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Legal Update: August, 2004: Part 1

This installment of August's legal update by noted First Amendment attorney Larry Walters examines the latest news on the Perfect 10 case, recent spam prosecutions and more...

Perfect 10 Strikes Out In Court
Norman Zada, the owner of Perfect 10, Inc., filed a lawsuit against Visa, MasterCard, First Data Corp., Cardservice International, and Humboldt Bank in January for contributory and vicarious infringement, which was dismissed by the United States District Court for Northern California. Zada's lawsuit alleged that the companies and banks facilitated and profited from the illegal use of his copyrighted material on other adult entertainment websites. The case was dismissed by Judge James Ware for Perfect 10 failing to provide enough evidence that the companies participated in copyright infringement. Zada claims over the past six years he has lost in excess of $29 million due to illegal use of his content, and he has spent nearly $8 million for attorney’s fees defending his content The court found that the credit card companies were too far removed from the content for vicarious liability to attach. Perfect 10 plans to appeal the ruling.

This ruling comes on the heels of after another ruling in a similar case, Perfect 10, Inc. v. CCBill, LLC, et al., where Perfect 10 sued IBill, Internet Key, CWIE, and CCBill for copyright and trademark infringement, trademark disparagement, unfair competition, false advertising, violation of right to publicity and violations of RICO. In July, United States District Judge Lourdes G. Baird rejected in part Zada's lawsuit against CCBill, iBill, and Internet Key based on the determination that the three companies did not directly or knowingly infringe on Perfect 10's content and that they qualified for the safe harbor protections under the Digital Millennium Copyright Act (“DMCA”). The Court noted that CCBill merely “provides a connection to the material on its clients’ websites through a system which it operated in order to provide its clients with billing services.” The Defendants also sought protection from the state law claims under Section 230 of the Communication Decency Act (“CDA”). Perfect 10 responded by claiming that the CDA’s legislative purpose was to protect minors from harmful material on the Internet, that the Defendants aid in the distribution of offensive and obscene material, and thus the Defendants should not be afforded protection under the CDA. However, the Court stated that CDA immunity is not based on the content of information, and the portion of the CDA attempting to regulate indecency on the Internet based on content has consistently been found unconstitutional by the courts. Therefore, the CDA barred the state law unfair practices claims.

Spam Update
The Federal Communications Commission (“FCC”) moved to insulate cell phones and personal digital assistants (“PDAs”) from receiving e-mail spam, by issuing rules requiring marketers to have explicit permission from wireless-device users before sending any commercial e-mail. The FTC also urged the industry to develop technologies to prevent spam from overwhelming wireless devices the way it has inundated computers. The rules are not applicable to cell phone to cell phone text messaging or to services that simply forward existing computer e-mail messages to a wireless device or allow the wireless device to connect to a computer-based mail account. FCC Chairman Michael Powell said in a prepared statement, "By prohibiting all commercial messages to wireless phones and PDAs absent affirmative consent from the consumer, Americans can now use their wireless devices freely, without being bothered by unwanted and annoying messages." This rule is in contrast to the CAN-SPAM Act, which allows marketers to send unsolicited spam e-mail until consumers request them to stop.

Spam Prosecutions
United States District Court Judge Manuel Real ordered Daniel Khoshnood, the owner of a California-based Internet company, to pay Microsoft $3.95 million for illegally using Microsoft’s trademarks and name in “typosquatting” spam messages. Microsoft filed the lawsuit last year against Khoshnood and his companies, Pointcom and Joshuathan Investments, before the CAN-SPAM Act became effective, for sending millions of unsolicited e-mail messages in violation of the Washington Commercial Electronic Mail Act and the Washington Consumer Protection Act. Microsoft Attorney Aaron Kornblum stated that spammers “need to understand that their activity is illegal and that if they inundate consumers with spam they will be identified, targeted and sued.” In fact, Microsoft has filed approximately 60 lawsuits against alleged spammers in the United States since 2003 and has been awarded a total of $54 million in resolved cases.

