The boyfriend, 15, might also be in legal hot water. The stepdaughter is 14.
The phony arrest was caught on tape, reports CBS News Correspondent Priya David Clemens.
The officer claims he faked the arrest to send a strong message about underage sex.
But now, authorities are trying to determine whether his actions were that of an overprotective father -- or a police officer who seriously misused his power.
The grainy cell phone video, obtained from the San Jose Mercury News, shows the police officer admonishing the boy-- their identities have been concealed.
The teen is seen being handcuffed and told he's under arrest.
The officer is heard saying, "not a good thing that the person you had sex with is a cop's daughter."
The video was shot by the boy's father, who can also be heard admonishing his own son, saying, "Use your head. Think about what he's talking to you about" as the officer threatens the boy with criminal charges "for having sex with a minor."
But after five minutes, the officer undoes the handcuffs and later tells the boy's family he had no intention of making an arrest, and that he was only there to send the boy a message --.something the family now says is a gross misuse of police power.
The officer also took his stepdaughter on a fake drive to juvenile hall, David Clemens notes.
The teen has been hit with misdemeanor charges of having sex with a minor.
Tony Boskovich, an attorney for the family, told CBS News, "The officer is about two feet away from him, towering over him, with his right hand on his duty weapon. In my opinion, he committed a kidnapping, he committed false imprisonment."
In a statement to CBS News, the officer's lawyer responded, saying the officer "is in control and is clearly concerned with the unlawful sexual relations the young man has had with the officer's daughter. Every parent would agree this is sage advice and we should not allow this message to be lost because of a misplaced focus on what the girl's father was wearing."
The teen wants the officer to go to jail, David Clemens says, and police officials are mulling changes in the rules governing how officers interact with family members or people they know.
But for now, that uniform has been taken away: The officer has been suspended as authorities investigate the case.
"I think," says former federal prosecutor Laurie Levenson, "the fact that it was a stepfather who intervened is going to make this less likely to be a criminal charge. … But people understand how, in family matters, people get very upset."
Click on the video below to see David Clemens' report, which includes the video of the phony arrest: