"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
AREAS OF PRACTICE
• Internet Matters
• Music & Other Entertainment Matters
• Intellectual Property Rights Enforcement
• Crowdfunding Matters
• Freedom of Expression Matters

Meet The New Boss, Same As The Old Boss?

 

As virtually every veteran entertainment businessperson knows, the industry that was formerly characterized as “recession proof”, has been reeling from the combined effects of a depressed economy, rampant piracy and a glut of free legal content. In response, many adult entertainment companies are evolving their business models to meet the challenges presented by the current environment. But in addition to economic pressures, adult companies are now beginning to face new challenges and new opportunities that are presented by whole host of new technologies and technological improvements poised to redefine how adult entertainment is created and monetized, and perhaps, even defined. Innovations such as IPTV, 3D video, 3D worlds, tactile devices, mobile video and mobile location-based apps are already beginning to impact the industry. Meanwhile, all this is happening against the backdrop of unprecedented social acceptance of adult content on a planetary scale, that just keeps growing and producing additional challenges and opportunities for the industry such as the exploding phenomenon of user-generated content.

 

Because of all the economic, technical and social upheaval faced by the industry, it is, unfortunate, but understandable, that many adult entertainment entrepreneurs are devoting much less time and resources to deal with the threat of criminal law enforcement, and are now focusing almost exclusively on the many economic issues they face. For many, this reallocation of resources seems particularly justified since it is generally assumed that the Obama administration is not as hostilely disposed toward the industry as its predecessor was. Unfortunately, after more than a year in office, there are troubling signs indicating that assumptions of the Obama administration’s favorable, or even neutral, disposition toward the adult entertainment industry might turn out to be wishful thinking.

 

As such, I thought that perhaps it’s a good time for a little reality check on the issue of possible enforcement of federal criminal laws, especially the obscenity laws, against the industry. Before we begin, however, it is important to state that I do not think the industry is on the verge of some kind of broad federal prosecutorial sweep of the type effectuated under the Reagan and Bush I administrations or threatened by the Department of Justice under George Bush. But for the reasons discussed below, I do think that the advice given in this column after the election of Barack Obama, i.e., that it is not yet time for adult entertainment entrepreneurs to let down their guard, is perhaps even more applicable today than it was in November, 2008.

 

Obama: Friend of Foe?

 

One of Obama’s catchy campaign slogans was “Obama, change we can believe in”. Unfortunately given the current administration’s apparent policy of compromising many of Obama’s stated core objectives including health care, military deployments, intrusive governmental surveillance, etc., some supporters are now wondering if the phrase should have been more accurately written as “Obama, you won’t believe the change”.

 

Indeed, actions by the Obama administration so far might give many in the adult entertainment industry good reason to wonder whether the words of candidate Obama are consistent with the actions of President Obama.

 

For example, regarding regulation of adult content on the Web, candidate Obama’s position was stated on his official website under the heading “Ensure the Full and Free Exchange of Ideas through an Open Internet and Diverse Media Outlets”:

 

“Obama values our First Amendment freedoms and our right to artistic expression and does not view regulation as the answer to these concerns. An Obama administration will give parents the tools and information they need to control what their children see on television and the Internet in ways fully consistent with the First Amendment. ”

 

These were welcome words for everyone in the adult entertainment business who had suffered eight long years under an administration openly hostile both to the adult industry and the core freedoms that protect its expression.

 

Yet despite candidate Obama’s stated position regarding Internet content regulation, as President, Obama chose as his Attorney General, a gentleman named Eric Holder. This raised some eyebrows among the industry’s First Amendment attorneys because of concerns regarding some of Holder’s prior actions when he was Deputy Attorney General under Janet Reno in the Clinton Administration. Most notably, in 1998 Holder sent a memo to all the U.S. Attorneys (federal prosecutors), stating that due to "increasing concern about the distribution of obscenity and child pornography both by traditional purveyors of 'adult material' and in particular by those who distribute such material over the Internet," it was important to remind the prosecutors that one of the Department of Justice's "priorities" was the prosecution of adult content producers. The memo further stated:

 

"[P]riority should be given to cases involving large-scale distributors who realize substantial income from multistate operations and cases in which there is evidence of organized crime involvement . . . However, prosecution of cases involving relatively small distributors can have a deterrent effect and would dispel any notion that obscenity distributors are insulated from prosecution if their operations fail to exceed a predetermined size or if they fragment their business into small-scale operations. . . In particular, priority also should be given to large-scale distributors of obscenity over the Internet. Because of the nature of the Internet and the availability of agents trained in conducting criminal investigations in cyberspace, investigation and prosecution of Internet obscenity is particularly suitable for federal resources."

 

The concerns of many adult entertainment attorneys were, however, substantially diminished by Obama’s selection of David Ogden as Deputy Attorney General, second in command to Holder. Ogden, a long time civil rights attorney and noted free speech advocate, had represented many adult entertainment businesses and was well-known and well-respected among adult entertainment attorneys. One could almost hear a collective sigh of relief by free speech attorneys when Ogden was confirmed by the Senate.

 

Further, because the post of Deputy Attorney General can be likened to the Justice Department’s chief operating officer with substantial oversight and decision making authority, many adult entertainment attorneys had hoped that Ogden would quickly disband the special “Obscenity Prosecution Task Force” that was created in 2005 under Bush specifically to bring obscenity prosecutions against adult businesses and their owners. While a less likely possibility, it was also nevertheless hoped by many free speech attorneys that Ogden might even push for dismissal or pretrial settlement of several ongoing obscenity cases that had been filed by the task force under the previous administration against adult entrepreneurs such as John Stagliano and Paul Little (Max Hardcore). But soon it became clear that the cases would continue to be prosecuted and, worse, that the Obscenity Prosecution Task Force was not going to be disbanded.

