the copyrights in your content. Without them, for reasons discussed below, filing a lawsuit against an infringer of your content may not even be economically feasible. The following two contrasting scenarios illustrate why this is the case.

 

Scenario #1: Copyright owner does not promptly register a work that is subsequently infringed.

 

When someone rips off a copyright owner by unlawfully duplicating or distributing the copyright owner’s work or an unauthorized derivative work made from the original, the owner can sue to obtain an injunction to stop the infringement and collect damages from the infringer. The damages can be what the infringer profited and the monetary damage caused to the owner as a result of the infringement (“actual damages”).

 

But let’s suppose, in our first scenario, that a copyright owner had not previously registered the work that is subsequently discovered to be infringed by an online pirate. This is a very common situation as the overwhelming majority of adult content producers unfortunately still do not make it a practice of promptly registering their works with the Copyright Office.

 

In addition to the lack of early registration, let’s also assume a couple of additional facts that are also very common when it comes to infringement of adult content providers’ works. First, let’s assume that the work at issue has been distributed by the legitimate owner for some significant period of time prior to the commencement of the infringement, say six months or more. Let’s also assume that the infringement of the work has also been ongoing for a while, say at least two months prior to the time the owner discovered the theft. Under these facts, the copyright owner has the right to sue for actual damages and obtain an injunction preventing further infringement.

 

Under the facts of this scenario, the copyright owner does not have the right to be awarded attorney’s fees that are incurred to stop and redress the piracy. This is an important, if not critical economic factor that often determines whether a copyright owner even decides to bring a lawsuit against the wrongdoer. The reason is simple, the attorney’s fees required to prepare, file and prosecute a copyright lawsuit are substantial. Even the simplest infringement lawsuit, if taken to trial, can run up lawyer fees in excess of $100,000. Since copyright infringement lawsuits generally are not filed unless the owner can reasonably hope to collect more from the infringer than what is spent trying, the unavailability of attorney’s fees often dissuades adult content owners from enforcing their rights unless the case offers the prospect of collecting relatively large sums of money as damages from the infringer.

 

Unfortunately, compounding the problematic economics is the fact that the content owner in this scenario is only entitled to the actual damages that the copyright owner can prove are the result of the infringement. This is also usually an expensive endeavor that can easily cost tens of thousands of dollars in attorney’s fees and associated costs, such as accounting expenses and expert witness fees. Add to all this the fact that a typical infringer will not have profited, and a typical owner will not have lost, more than the anticipated litigation costs to resolve the matter, and you can quickly see why online infringement of adult content is goes virtually unchecked.

 

Scenario #2: Copyright owner promptly registers a work that is subsequently infringed.

 

In our second scenario, the copyright owner promptly registers the copyright in the subject work (1) within the first three months following the copyright owner’s first publication of the work or (2) at least prior to the time that the pirate started to infringe the work in question.

 

Under these circumstances, the Copyright Act entitles the owner of a registered copyright to elect to recover statutory damages for infringement instead of actual damages, which, as indicated above can be costly to prove. Moreover, the early registration of the copyright in the subject work also entitles the owner to seek the recovery of attorney’s fees expended in prosecuting the lawsuit.

 

This means that without having to prove that the pirate profited a dime, or that the owner lost money resulting from the infringement, the copyright owner can obtain money damages in the amounts provided by statute (the Copyright Act), hence the term “statutory damages”.

 

Fortunately for the copyright owner, statutory damages can be substantial. For example, the court could award statutory damages in an amount up to $150,000 per infringement of the registered work in cases of willful infringement, such as where the infringer knew or should have known that the infringer did not have the right to exploit the work. The courts, however, are not required to award the maximum amount.

Since infringement of adult content often involves a plurality of the adult content owner’s works, if all of the subject material has been promptly and properly registered to maximize statutory damages, a typical infringer often can face potential statutory damage awards in excess of a million dollars.

 

In addition to the availability of potentially huge statutory damage awards, a prompt registration of the copyright in a work also entitles a copyright owner to seek a court-ordered reimbursement of the owner’s attorney’s fees expended in the process of enforcing the owner’s copyrights against the infringer.

 

Adding the one-two punch combination of the availability of statutory damages and attorney’s fees to the owner’s enforcement options will often make all the difference in the world when evaluating whether an online rights enforcement action will be economically reasonable to undertake. With the availability of statutory damages and attorney’s fees, more often than not it will be, and the infringer, often having performed a corresponding calculus will understand this fact. As a result, the infringer is likely to be more motivated to settle the matter on terms favorable to the content owner.

 

The current fee charged by the Copyright Office for registering a copyright in a work is $35 per e-filed application.

 

3. If licensing your content to third parties, be sure to transact your deals through properly drafted content license agreements.

 

Content licensing is essentially a contractual matter. So almost always, the success and profitability of a content licensing deal will depend on how well the deal was negotiated and how skillfully the licensing agreement was drafted. The following are some basic tips that can help a content licensor negotiate the best content licensing deals possible.

