A little over two weeks after PayPal threatened to limit Smashwords's account if it didn't "correct" their titles containing bestiality, rape, and incest, Smashwords's founder Mark Coker and his company are trying to rectify the problem by working as a middleman between their 30,000+ authors, PayPal, and independent privacy rights and anti-censorship organizations rallying to their cause. As it stands now, PayPal has contacted Smashwords about the possibility of relaxing the enforcement and has assured the distributor that their account will not be in immediate risk of limitation pending ongoing discussions. The two sides have agreed to continue to work together in good faith so that a mutually reasonable outcome may be found, Coker told PW.

The issue began February 18, when Coker received an e-mail from PayPal notifying him that Smashwords had until February 24 to correct titles with the controversial topics or else the Smashwords account would be limited. PayPal told Coker: "Our banking partners and credit card associations have taken a very strict stance on this subject matter. Our relationships with the banking partners are absolutely critical in order to provide the online and mobile services we do to our customers. Therefore, we have to remain in compliance with their rules, which prohibit content involving rape, bestiality or incest."

It was then up to Smashwords to interpret their intent, so they modified their Terms of Service, and on the afternoon of February 24, Smashwords sent an e-mail to all of their erotica authors, asking them to remove bestiallity, rape, and incest content.

"The e-mail set off a hell storm of rage over the weekend directed at both PayPal and Smashwords," said Coker. "I spent the entire weekend engaging directly with authors via e-mail and on blogs, telling my side of the story and assuring them of our motives. I've never personally experienced such vitriol. It was tough to hear such attacks against us when I knew in my heart they were untrue and misplaced. The very people I wanted to protect were attacking me."

A few days later, PayPal suggested the relaxed enforcement, and Coker responded by informing Smashwords's authors in an email of his intention to work in good faith with PayPal. He also informed them that Smashwords would delay enforcement of the new proposed guidelines until after discussions with PayPal had concluded. In an email, Coker urged his community of authors and publishers to voice their opinions to PayPal and the credit card companies.

This e-mail reduced the uproar on the part of the authors. Said Coker: "I never changed my position, but I think people are now understanding my strategy better, and understanding I really do stand on the side of free speech and am against censorship."

Coker is keenly aware of the story that unfolded recently with Bookstrand, in which PayPal issued a similar ultimatum. That issue ended with Bookstrand deciding to drop most indie authors. To avoid a similar outcome, Coker is proactively welcoming the support of independent privacy and anti-censorship groups like the Electronic Frontier Foundation (EFF), the National Coalition Against Censorship (NCAC), and the American Booksellers Foundation for Free Expression (ABFFE). The organizations' responses can be read here and here. Coker and Smashwords will continue to work with PayPal: "Our intention is to work in good faith with PayPal to reach a mutually beneficial conclusion. They want our business and we want to continue our four year relationship with them. In the event we fail to reach a satisfactory conclusion, then we'll cross the bridge at that time."

"My hope is that this becomes a watershed event for free speech and the freedom to publish legal content," said Coker. "I think some are starting to view Smashwords as a company with the ability to stand up and fight for them, even though we are not a publisher. We're a distributor, but we have the ability to act as a collective of 37,000 indie authors and small publishers. I don't mean 'fight' in a legal, lawyerly way. I'm talking about the ability to raise issues, mobilize authors and readers, and work as a good citizen to represent the best interests of authors, publishers, readers and retailers. Their interests are our interests. The power of publishing is shifting from publishers to authors, and my job - our mission - is to serve them."