 

Then, after only 10 months on the job, my colleagues and I were stunned last December when we learned that Ogden had unexpectedly tendered his resignation to return to private law practice. To date, neither the Justice Department nor Ogden have published any details regarding why Ogden decided to leave the agency. Ogden’s sudden and effectively unexplained departure has left many to wonder if there were policy differences between Ogden and Holder regarding the Justice Department’s apparent continued interest in obscenity prosecutions and its strong continuing defense of the federal record keeping and labeling regulations (18 U.S.C. § 2257 et seq.), which, incidentally, Ogden himself had tried to judicially invalidate nearly twenty years ago in case of American Library Association, et al. v. Reno.

 

But Holder’s anti-porn history, Ogden’s departure and the continued vitality of the Obscenity Prosecution Task Force are not the only reasons why concerns are beginning to mount regarding Obama’s alleged commitment to First Amendment values when it comes to adult content. Recently in cases handled by our firm and other firms, Obama’s Justice Department has vigorous opposed the logical, ethical, constitutionally-correct and freedom-preserving notion that in obscenity prosecutions involving adult content distributed via the Internet, the charged content should be judged by a national community standard and not by the traditional local community standards evaluation used for physical content, like DVDs.

 

One would think that support for such a national standard in Internet obscenity cases would be a no-brainer for an administration that came to power with the promise to “Ensure the Full and Free Exchange of Ideas through an Open Internet”. Even Supreme Court Justice Steven Breyer and former Justice Sandra Day O’Connor have noted the inherent unfairness, impracticality and unconstitutionality of an obscenity evaluation mechanism that subjects persons using an automatically world-wide distributing medium (the Web) to the community standards of a single small community, which might be unusually or even uniquely intolerant of adult content. According to Breyer, requiring that local community standards be applied to content distributed by the Internet gives such conservative communities a “heckler’s veto” over what can be distributed via the Internet.

 

But regardless of the clear need for a national standard for Internet content distribution, to date, the Obama Administration’s efforts to preserve the arcane local community standards have been successful in every challenge, excepting our case, U.S. v. Kilbride, in which we were able to obtain the first Federal Circuit Court ruling establishing the requirement that a national standard must be used to determine whether sexual content distributed via the Internet is obscene.

 

But disappointing as the Obama Administration has been so far in the area of its commitment to protect First Amendment freedoms on the Web, a new development might signal that even greater disappointments may lie ahead. According to confidential sources, the Obscenity Prosecution Task Force may be engaged in investigations in preparation for the initiation of new obscenity prosecutions. This would be an alarming change from the previous activities of the Task Force under the new administration which has been limited to the prosecution cases that were commenced under the Bush Administration. If true, such developments would be troubling indeed, particularly if the current administration is intending to take a play out of the Bush Administration’s playbook by using prosecutions of adult entertainment businesses to win votes.

 

I sincerely hope that the Obama Administration will not repeat the reprehensible habit of its predecessor to play politics with our First Amendment freedoms. But participants in this industry should have no illusions about the fact that pornographers are an easy political target and this is going to be a tough election year for democrats. And in that game, adult entrepreneurs must deal with the reality that while the adult industry as a whole might be an economic giant, it is a political pygmy in terms of its ability to influence Washington.

 

Next Steps

 

Given the current situation, I am advising my clients, in simple terms, “not to let down their guard”. While the industry and its attorneys have made great strides over the past two decades protecting our freedom to express erotic ideas, we are far from out of the woods. As such, the following are precautions I believe every adult business should take:

 

  • Evaluate the current legal compliance status of the company. Every adult entertainment enterprise should consult with a qualified adult entertainment attorney to determine whether their business is in compliance with applicable laws.

 

  • Be aware of the dangers of vicarious liability. Criminal laws can be violated vicariously. This means that party A can become criminally liable for the wrongful acts of a party B that party A aids or abets. Because so many adult entertainment business models, such as affiliate marketing programs, upsells, etc., financially connect independent adult companies to one another, the issue of vicarious liability for the criminal acts of another party must often be taken into consideration. To the greatest extent possible, adult businesspersons should take care to do business only with reputable outside entities. Evaluation of an adult company’s potential exposure to vicarious liability should also be performed only by a competent and experienced attorney in the field of adult entertainment law.

 

  • Beef up defenses. Our federal constitution, and the constitutions of the states, provide powerful protections of our freedom of expression. But those protections are not without limitation. Each adult businessperson should have a basic understanding of the scope of these protections. I have found that when operators of adult companies possess such knowledge their businesses have the best chance of consistently operating in a manner that provides the maximum amount of constitutional protection.

 

  • Join the Free Speech Coalition (“FSC”) and ASACP. I strongly recommend that each and every adult entertainment company join these two organizations. FSC works tirelessly to protect the rights of the industry participants and ASACP demonstrates to the world the industry’s commitment to battle child pornography and protect children from unwanted exposure to online adult content.

 

  • Get involved. Finally, I strongly encourage you to get involved in the political process. For it is only through the election of leaders that understand, respect, and truly champion our sacred freedom of expression that our rights will be protected from further erosion by politicians who are all too willing to pander to even the most intolerant of their constituents.

 

This article is not intended to be, nor should be considered to be, legal advice. I strongly urge you to seek the counsel of a qualified and experienced adult entertainment attorney familiar with the legal matters discussed in this article.

 

 

1Gregory A. Piccionelli is an adult entertainment attorney experienced in Internet matters. He can be reached at Piccionelli & Sarno at (805) 497-5886 or greg@piccionellisarno.com.

 

 

 

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