 

  • Prepare. Know the deal you want to make. Before you begin negotiating a content licensing deal, or just about any other kind of agreement for that matter, it is important to be prepared. You should always have clear objectives and know what you are willing to compromise. I have found that it often helps to make a list of key deal points and negotiation goals with my client before commencing discussions with the other party.

 

  • Know what the other party’s interests are and what the other side wants from the deal. Understanding the other side’s goals, interests and concerns is a critical part of getting the best deal by helping you to determine what is, and what is not, likely to be negotiable for the other side.

 

  • Be aware of, and use, the enormous licensing flexibility copyrights provide you. Through a licensing agreement, the copyright owner may license to one or more licensees some or all of copyrights associated with content. The owner can, for example limit the duration and scope of the rights granted to the licensee. For example, the copyright owner might authorize a licensee to distribute copies of the content only via the licensee’s company web site, while reserving all other rights.

 

Similarly, the owner may limit the license to use the content to one or more specified distribution media. For example, a content owner might grant a distribution license for cable or satellite broadcasts while prohibiting any use of the works by the licensee via the Internet, via mobile platforms or even via any other media.

 

A content owner can also limit a content license to a particular geographic area. When this is done, the limited area to which the license applies is usually referred to in the licensing agreement as the licensed “territory”. For example, a content owner might grant a license authorizing the exhibition of the certain works by means of cable broadcast in the territory comprising North America.

 

There are a large number of ways that the rights associated with virtually any adult content can be “sliced and diced” allowing a content owner to profitably exploit the same content over and over again. In fact, it is this fundamental characteristic of intellectual property rights, the ability to separately exploit many different rights that can be limited in duration, geographical application, and in other ways, that provides tremendous opportunities for content licensors to profitably exploit their works over and over again.

 

  • Avoid “over-licensing” rights. One common problem I frequently encounter in content licensing deals that have commenced before my entry into the process involves what I call the “over-licensing of rights”. This can occur when a licensor has unnecessarily given up more rights than required to do the deal. Over-licensing is problematic for licensors principally because it often limits the licensor’s ability to enter into other deals regarding the subject content. This is especially true if the rights licensed are exclusive rights. The following are four common types of over-licensing.

 

Media Over-licensing. Media over-licensing generally involves situations where a prospective content licensee will seek to acquire rights to use the content in either more types of media than the licensee has the means to exploit or in more media than the licensor should prudently allow.

 

Territorial Over-Licensing. A content licensee will often seek to obtain a content rights license applicable to the largest territory possible. Often the initial content licensing draft will indicate that the territory covered will be “the world” or “the universe”. Most companies in the adult entertainment industry do not have the ability to effectively exploit adult content rights on a global basis by any media means other than the Internet. Thus, if the licensing deal involves cable, satellite, DVD or mobile distribution, I usually suggest that the prospective licensee should be required to justify the need for each geographic area in which the license will apply, especially if the licensor will be granting exclusive rights in the territory and/or the deal will involve revenue sharing.

 

Exclusivity Over-Licensing.Like media and territorial over-licensing, many adult content licensors are approached to enter into content deals that require the granting of exclusive licenses that are unnecessary or contrary to the licensor’s best interests. Exclusivity over-licensing can be especially problematic in situations where the exclusive license is coupled with media and/or territorial over-licensing and a revenue sharing arrangement.

 

Term Over-licensing. Licensees understandably seek to obtain from licensors the longest possible term for the least amount of money, while licensors understandably seek just the opposite. The most common problem involving term over-licensing results from a licensor’s unnecessary “locking-up” of content in an exclusive rights license for a period of time that forecloses subsequent exploitation opportunities.

 

  • Include good accounting and audit provisions in revenue sharing content licensing deals. For licensors in content licensing deals where the licensor’s compensation comes from a share of the revenue generated by the licensee’s exploitation of the content, it is imperative that the licensor have sufficient rights to verify that the revenue sharing payments are accurate.

 

  • Be prepared for disputes down the road. Prospective content licensors and licensees seldom want to dwell on the topic of dispute resolution while they are in the middle of negotiating. But this is exactly the time when the parties should consider how they will effectively resolve any disputes that may arise under their agreement. Care should be taken to be sure that if there is a dispute, it will be resolved at a location that is convenient for you, and that the adjudication of the dispute will use the laws that will work most effectively in your favor.

 

  • Engage an attorney experienced in adult content licensing matters to negotiate/draft/review your content licensing agreement as early in the process as possible. The topic of adult content licensing is complex and ever-changing in the face of the dynamic economic realities of the adult entertainment business and the constant emergence of new technologies and new ways to exploit adult content. The negotiation and drafting of effective adult content license agreements is as much art and future forecasting as it is a business and legal endeavor.

 

In addition, it is important to appreciate that in addition to the intellectual property aspects of adult content licensing, the subject matter of the deal, i.e., the content, will at all times be subject to many criminal laws, such as the federal obscenity laws and record keeping and labeling laws commonly known as the “2257 Regulations” (18 U.S.C. §2257, 18 U.S.C. §2257A and 28 CFR 75 et seq.). Therefore, if you are considering the licensing of adult content, regardless of whether you will be a content licensor or a content licensee, I strongly recommend that you consult an adult entertainment attorney with experience in the negotiation and drafting of adult content agreements as early in the deal making process as possible.

