Over two years ago, I wrote an article for XBIZ titled “Preventing Legal Problems Before They Start” (which I recommend checking out sometime).
I discussed the importance of having your lawyer conduct regular “legal checkups” to ensure that your adult entertainment business is running in accordance with applicable law, as well as what such a checkup should include — and why, more than ever, it is essential that you are up-to-date on the latest laws and regulations that affect your business and the consequences of non-compliance.
There is no such thing as a ‘standard privacy policy’ and stealing another website’s privacy policy is suicide.
The article also stressed that business operators taking the “if it isn’t broken, don’t fix it attitude” is nothing more than driving towards a dead end.
Although I wrote this article back in May 2017, I continue to be regularly contacted by XBIZ readers about it and am proud to say it has led to saving adult business operators a great deal of pain and suffering.
So now, after two years of conducting “legal checkups,” I thought that it would be a great opportunity to share a few of the most common findings.
Stolen Term Syndrome
I’ve spoken and written ad nauseum about the dangers of stealing the legal terms and disclaimers from another website because you think that all legal disclaimers are all the same. Here is a perfect example of a disaster that I encountered as a result of a company trying to save a few bucks. My client (the good guys) had significant legal claims against a certain company (the bad guys).
At some point, the bad guys decided to steal another website’s legal terms without legal review. As it turns out, despite having virtually no connection to the State of Michigan (as they were located in a state thousands of miles away), their stolen terms had a clause that bound them to litigate all disputes in the State of Michigan. As you can imagine, the bad guys were not too thrilled about getting sued in a jurisdiction they’d never even visited. Oops!
See, data security and the handling of sensitive data is a war being fought by virtually every state and country. There is no such thing as a “standard privacy policy” and stealing another website’s privacy policy is suicide. Each week, another jurisdiction passes a new law related to data handling and is stepping up the penalties associated with violations. This includes both extreme civil fines that can easily bankrupt a business and potential criminal prosecution for certain types of violations.
One of the most common laws being passed in jurisdiction after jurisdiction imposes severe penalties for making a misrepresentation in a privacy policy — so, does it make sense to just copy and paste someone else’s privacy policy? If you still can’t answer that question, then I encourage you to talk to your lawyer … now! As an aside, if you still aren’t taking the GDPR seriously and haven’t gotten your business into compliance, then you are playing with fire.
Fracture of the DMCA
It is ludicrous that in 2019, I still have to constantly remind operators of websites and platforms that support user-submitted content that DMCA protection is monumentally essential. No matter how many copyright infringement lawsuits get filed and make headlines, apparently the message is still not being conveyed properly.
During the course of “legal checkups,” I have encountered numerous individuals and businesses that believe that they have done everything necessary to avail themselves of the DMCA Safe Harbor defense should it ever become necessary, but then I find out a lot of folks don’t realize that as a service provider, you are required to designate an agent to receive notifications of claimed infringement with the United States Copyright Office.
No registration in the DMCA designated agent directory means no safe harbor protection. Over and over, during the course of performing legal checkups and a DMCA compliance audit, I’ve had people assure me that they are compliant because they have a webpage titled DMCA, with a functioning email address. When I ask the person whether they’ve registered with the United Copyright Office, the most common answers I get are “I thought that was optional” and “What’s that?” Hence, my diagnosis is the person is suffering from a “fracture” of the DMCA.
Pre-Checked Box Blindness
Website operators and business owners are typically very proud, and they should be. After all, they are running successful online businesses in one of the most highly censored arenas in the world. When clients come to me asking for a “legal checkup,” 9 out of 10 times they tell me that they don’t expect me to find anything wrong and “maybe just a tweak here and there.”
I usually follow up by asking whether they believe their business is compliant with the various regulations enforced by the dreaded FTC, including ROSCA. Once again, the client responds by saying “Oh, absolutely … I’m sure you won’t find any serious issues.” And with a few clicks of my mouse, I head to the client’s signup page, where I find nothing but negative options (aka pre-checked boxes).
ROSCA specifically places limits on pre-checked boxes and makes it illegal for a person or company to charge any consumer for any goods or services sold in a transaction through a negative option, unless the person: (a) “provides text that clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information; (b) obtains a consumer’s express informed consent before charging the consumer’s credit card, debit card, bank account or other financial account for products or services through such transaction; and (c) provides simple mechanisms for a consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account or other financial account.” My diagnosis is pre-checked box blindness.
The good news is that all of the issues I commonly see are curable and can be resolved with a little time, effort and investment in proper legal compliance. Like I wrote back in 2017, “a proper legal checkup” will give you the opportunity to talk to your lawyer about past, present and future business intentions. As much as a “legal checkup” enables your attorney to get a handle on where you may have loose ends to tie up, it also presents a unique opportunity for you to be educated on the various changes and creations to applicable law.
Don’t wait until it’s too late.
Corey D. Silverstein is the managing and founding member of Silverstein Legal. His practice focuses on representing all areas of the adult industry and his clientele includes hosting companies, affiliate programs, content producers, processors, designers, developers, operators and more. He is licensed in numerous jurisdictions including Michigan, Arizona, the District of Columbia, Georgia and New York. Contact him at MyAdultAttorney.com, corey@silversteinlegal.com and (248) 290-0655.