educational

2257 Regs, Live Chat Performers

Gregory Piccionelli

Lately, the adult industry’s legal focus has been on hot-button topics like online piracy, new laws regulating cross sales and, of course, .XXX.

Because of this, there have been relatively few recent discussions in the industry press regarding the federal criminal laws known as the “2257 regulations” (18 U.S.C. §2257, 18 U.S.C. §2257A and 28 CFR 75 et seq.).

It is a sobering thought in the live cam context that all producers under the 2257 regulations are subject to FBI inspections and prosecution for any, even trivial, violations of any of their dozens of record-keeping and labeling requirements.

This is unfortunate because the 2257 regulations are alive and well, especially after recently surviving the first round of a constitutional challenge brought by the Free Speech Coalition in Pennsylvania, which saw U.S. District Judge Michael Baylson grant the government’s motion to dismiss FSC’s lawsuit.

Fortunately, FSC has appealed Baylson’s ruling to the 6th U.S. Circuit Court of Appeals. So we all can continue to hope to see the day that justice and reason will prevail with the eventual invalidation of this horrific law. But that day, if it is to come at all, is still a long way off. So, unfortunately, since the constitutionality of the 2257 regulations has been ultimately upheld in literally every legal challenge to the law to date, it would be foolish for any adult entertainment business or entrepreneur to do anything but comply with all of the 2257 regulations.

Because of this, and because we are already within the statute of limitations period for potential prosecutions under a republican administration should Obama not be re-elected, I thought that it may not be a bad idea to revisit the 2257 regulations, at least in regard to one frequently overlooked, but increasingly important context: live chat performances.

The 2257 regulations and live chat.Live adult videoconferencing, otherwise known as “live chat,” has become one of the most profitable market segments of the online adult entertainment industry.

As I have frequently discussed in previous articles, live content is one of the areas of the adult business that is, and is likely to remain, relatively resistant to the negative effects of content piracy, along with adult dating, erotic novelties sales, and sexually explicit virtual worlds services. It is no wonder that a huge portion of traffic generated at tube sites is sold or directed to live content providers.

But, unfortunately, as with previous cycles of new adult entertainment business development, more often than not, new adult cam businesses tend to operate, at least initially, under a management mandate of “generate the sales now and talk to the lawyer later.”

Having been one of the principal lawyers in the business for so many years, I am sorry to say that the prevalence of this unfortunate and misguided business philosophy, and its application in the live cam business arena, is hardly surprising. But it is for me, and should be for any participant in, or affiliate of, a live cam business, a matter of great concern if the cam business is not in compliance with the 2257 regulations. And unfortunately, I am sorry to say, many cam businesses are simply not in full compliance with the 2257 regulations.

The problem starts with the fact that many cam business operators, live content aggregators and cam performers simply do not know that the 2257 regulations apply to transmissions of live content as well as recorded content.

For many years prior to the FSC’s first challenge to the 2257 regulations and the subsequent changes to 28 CFR 75, it was only Robert Sarno and I, along with a relatively small number of other adult entertainment attorneys, that believed that the 2257 regulations fully applied to live content. Litigation with the government, which resulted in Department of Justice opinions regarding the matter, subsequently published DOJ comments and, ultimately, new explicit regulatory provisions pertaining to live content (e.g., the requirement to store brief recordings of live cam shows in the 2257 records), all proved that our interpretation was indeed correct all along.

Nevertheless, like the supposed “two-photographic IDs requirement,” the erroneous 2257 counseling by some lawyers regarding the inapplicability of the 2257 regulations to live content years ago, which unfortunately was repeatedly disseminated by armchair lawyer-wannabes on the boards, seems to have left a somewhat indelible mark on the collective psyche of the industry.

But above and beyond the common misperception that the 2257 regulations do not apply to live content, is a widespread and increasing problem of a lack of understanding of who has to keep the 2257 records pertaining to live cam content and how the live content must be properly labeled to indicate were those records are maintained. This is, in my opinion, becoming a problem of epidemic proportions as literally thousands of online chat performers are in the business of creating content subject to the 2257 regulations (“2257 content”) on a daily basis.

In a nutshell, here’s the problem. The party that initially creates 2257 content is defined as a “producer” in the 2257 regulations. In fact, the party that originally creates the content is defined as a “primary producer” in 28 CFR 75.1. As such, the producer has an obligation to create and maintain the records required by the 2257 regulations in precisely the manner the law prescribes.

In the case of an independent live chat performer providing live content for an adult cam website, can you guess who the primary producer of the live show content is? Well I can tell you that I have seen many surprised faces of live cam performers, cam company owners and live cam marketing affiliates over the years as I have informed them that the primary producer of explicit live cam content is almost always the cam performer. After my disclosure there are usually two responses, one following quickly upon the heels of the other. The first is, “oh yea, that makes sense,” followed by “does that mean the performers have to have all the 2257 records?”

Given that the primary producers in the live adult cam business are, more often than not, what the business calls “talent,” i.e., persons not traditionally known for their record-keeping skills, it should go without saying that the exploding adult live cam business is like an accelerating train on a collision course with the next republican DOJ enforcement mountain. It is a sobering thought in the live cam context that all producers under the 2257 regulations are subject to FBI inspections and prosecution for any, even trivial, violations of any of their dozens of record-keeping and labeling requirements. To get a handle on how big this problem could be, consider, for example, how many live cam performers currently affix a proper 2257 statement to their live shows indicating where the records for their shows are maintained.