 

4. Develop and implement an economically reasonable copyright enforcement strategy.

 

If you produce adult content that is distributed via the Internet there is a relatively good chance that your material will be illegally copied. In fact, digital piracy of adult content is so rampant and pervasive on the Web that many producers and other industry observers have stated their belief that for every copy of content lawfully provided more than 500 copies of the work is obtained illegally through piracy.

 

Unfortunately there is no panacea for digital piracy, and there is no slam-dunk way to prevent online content theft. But that does not mean that content producers should not proactively attempt to limit the piracy of their content. This can often be done cost-effectively through the implementation of an appropriate anti-piracy program that is specifically designed to address a producer’s rights enforcement needs within the producer’s budgetary constraints. The development of such an anti-piracy strategy should be done with the assistance of competent adult entertainment counsel familiar with copyright matters.

 

The following are common components of many anti-piracy programs that I have developed for adult content producers:

 

  • Training and use of company personnel and/or engagement of outside firms to locate infringements on the web and in peer-to-peer file sharing systems.

  • Using appropriate “take down” notices to order the removal of infringing content from websites as specified by the Digital Millennium Copyright Act.

  • Using other communication means to effect termination of infringing activities.

  • Evaluating infringement cases that are non-responsive to initial infringement resolution efforts to determine if commencement of infringement litigation is appropriate.

  • Filing copyright infringement lawsuits when appropriate.

  • Posting on the producer’s website(s) the company’s policy regarding theft of its content along with notice of successful enforcement actions taken against infringers.

  • Engaging specialized foreign rights enforcement firms to effectuate enforcement of the producer’s copyrights abroad.

 

A word about mass defendant copyright lawsuits. There have been a lot of news stories in the adult industry press lately about adult content producers filing lawsuits against large numbers of unnamed defendants allegedly infringing their content via peer-to-peer file sharing systems. This is understandable since most adult content producers believe that theft of their content via the BitTorrents and other peer-to-peer systems is a significant cause of declining revenues. It is also understandable that frustration over the difficulty and cost of traditional methods of copyright enforcement, i.e., suing peer-to-peer infringers individually, has motivated a number of producers to engage the services of new companies and associated law firms that offer the possibility of revenue generation through such mass copyright enforcement procedures.

 

But as a number of adult content production companies quickly learned, success is not just about size, at least when it comes to the number of defendants sued in a lawsuit. In fact, a large proportion of these cases have already run into serious procedural roadblocks in court, in part, because they involve suing a large number of unnamed defendants.

 

If you are considering engaging a company specializing in mass defendant copyright infringement lawsuits, before you hire the company, I invite you to read my article

10 Things To Consider Before Engaging A Firm To File A Mass Copyright Infringement Lawsuit”. The article is available at www.xbiz.com or by email request to me at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Finally, while I am an advocate of proactive copyrights enforcement to help stem the tide of online content theft, I do not support the position maintained by some that copyright infringement litigation can become a new reliable profit center or revenue stream for content production companies. In my opinion, proactive anti-piracy efforts, including in some instances, copyright litigation, should be viewed as a means to retard infringement losses and maintain content value.

 

5. Comply with all regulations applicable to the content.

 

It is important to always remember that, unlike mainstream content, the production and distribution of explicit sexual depictions are highly regulated activities. Many federal and state criminal laws that include severe penalties for their violation apply to adult content creation and exploitation. Therefore, to save money and stay out of jail, know what the laws are and comply with them. To help you do this, it is prudent to review every aspect of your production and distribution of adult content with competent adult entertainment counsel.

 

The following is a list of some of the important regulations that all adult content producers should understand and comply with:

 

  • laws prohibiting payments to persons to engage in sexual activities (e.g., prostitution and pandering) and procurement of persons to engage in such activities (e.g., pimping);

  • the 2257 Regulations;

  • the child pornography laws;

  • safety and workplace regulations pertaining to adult content production;

  • regulations regarding the tax treatment of works as employees or independent contractors;

  • privacy and medical records laws;

  • negligence laws pertaining to on-location accidents and transmission of sexually transmitted diseases;

  • motion picture production permit regulations; and

  • the obscenity laws

 

A final tip: you simply must have competent counsel.

 

While adult content production has never been more a more inexpensive and available to a broader spectrum of adult entertainment companies, as you can see from the foregoing, it is nevertheless as much a legally complex endeavor as it has always been, if not more. Consequently, it cannot be overstressed that if you are, or if you are considering becoming, an adult content producer it is imperative that you consult with a competent and experienced adult entertainment attorney.

 

This article is not intended to be, nor should be considered to be, legal advice. If you have a legal question or other matter related to the any of the topics discussed in this article, I strongly urge you to contact our office at the number below or seek the counsel of another qualified and experienced adult entertainment attorney familiar with the legal matters discussed in this article.

 

1Gregory A. Piccionelli is an intellectual property attorney specializing in adult entertainment matters. He can be reached at Piccionelli & Sarno at (818) 201-3955 or greg@piccionellisarno.com.

 

 

 

 

 

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