EP 35 - Karl Kronenberger -
Trademarks Copyrights Cybersquatting and Other Legal Terms
|Awesomers Authority - We'll talk to subject matter experts that talk about various topics that would be of interest to other Awesomers who are listening including, but not limited to, starting a business, running a business, best marketing ideas, sourcing in China, organizational development, tools to help your your business more profitably and much more.
|Karl Kronenberger is an indispensable resource and trusted advisor to his clients on issues relating to Internet law, media, and technology.
A seasoned litigator, Karl has tried more than 20 jury trials and many more bench trials, and he regularly handles complex Internet law issues, such as Internet trademark and copyright infringement, spam litigation defense, Internet defamation and false advertising, cybersquatting, FTC lawsuits, data breaches, website agreements, and privacy disputes. Karl thrives on litigating matters where the legal terrain is uncharted, as is often the case in the realm of Internet disputes.
As a former general counsel to technology and non-technology companies alike, he has handled many of the day-to-day legal issues these companies face, including intellectual property issues, licensing and distribution agreements, and domain name disputes. Additionally, he handles a variety of transactions and business disputes for services, technology, and media companies.
A former prosecutor and Army JAG Corps officer, he is both aggressive and creative in solving problems, while maintaining the highest of ethical standards.
Having a good legal defense is just as good as having a good legal offense.
On today’s episode, Steve welcomes Karl Kronenberger, an indispensable resource and trusted advisor on issues relating to Internet law, media, and technology. Karl is a seasoned litigator regularly handling complex Internet law issues, such as Internet trademark and copyright infringement, spam litigation defense, Internet defamation and false advertising, cybersquatting, FTC lawsuits, data breaches, website agreements, and privacy disputes. Here are more gold nuggets on today’s episode:
Why ignorance is not an excuse, especially in E-commerce.
The importance of being proactive in the health and beauty niche.
The three founding pillars of Amazon: low price, selection and service.
Trademarks, copyrights, cybersquatting, intellectual property, DMCA and other legal terms you need to know.
So hit the play button and get valuable legal advice to help you protect your business in the long run.
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1.15 (Steve introduces today’s guest, Karl Kronenberger.)
You're listening to the Awesomers podcast. You're listening to episode number 35 of the Awesomers.com podcast and this is a secret everybody. If you want to find show notes and details just go to Awesomers.com/35 that's Awesomers.com/35 and you'll find any little notes and details. Sometimes we add in links to the book to other things we talk about and it's a great way for you to stay informed. Now, today, my guest is Karl Kronenberger and Karl is an indispensable resource and trusted advisor to his clients on issues related to internet law media and technology. A seasoned litigator, Karl has tried more than twenty jury trials and many more bench trials and he regularly handles complex internet law issues such as internet trademark and copyright infringement, spam litigation defense, internet defamation of false advertising, cybersquatting, FTC lawsuits, data breaches, website agreements and even privacy disputes. Karl thrives on litigating matters whether the legal terrain is uncharted as is often the case in the realm of internet disputes. As a former general counsel to technology and non-technology companies alike, he's handled many of the day-to-day legal issues these companies face including intellectual property issues licensing and distribution agreements and domain disputes. Additionally he handles a variety of transactions of business disputes for services technology and media companies. Karl's even a former prosecutor and an Army Jag Corps officer and he's both aggressive and creative in solving problems and he always maintains the highest level of ethical standards. Karl and his team are so awesome. I have definitely worked with Karl himself and various members of the firm over the course of many many years, probably getting close to 15 years and that over that time we've done very complex litigation and many of the things I've already mentioned like cybersquatting and intellectual property and trademark management and so on. You know I'm a big believer in having experts in your corner and Karl's definitely one of the best in this category and one of the very first kind of internet law specialists this is why we have such a good time I know you're going to enjoy and love today's episode.
Welcome back Awesomers. It’s Steve Simonson and today my special guest is Karl Kronenberger. Karl, how are you buddy?
Karl: I'm doing great. Good morning to you.
Steve: it's very good morning to you. So Karl and I we go way back and as you heard from it the introduction, he's a super qualified specialist and his firm handles all kinds of really important things for E-commerce sellers out there. And so Karl maybe just for,you can supplement the bio that I've already read in, just tell people kind of what you do today and kind of what takes up your time what you're committed to doing day to day.