And lest one might be led to believe that problems associated with 2257 regulations compliance in the context of live cam performances are limited to the primary producer-performers, consider the following.

Another potential legal train wreck in the making results from the criminal liability exposure faced by parties benefiting by, or otherwise associated with, a live chat performer’s failure to comply with the 2257 regulations. This problem, can reach, for example, to content aggregators, such as companies that contract with independent live cam performers to provide live content through the aggregator’s site(s). It can also reach to marketing affiliates that send traffic to such aggregation sites or to the noncompliant cam performers directly.

The zone of potential liability for 2257 Regulation noncompliance by cam performer-producers can most easily result from two potential causes, (1) the violation of a live content aggregator company’s 2257 regulation obligations as a live content “distributor” and (2) the imposition of vicarious criminal liability upon the live cam company, such as for aiding and abetting a performerproducer’s violations of the 2257 regulations.

The “Distributor 2257 Obligation” (18 U.S.C. § 2257(f)(4)).Even lesser known than the applicability of the 2257 regulations to live cam performances is the obligation imposed by the law upon non-producer distributors of 2257 content. The “2257 distributor obligation” applies to sellers and distributors of adult content, including those that do not create or modify the content or upload it to a website server.

It is, therefore, an obligation that is separate and apart from the primary and secondary producer’s record keeping and labeling obligations. Specifically, Section (f)(4) of 18 U.S.C. § 2257 sets forth the 2257 distributor obligation stating that it is unlawful for any person to knowingly sell, offer for sale, or transfer, any content that is subject to the 2257 regulations which does not have a compliance statement describing where the records required to be kept by the producer of the content are located. This express prohibition against advertising, selling or transferring 2257 content without a proper compliance statement is, unfortunately, not nearly as well-known as the infamous record-keeping and labeling requirements imposed on primary and secondary producers by the 2257 regulations.

It is, in fact, a third type of obligation under the 2257 regulations that is in addition to the record keeping and labeling requirements. And it is an obligation applicable to any person or entity that transfers the content regardless of whether they initially produced the material (i.e., as a primary producer) or merely uploaded the content to, or manage the content on, a website (i.e., as a secondary producer).

Many operators of online adult companies with business models that do not fit within the definition of what constitutes a “producer” under the 2257 regulations are shocked and surprised to learn that the 2257 regulations still apply to them even though they have no recordkeeping obligations.

And surprise often becomes sincere concern upon the realization that the “distributor” obligation imposed upon 2257 content providers is not insignificant. This is because the DOJ has repeatedly stated that any violation of the 2257 regulations, no matter how trivial, comprises a fully chargeable offense under the 2257 regulations subjecting the offender to up to five years in prison for the first count and up to 10 years for each subsequent count. Thus any offering, selling or otherwise transferring of any 2257 content without a proper compliance statement subjects a non-producer distributor to the same penalties as a producer of 2257 content that fails to keep any 2257 records all!

A person or entity could also be vicariously exposed to criminal liability for a live cam performer’s failure to comply with the 2257 regulations. For example, a live cam content aggregator or an affiliate marketer could potentially face criminal prosecution for aiding and abetting criminal activity or participating in a criminal conspiracy to violate the 2257 regulations.

Federal law defines “aiding and abetting” as follows: “Whoever commits an offense against the U.S. or aides, abets, counsels, commands, induces or procures its commission, is punishable as a principle.” Thus, the offense of “aiding and abetting” occurs when a person willfully associates himself or herself in some way with a criminal venture and willfully participates in it as he or she would in an endeavor that he or she wishes to bring about. Conspiracy, on the other hand, requires the government to prove knowledge of, and voluntary participation in an agreement to violate the law. Conspiracy does not require a completed crime, while “aiding and abetting” does not expressly require proof of an agreement to violate the law.

Since violation of the 2257 regulations can be as simple as failing to display a proper compliance statement indicating where the required 2257 records are maintained, there is a real danger that a party that provides public access to such non-compliant live cam shows though a website or knowingly drives traffic to such non-compliant live cam shows could potentially be at risk.

Technical challenges and solutions.As new technologies become available to adult entertainment businesses, they often create new, and sometimes, vexing, legal challenges for companies that wish to use the technologies in the context of creation and/or distribution of explicit adult content. Such was the case when adult content became available via VCR tapes and DVDs, via dial-aporn lines, and, of course, via the World Wide Web. And now ubiquitously available live cam chat via computers from laptops to iPhones is similarly providing its own new and unique legal challenges.

But as a long-time adult entertainment attorney, like many of my colleagues, I have repeatedly been tasked with burden of creating for our clients the means to exploit a new technology while fully complying with the law. Rest assured that the legal challenges presented by live cam business models are not insurmountable by any means. In fact, our firm has been providing numerous solutions for the problems discussed above to our live cam clients for many years. For example, we have developed effective uses of the third party record-keeping alternatives provided in the 2257 regulations to address some of the issues above.

Unfortunately, a comprehensive or detailed discussion of those solutions clearly exceeds the scope of this article. But if you or your company would like further information or counseling regarding the matter, please feel free to contact me via the email address or phone number below.

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.

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

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