eBay picture thieves

The other day I reported the third case of someone stealing my wife's pictures on eBay. This is a really annoying practice that sometimes denies sales. The other seller doesn't have to take the time to produce a picture or write a description, then undercuts my wife by a couple of bucks. There is a reporting process but I don't leave it at that. I generally follow up with a notice that we may file a copyright lawsuit and demand a small payment and the signing of a settlement agreement. Essentially it defines damages for future violations and agrees to jurisdiction in our local court as a contract matter. With this approach, we never see a repeat pirate. Sometimes I hear people moan about how copyright laws are unfair and people should be allowed to use other's pictures. That ignores the time, effort, skill and equipment it takes to produce an effective picture. If anything, eBay needs to be more draconian on repeat violators. Many of these violators steal pictures as a regular practice and just relist with their own pictures whenever somebody occasionally properly reports the violation. Many of these violators are powersellers primarily BECAUSE they don't have to take the time to produce pictures, etc.

What Difference Can You Make

It is funny how consistent hard work seems endless until you take a look back. I was talking to a paralegal in one of the companies I monitor for. We were discussing one annoying perpetrator when we started talking about the beginnings of the monitoring program. Counterfeits were everywhere but everyone was using the company’s own pictures so that even we found it hard to distinguish the good, the bad and the ugly. There were days when hundreds of auctions were reported and hundreds more were up before they were pulled. Now we had it down to two or three for each product and the counterfeits were spotted on their first auctions. Others in the industry were asking how come our product wasn’t scalped like theirs were on eBay.
The answer is the same as why crime is high in one area but not another. It was nothing more than boring vigilance. Criminals know which police departments are paying attention for the slightest infractions and which more interested in coffee, doughnuts and women. We had been monitoring daily and thinned the herd with constant hunting. While many unscrupulous sellers had been put out of business, for others we could search their lists of auctions and see they had figured out who didn’t monitor.
Along the way we had spotted everything from counterfeits (which is a multi-billion dollar industry) to items stolen from every step of the supply chain (factory, ship, truck/train, store, website and home). And to think, if it weren’t for us, all of it would go completely unchecked. I was asked recently how much I figured counterfeiting was costing the company. I had to stop and think. From the records we kept, I knew we reported over 3,000 auctions a year. Considering some offered hundreds of units available and were clear counterfeits but many others were simply someone that had bought one and were no longer using it, it is hard to say. Assuming the repetitive sales cut out by the reported auctions, it is likely at least that number of displaced sales were stopped. The company’s units averaged at least $200 each so this would run easily in the range of $600,000 on the low side. Considering the collateral damage of diluted goodwill/value to authorized distributors in our marketing materials and the damaged goodwill of consumers stuck with an inferior quality unit they never understand is not the company’s, this figure is much higher. We won’t even consider the injuries caused by counterfeits you have to be trained to spot they are so close in appearance but not quality. I know because I have identified counterfeits responsible for some pretty nasty injuries.
That is why I marvel at how often I can pick a random product and find rampant infringement for it on eBay. What are these companies thinking? While there is a certain validity to the argument that since eBay is causing this, then eBay should stop it, there is equal validity to the reality that eBay is not going to be made to stop it on their own. eBay makes a valid point that although many things are obviously suspicious, they cannot possibly know every detail of every product of every manufacturer in the world. eBay does make efforts to filter auctions that offer “replica” items and other indicators. But when a seller uses the maker’s pictures and claims to be selling authentic, eBay can’t just pull the item because of a low price. Sometimes certain distributors put items on clearance at blow out prices. The other side to this coin is that once upon a time, flea markets were filled with these counterfeits. A company wanting to monitor would have to physically send people to these flea markets to walk the aisles. Now eBay is the place that has sucked all of the air out of the room. No flea market can match the volume an eBay seller can move. Now the end of the chain can be spotted from a desk. An experienced paralegal with a good outside counsel can identify and bust up rings with effective efficiency even though it must be constant. In the old days, it would take an army to hit all of the flea markets with enough presence to make a difference.
eBay, to be sure, has its own interests which ARE NOT yours. eBay can, however, be made useful and effective. There are programs to handle these situations but they all require the manufacturer to take the initiative. Since many of the violations have damages, a good legal team can almost pay for itself just in settlements and judgments, not to mention the damage you prevent by taking action. I have said it before, that while some wagon makers griped about the automobile and went out of business, others adjusted to the new reality and are in business to this day. The world is changing and you make the decisions for your business today.

What's the harm?

I just ran across a website that is dedicated to exposing counterfeits. Sometimes I do my job just thinking all I am doing is helping the profits of the company. In the back of my mind, I really am aware of all the stuff that is logically behind fakes, but a website like this really lays it out. I'll let the site do the talking. Counterfeits support everything from criminal gangs and terrorists to child labor and sweatshops.

http://www.myauthentics.com/myths.html

Who is stealing my pictures and why does it matter?

I have found that many people, especially a lot of the people using the pictures, don’t really understand the harm and don’t understand the need for enforcement. The irony of this reality is that they really do understand the value of using the pictures. For starters, anybody that has put more than ten auctions on eBay and made any effort to learn how to do it right knows that a picture is worth a thousand words as well as more sales and higher prices. It is just a fact, corporations like Sears and Wal-Mart spend millions on advertising including creating professional images, whether pictures, drawings or video. For starters, if some guy buying out a clearance rack in a city where the widgets didn’t fare so well uses the pictures on eBay, the advantage of the company’s dollars spent on the graphics is diluted. Their ads look like every seller’s auctions. But there are other reasons as well.
One of the biggest of these reasons to use the company’s pictures is to mask counterfeits. It has been my experience that a significant percentage of the volume sellers on eBay that use the “stock” photos, are not actually selling the pictured product. If buying a Thompson Chair (made up name) which is made of solid oak, masterfully formed and richly stained from an auction with a stock photo, you may find yourself in possession of a Townsend Chair, made of cheap pine and painted with a wood colored paint. It may even be oak but made cheaply and not nearly as sturdy. You name the product, cell phone batteries (severe problems with exploding counterfeits), the latest toy craze, clothing, designer items, etc. and counterfeits are being sold on eBay with stock photos. Some of these companies monitor their products, others do not.
If you manufacture or market a product and have never done so, just log on to eBay and type in the names of your products. If your products are popular at all, there is likely a lot of auctions. Even adding to it, notice how many auctions list dozens and sometimes more units available. Chances are if there are lots of these, there are lots of counterfeits and stolen/fraud related units. If you are not monitoring, the picture use is like to be close to universal. A well monitored product is usually filled with pictures obviously taken in somebody’s garage or living room. A byproduct of the monitoring is a knowledge born of experience which tells you which are counterfeits and which may be stolen. Once you have this knowledge, you can start hunting down the holes and plugging them, because it is your profits that are flowing out on that screen. While constant monitoring can seem costly, when you run the numbers on what you may be losing, the cost of not doing it is even greater.

Telecommuting

Telecommuting is a new buzzword and it is becoming more common. The major factors are rising gas prices, frustration with long commutes and evolving technology. In my business, I use telecommuting about one third of the year. I have also rejected jobs which are much better paying because of the long drive even though I had done that in the past. Currently, I have a tax business and I have an anchor job as an independent paralegal. The tax business is 1 mile from my home and I am eyeing properties for the future that are within 200 yards of my home. The company with my anchor job is 1.5 miles from my home. That is a departure from the past where I often faced commutes from 20 to 50 miles one way or 40 to 100 miles of driving daily.
So why do I telecommute? You have to understand the tax business. The tax season generally runs from January (tax year ends in December, can’t file a return until the tax year ends) to April 15 (the tax filing deadline). In between there is the occasional late filer for various reasons but that is by appointment only. During the tax season, it is like being a car salesman, if you aren’t there when the buyer stops by you don’t make the sale. That means I have to quit the job or do the job from my tax office during times without an appointment scheduled.
Fortunately, my anchor job lends itself to telecommuting. My base responsibility is to monitor the internet, mostly eBay, for the company’s products. It is basically a marketing and distribution company. While I take care of a number of other projects during the period I do go into the legal department, I really can handle it from anywhere I have an internet connection. There are a number of issues that arise. First off, when I find violations of the company’s intellectual property (unauthorized picture use or counterfeits being sold), I save the auction or web screen as an Adobe PDF file. When I am away from the office, I put these on a flash drive along with the correspondence and notices. Once a week I go in to download the auctions from the flashdrive. In the past, we printed out the auctions and kept paper files. This made it clumsy because if I had to refer to a past auction, the mountains of paper were at the legal department’s offices. I had to wait to take care of that during the weekly visit. The paperless office is a wonderful thing. Whenever an angry seller whose auction was removed or outside counsel preparing to file a lawsuit needs to see proof of what the auction contained, I now simply click through a few folders and attach it to an email. Before, that task involved looking through an index then searching through filing cabinets and flipping through stacks of paper followed by the copy machine and mail room or fax. That usually also involved cover letters and file copies, etc.
There is also the idea of internet access to computer files. Although there are risks involved with this, much of the work I do is not that sensitive and little if any of the correspondence is any internal decision making (ie whether we have grounds to demand removal of an auction and should we).
But as an independent paralegal, I also do work outside my anchor job. Many of these attorneys are 50 miles away or even occasionally across the country. These clients really benefit because my costs in setting up the office and computers, phones etc. are much cheaper than the clients can ever hope to achieve in the more expensive larger cities. I am in a less expensive city with an excess of empty commercial real estate. My office is a true bargain and if forced to I can simply work out of my fully functional home office. Meanwhile, rent for office space and the cost of equipment can add thousands to the cost of any employee as any business owner knows. I can charge a flat rate like $25 an hour that allows the attorney to save money on what their expenses would be for an in office employee while avoiding the responsibility to maintain that overhead. As I expand, I am finding that I can get competent paralegals to work for me for much less than they would think of accepting to commute to the large cities. I find a mix of their being able to work from their own homes or my offices is viable depending on the project. It is also very attractive to the worker who can then find decent paying work that allows them to manage their affairs much better by avoiding wasted time in a car and the accompanying expenses.
To the forward thinking business person, telecommuting offers expanded flexibility and cut costs. It is kind of ironic to think of attorneys and companies in Cleveland, Columbus and New York or Los Angeles shipping jobs to Canton, Ohio instead of India, Canada or Mexico but the economics and technologies are there. It just takes time for the realities to take effect.

eBay and Taxes

It is interesting watching eBay sellers and taxes. The congress finally started to address one of probably the biggest groups of unreported income earners today in the "American Housing Rescue and Foreclosure Prevent Act of 2008". The recent bill signed into law to rescue homeowners includes a provision designed to offset the expenditures. It requires providers such as paypal and eBay to start reporting its seller's income starting in 2010 to the IRS. The IRS has tried to do this with regulations but has met very stiff resistance from eBay. One estimate is that this will result in almost $1billion a year in additional taxes being paid that are already required by current tax laws.

Feeding this is both dishonesty, confusion and just plain ignorance (some of it willful). There are the people just like the bar owner that rakes in $5k a night and reports $2k with expenses of $2.5k. These folks will report only that which they can be caught with and even then report as little as possible. You also have the people that have heard the refrain nothing on the internet can be taxed. Yes, your state and city cannot levy taxes specifically on the internet use and sales. But already existing taxes such as capital gains, retail profits and sales tax still apply. Many people just plain don't know and eBay makes no effort to explain it to them. Then there are also those that believe everything on the internet should be free, including music, pictures and the ability to sell Tiffany and Rolex "replica" items.

The truth of the matter is that eBay and other internet sites are a Wild Wild West and the government is just now realizing it has to control this territory. I have been posting specials in my tax business to help those who are eBay sellers with reporting their tax income. I have not had a single taker. My wife is a seller and we report her income. Many are petrified because if they are a power seller, they AT LEAST have $12,000 in gross sales ($1,000 a month for power seller status). This is even scarier because as a self-employed person, the self-employment tax must be paid. This is both the employer's and the employee's half of the Social Security and Medicare taxes (total 15.3%). Fortunately, as a business there are a whole host of thing you can deduct. This includes eBay/Paypal fees, postage, supplies, the purchase price of goods, the computer and even possibly morgage/rent, utilities and other home expenses. All of these are subject to a maze of rules, regulations and exceptions that would give any intelligent person a migraine.

Now, that being said, the IRS is not interested in people who aren't making thousands. These persons are the ones who occasionally clear out a room or their attic and sell the eight-trac tape player or CB radio they find. Basic tax law, these items were never depreciated and are typically sold for much less than was originally paid for them. Your basic garage sale item is typically not taxable for this reason. Now, this is compared to someone who deals with distributers of "As Seen On TV" products, bargain shoppers making a killing off the clearance racks or collectors who sell everything from Hot Wheels to Beanie Babies and baseball cards. Many of these sellers can make unbelievable amounts on eBay sometimes hundreds of thousands.

I can't predict the future but if you think Uncle Sam will ignore this pot of gold, I want to know if you would like to buy the Golden Gate Bridge.

A few commments on eBay, Tiffany and counterfeits

From what I do on a daily basis, which is monitor eBay for unauthorized picture use and conterfeits, I find the Tiffany lawsuit an important event. Many manufacturers and marketers detest eBay and the monster it has become. Many eBay sellers detest the manufacturers and marketers for pulling their auctions that use the marketing materials or sell "replicas" or "genuine" products by the truckload at less than half of retail (just like the guy in New York selling Rolex's out of his trunk). The truth here is found in a paraphrased quote from Solomon: When all is said and done, there is truly nothing new under the sun. That is true with eBay. Fake or pirated Levis, Nikes, music, movies and even, yes, Tiffany handbags have been sold at countless flea markets from the time such products came into being. These are just brought into one easily searched place.



There is a structure set up, regardless of the perfection or lack thereof, to handle this. It involves the intellectual property owner reporting an infringing post or auction to the service provider (ie eBay). The service provider (ie Ebay) then promptly (depending on your definition of promptly) removes the offending listing in exchange for immunity from liability. The Tiffany ruling basically endorsed the Digital Millenium Copyright Act (DMCA) and granted eBay its immunity. Essentially, Tiffany failed to prove that eBay did not remove reported items in a prompt manner. Tiffany, for its part, wanted eBay to actively control the listings of counterfeits. eBay, whether marketers like it or not, does not make their products and beyond filtering auctions with words like "fake" or "replica", has no way of knowing a fake from a legitimate product. For the most part, only the manufacturer can truly spot fakes. There is also the interesting rulings from France and Germany to throw into the mix. If one doesn't like the laws in the USA, does one simply sue in France? Such are the headaches of the digital age. My own suspicion is that eBay will essentially find a way to abandon France and since the model under those terms is unprofitable, France will be without eBay or an equivalent.



eBay is the new way of doing business. There are those that didn't like the automobile. Some carriage makers contracted with Ford and other automakers and simply adjusted their business. Others so detested the new fangled things they rode their horse and their business right over the cliff. There is nothing new under the sun. The reality is that many sales can be had, new ways for selling are at hand. One of those realities is that it is much easier to sell stolen goods, counterfeit items or use someone else's pictures and text to sell. By the same token, it is also easier to spot these folks.



First, we look at stolen goods. Have you had your notebook computer or blackberry stolen? One cop I know told me the first thing he would do after filing a police report is keep an eye on eBay for it. You would be amazed at how often this is true.



Second, we look at counterfeit items. Are they on eBay? Do birds fly? Does a fish swim? In the past, these were at flea markets. In the past a company had to send someone to any auction to catch these. Now, eBay has so dominated the marketplace that while the flea markets still exist, the sales and profits are made there. All the company has to do is hire someone, train them to spot the fakes and have them follow the procedures.



Third, we look at unauthorized use of pictures or marketing materials. Does this happen? If you monitor, probably about 2 or 3 out of a hundred. If you don't monitor and report, it is probably 100% using your pictures and looking like they are official sellers when in fact most are selling large quantities of "new" items for less than half of retail. We all know this means mostly counterfeits. These are all displaced sales that would otherwise have resulted in sales for you. But there are enough legitimate sellers that find liquidations and clearance items that eBay can't just pull all of them. My wife is an eBay seller and she DOES find clearances at prices that are clearly meant to dump the leftovers. I gaze at a pile of George Foreman grills she got for less than a tenth of retail.



Speaking of my wife, there is a reason why someone uses YOUR pictures. It is very clear that in real estate there are three primary factors in value and sale, 1) location, 2) Location and 3) LOCATION. For online sales, professional pictures make a big difference in volume, price and even whether an item sells. My wife does take her own pictures, which eBay does repeated warn and advise. She does quite well. Another reason for using someone else's pictures, they also assist counterfeiters in masking their products. For this reason, if someone asks you for permission to use your picture, be wary.



My personal thought is that some retailers will try to stop the flow and lament new expenses and work to be done. Others will embrace online sales and do what it takes. These sellers will themselves be on eBay and monitor the competition. You cannot just pull everyone that sells your widgets, but you can surely limit the counterfeits and figure out where in your supply chain widgets are falling off the back of the truck. The times they are changing.