The case is United States v. Hotaling, decided on February 28. Child pornography has no First Amendment protection, one of the few areas where the government can restrict speech on the basis of content. This is because making child pornography illegal is a good way to drain the swamp; making it illegal to possess these images makes it less likely that someone else will create them. Also, the psychological trauma associated with having your naked child images living on forever in someone's hard drive or elsewhere makes it a compelling governmental interest to stop child porn.
The guy in this case was morphing images (probably through computer technology) to place adult naked bodies below the faces of children. His computer hard drive showed that they were placed in folders that could be used to create a website. The images were not distributed online, however. Taking up an issue that the Founding Fathers never dreamed up in a million years, the Court of Appeals (Newman, Hall and Restani) finds that "morphed child pornography utilizing the face of child and body of an adult is not protected expressive speech under the First Amendment."
In 2002, the Supreme Court said that virtual child pornography is protected by the First Amendment because it does not use pictures of actual minors. The Second Circuit adopts the views of a sister Circuit in distinguishing that case:
We agree with the Eighth Circuit that the interests of actual minors are implicated when their faces are used in creating morphed images that make it appear that they are performing sexually explicit acts. In this case, even though the bodies in the images belonged to adult females, they had been digitally altered such that the only recognizable persons were the minors.
Furthermore, the actual names of the minors were added to many of the photographs, making it easier to identify them and bolstering the connection between the actual minor and the sexually explicit conduct. Unlike the computer generated images in Free Speech Coalition, where no actual person’s image and reputation were implicated, here we have six identifiable minor females who were at risk of reputational harm and suffered the psychological harm of knowing that their images were exploited and prepared for distribution by a trusted adult.