Sex News
The newest in the legal dispute over Cameron Diaz’s S&M video “She’s No Angel: Cameron Diaz,” escalated with allegations that Seth Warshavsky, who released the Pamela Anderson-Tommy Lee sex tape on the Web in 1997, may be linked to the video’s distribution. Diaz’s video features her topless, wearing S&M clothing. Cameraman John Rutter and Diaz have been battling over the tape’s rights for almost one year. An anonymous source claimed that Warshavsky, who allegedly fled to Thailand in 2002, is involved with the Diaz video. However, the anonymous source stated, “Some of the guys [reputedly involved with the Diaz video] are offshore, and you can’t do anything about them.”

In other news, the Brantley Harbor Homeowners Association, located near Orlando, Florida, won its lawsuit against a gay Website, College Boys Live, which they sued for violating regulations concerning running a home-based business. Benjamin Bull, chief counsel for the Alliance Defense Fund, the organization who funded the lawsuit, stated that the gay Website was a commercial business that generated income “from illicit activity . . . (that) was not only a nuisance that was in clear violation of the homeowners' association regulations (but) also posed a danger to residents.” He denied homosexuality was a motive in the lawsuit and articulated that the dangers of the site included increased speeding cars in the neighborhood and increased noise from parties. The dispute began in 2001, after a water balloon broke a window in the house and a curious neighbor came to help, following which the “curious neighbor logged on (to College Boys Live), launching the firestorm of controversy.”

Girls Gone Wild Settle With The FTC
Mantra Films, the sellers of Girls Gone Wild videos and DVDs, has settled unauthorized shipping and billing charges with the FTC for $1.1 million, as a combined consumer redress and a civil penalty. In 2003, the FTC filed the complaint against Mantra Films and its stockholder Joseph Francis for violating the FTC Act, the federal Electronic Fund Transfer Act, and the Unordered Merchandise Statute. A court order was issued barring Mantra Films from future activities involving failure to disclose how continuity programs work clearly, enrolling customers in the programs without their consent, and charging customer’s credit or debit cards automatically without the customers' consent. According to the Settlement Order, $548,392.00 of the money will go to consumers who are put into the continuity programs without their consent from February 2002 through June 2003, but canceled enrollment when they returned the first monthly shipments for refunds and got no refunds. The remainder will pay for the civil penalty. Mantra Films will have 60 days from its July 30th signing to comply with the redress order.

Court Bans Sex Toys in Alabama
In Sherri Williams et al v. Attorney General of Alabama, the Eleventh Circuit Court of Appeals upheld a 1998 Alabama law banning the sale of sex toys, which include "any device designed or marketed as useful primarily for the stimulation of human genital organs.” After Alabama’s law went into effect in 1998, a group of plaintiffs sued then-Alabama Attorney General William H. Pryor Jr., alleging that the new law violated their civil rights, including the guarantees of free expression, due process and safety from unreasonable government searches of homes. With the ruling, Alabama joins Georgia, Mississippi, and Texas (and perhaps Kansas) with adult toy bans. Most sex toys are illegal to sell in those states, but shops often can survive prosecution if they can prove the products are for novelty use only. The court said that Alabama’s sex-toy laws, which are punishable by up to one year in prison, do not affect the use of condoms and Viagra or similar drugs, and do not apply to sex toys prescribed by a physician.

However, the Court’s reason may be flawed because the United States Supreme Court recently ruled that the right of privacy extends to personal sexual autonomy. Williams plans to appeal the case to the United States Supreme Court.

Lawrence G. Walters, Esquire, is a partner with the law firm of Weston, Garrou & DeWitt, with offices in Orlando, Los Angeles and San Diego. Mr. Walters represents clients involved in all aspects of adult media. The firm handles First Amendment cases nationwide, and has been involved in much of the significant Free Speech litigation before the United States Supreme Court over the last 40 years. All statements made in the above article are matters of opinion only, and should not be considered legal advice. Please consult your own attorney on specific legal matters. You can reach Lawrence Walters at Larry@LawrenceWalters.com, www.FirstAmendment.com or AOL Screen Name: "Webattorney."

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