Karl: Sure well I'm sitting here in San Francisco, that's where our firm is based and we are a 5-attorney boutique firm. All we handle is internet and tech matters and for years we hear all different types of E-commerce matters and we did get involved with some Amazon matters. A good number of years ago shortly after launch of the marketplace and it was just so tiny back then, but it's grown and we're doing a lot more and it's sort of shocking, the amount work that we're doing these days for people that are selling on Amazon or other marketplaces, generally E-commerce by Amazon. It's just this incredible explosion not just generally, but for our practice. So it's been a big focus of mine for the last couple of years and we've spoken many times about all different issues, problems, scenarios. So that's a big focus of ours and of course we do other type of work as well. We do a lot of general keyword, golf or Internet technology companies copyrights and trademarks and a lot of trade secrets. Dealing with things that come up for a lot of our clients in this realm of new media interactive media. We also do a lot of work for people in the affiliate marketing space so advertisers, ad networks and publishers and that sort, a little bit with E-commerce, sellers time to time and lastly there's a good amount of FTC defense work. That's a big thing for me I represent companies against the FTC in court. I testify as an expert on FTC matters which by the way, I've testified as an expert on Amazon matters particularly IP issues with Amazon Marketplace in the FTC and that Amazon experience sometimes come together. But that is big in mind as well FTC defense and you'll hear that from time to time in a lot of my comments.
Karl: Go ahead.
Steve: I just wanted to jump in because I think a lot of people underestimate some of the FTC reach that exists online. So often people are just posting this or that or they're you know, “Hey this is a great company” or you know they they make all kinds of innocuous comments online. They don't know that the FTC is regulating a lot of that stuff, in my mind a lot more than they believe. Do you see that as a common problem? People don't really understand some of the reach of the FTC at this point?
Karl: It's a huge problem, especially in this realm of startups where people are coming in to the various marketplaces whether it's second online marketplace like Amazon or just generally out there selling on the internet, not having much business experience maybe not having any mentors, you have things where people were just copying what they're seeing others doing out there without realizing that certain things are off limits under FTC guidelines and rules and regulations. I mean as example, the endorsement regulation that's the big one and I bring it up because it's very relevant for people selling online definitely Amazon. a lot of people don't know that if you give something to someone a free product for example and they don't disclose that you know review that's a violation of the endorsement regulation. So in there all these different ways that endorsement regulation and covers testimonials can be violated and it's unfortunate but I've seen some people get hit by the FTC with what can be viewed as a fairly aggressive lawsuit and it's disappointing because there's so much non-compliance out there it's extremely frustrating where someone feels like they're doing just what everyone else is doing but then they're the ones that gets to get hit chosen by the FTC to be the example.
Steve: Yes, that unlucky example. So, I definitely, we're going to dive into some FTC and the endorsement. One of the ones that I think is most overlooked but a lot of people just simply don't know that exists, which you know what do they say, ignorance is not
an excuse or something along that line. It doesn't mean you have to know the law, you just have to comply with the law.
Karl: It's not a defense.
Steve: Yes, it’s not a defense.
Karl: Every now and then, let me play in a little bit, but it's sort of after the fact in terms of mitigation so on these issues you're right it is nonsense.
Steve: Yes and I think you know every E-commerce person on the planet has probably been guilty in one form or another violating that endorsement class or that endorsement rule just to be clear and myself included along the way. So we're going to talk about that. We're going to talk about some of the the health and beauty kind of claims that are out there. We're going to talk about some of the normal Amazon situations where you're kind of called in to help out and so much more but we're going to do that right after this break.
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Steve: Ok Awesomers we're back again I've got Karl with me today and we are talking about all kinds of legal things. And you know I want to just kind of get in our time machine Karl and go back. We probably, started interfacing I want to say in the mid-2000s, maybe 2003, 4, 5? Something like that. Do you think that's about right?
Karl: I think it's about right it's been a while, you know, we started working actually on trademark matters.
Steve: You got me.
Karl: Our start together and I think it was maybe three to four years after I started this firm and I had a great experience working with you.
Steve: Yes it was, definitely. So what I remember especially and it really spoke to me and I think it still is just as it is today as it was back you know 15 years ago-ish that you guys specialize in internet stuff right and we were struggling with cybersquatting.
We were struggling with you know trademark related things because we had a fairly successful company that was getting a lot of attention. So people would go cybersquat you know with typos and domain names and all kinds of different things and it was just kind of like a whack-a-mole situation but you helped bring order from chaos as I like to say and we also had a very complex litigation that you were able to help with the cross borders between Washington, California. Just really really great experience and so for all these years I always kind of think of Karl and his firm and his team as a really great resource for you know anything that they specialize in right. We don't go to Karl and say, “Hey we're doing some maritime law and we want to you know put in a weather station” that's probably not his specialty but anything internet, we kind of start with Karl's firm and see how they can help us. So really great history. I appreciate everything you've done for us. in fact he helped us win a pretty significant litigation. I always sum up that story where I say, although it didn't finally go to court. We went to mitigation, and what do they call them.
Steve: Thank you. We went to mediation and you know they kind of bring both parties into the room and they you know they get both guys and they basically say, “Hey! You guys are both full of crap. You know nobody's getting nothing.” And then they split into parties and the mediator came in and said, “Hey listen I've read the thing. I think you guys are completely screwed. He's talking to us and I've already talked to them.” They say, “If you give them a hundred grand, they'll walk away right now and we'll just call this thing a day.” And our response was something like, “Okay, well we hear what you're saying, we disagree. Our counteroffer is give us 6 million dollars and fifty percent of the company.” And the fun began and it was a long day. But at the end of the day I think we came far closer to our sides than they did there. Don't you think so?
Karl: I think so.
Steve: It's very fun but not fun actually. But it's fun to look back at it and just go hey score one for the good guys. Of course the other guys probably disagree but c'est la vie. So Karl let's let's just talk about you know, how you got started and what made you go down the path of law. You know obviously, you had to go to university. I hear that's what lawyers do. Tell us about that.
13:21 (Karl shares how he started down his legal path.)
Karl: Well I went to Notre Dame and I was in something called ROTC, Army ROTC and that's how I paid for college. And when I graduated I decided instead of going in as platoon leader, I would go to law school. It was really either medical school or law school or being a platoon leader. And I never really took in science classes so it was really one choice.
Steve: So that's the interesting story how he decided to go into law.
Karl: But it was a great experience because I went into the army after law school, just fantastic years of my life where I got to live overseas. I got to live in different parts of country and I tried a lot of cases. You know criminal law and when I was within the army I got assigned to the US Attorney's Office, actually in Seattle when I was there at Fort Lewis and did some trials there and again it just this great foundation for any lawyer, especially lawyers who like to litigate. So when I was in the Army I had a great interest in tech and especially when I was in Korea because then it was really expensive to call home so the internet was just arriving. And I found in internet called Mosaic which was this web browser and I remember the very first website I went to which was CNN and I remember OJ Simpson, his picture slowly loading onto that computer screen as my first first web page. I think it was back in 1990, late 94 and since then I just had a big focus on tech. A lot of what I’ve learned is self-taught. I learned basic codings when I was in the army just for fun and I reinserting things for the Jag Corps some technology efforts mostly in the form of automation within the Jag Corps. and then when I got out of the army I wanted to do something that was tech related because just it was my personal interest. So I started a company with my two brothers which involved the distribution of media, mostly animation for kids on TV and internet, it was the internet. And I learned a lot about tech and internet and various types of licensing deals and dealing with that networks and advertising. And then I sold that company and I worked kind of work for two years as a general counsel of the company that bought it, which was this digital media holding company, where I did the work for all these other digital media companies and then...
Steve: How did you like that general counsel spot? Just out of curiosity. A lot of people when they you know, entrepreneurs particularly, when they exit a company and they're bound to kind of hold on to some sort of retention concept in your case, a couple years there's varying experiences. How was your experience as general counsel there?
Karl: It was pretty good. It was good because I had my work cut out for me and I had a lot of pressure on me but it wasn't necessarily a sort of, it's from pressure dealing with
growth that some others had. It was more getting deals done, various acquisitions that the company was doing and I enjoyed it because again even you know back then this was 2001 certain things were were still fairly new. So there are a lot of unique issues to deal with in acquisitions when we were acquiring different companies and so I really enjoyed it. It really helped create this foundation for me because I had obligation foundation and running this digital media company, counseling all these companies that we’re acquiring. That was a great foundation for even starting the law firm which is what I did once I finished up that two years.
Steve: Gotcha! So you actually hung out your own shingle once you finish your general counsel and that was of course times in with the timeline we reflected on earlier where you had just started out for a couple years and I ended up finding you. And of course you know Karl's firm has done so many different types of things over the years that have have crossed a number of things, all tech focused but some of the things that I think people don't realize are not just the FTC stuff we talked about earlier but like the usage of certain words as it relates to health or beauty products. Can you talk about that? Just for a minute, just to you know talk about some of the common problems that people face there.
Karl: Sure. I think the the most important ones are in the realm of the marketing, false statements used in whether its various landing pages off Amazon or on Amazon. It's in the description and the bullet points, I think that some of it is just very basic. They’re often claims that people make about what a product can do or what a product contains that are just, they're false. I think one that is sort of concerning is the use of the word organic or natural. Those are the big ones especially within Amazon. There are a lot of people out there that are just just using those phrases without thinking much about it. Those can give rise to significant liability. I think in the Amazon round, it's been more civil liability where there are attorneys out there that are threatening and launching class-action lawsuits over the word natural or over the word organic. Off Amazon there's just a lot of different things that people say that can give rise to liability, the before-and-after pictures is a big one. There's a lot of atrocious things going on but they were just are making up things. They're using Photoshop and or getting before-and-afters for people working with some other product and never even use their product. That gets us into this realm of testimonials because off Amazon, if I think it’s pretty risky especially with all the beauty products to have fake testimonials or testimonials where this material connection with the company is not disclosed that material connection being, I got a free product or I'm related to the owner. A lot I think that as you as you mentioned Steve a lot of people have these experience especially when starting let's say a new product in amazon they've got some friends and family buy the product and they do review and i mean i think technically violation of the statute but I wouldn't say it's if it's the worst violation in the world. I think when you start looking at on Amazon where it's not just four or five reviews but you've got hundreds and hundreds of reviews and there are schemes that people use to pay people, refund them for the product that's where you sir you cross the line especially in Amazon. So as I said you've got this endorsement regulation which pervades all the ways these E-commerce names on stores. but then you also have these issues dealing with false claims. Claims about what the product can do and I can go into that a little bit more if you want I think with when it comes to health and beauty products, people are coming up with their marketing claims, there needs to be some obviously some good paid basis in fact. If it deals with some medical issue about what this product can do for someone in a medical or health way there needs to be some substantiation in peer-reviewed medical studies. So we often help people gather that documentation when we will have do a review of these marketing claims we'll assess what the substantiation is to determine whether or not these companies are on firm footing. But often they're just it's ignored and in their statements about this one you could lose this much weight lose you know lose a pound a week or ten pounds a month or other other marketing claims about what something will do for your body or your skin or your latency.
Steve: Yes, so this is a very important point and one thing that I want our is out there to take particular note of. So first of all, if you're in the health and beauty and that you've had at a marketing epiphany about all the great benefits that this product will offer whether you use the words natural or organic or pure or any of these types of things there's regulations around these things and how they're to be marketed and this is a you know under the guise of consumer protection and there's arguments that I would generally support this you know in trying to get people to be honest and forthright about their claims. So my point or what I recommend that people do is if they're in that space they should have somebody who's knowledgeable and who understands a lot of that review and you kind of alluded to this slightly earlier. But you know I regularly have people call me and they say, “Hey I've got this problem” or you know “I've got this troll type of attorney who's just sending out you know class-action kind of form letters.” Basically threatening to sue anybody who's ever you know sneeze the word organic or pure or natural or any of the other usual and so they call me and they're like, “Hey I don't know what to do” and I'm always like, “First of all, make sure you get somebody like Karl's firm to review the situation. Make sure you understand where you stand.” And you know the best advice is be proactive before you have the problem. How about do the review and try to make sure that you're you're doing everything that you can that maximizes your marketing opportunity without increasing liability based on violation of rules that you may not know exists so. Can you talk about how that proactive part of the equation works where people come to you and get their you know get their house in order ahead of time?
Karl: The timing is so important and this is a common scenario I'm going to tell you about where people will develop a product and they're developing some of the marketing copies so they're writing down in some sort of document which they're going to hand over to a designer to create a box and to create a label. They'll also use that to create the listing on Amazon or maybe a landing page on the website and maybe they'll use the word natural, organic or some other claim regarding people's health and without that much thought in it, into being put into it. Because at that point they're running sort of fast and there's excitement about a new product and there's a lot of opportunity out there and they're thinking, “Oh we can always change things later. Let's just get things going go go go.” Without much focus on legal issues so maybe there's an initial run of 5,000 boxes and and labels and inventory is shipped out to various warehouses or Amazon and then there starts to be some growth and then they start to realize that you know maybe, let's maybe even still look at this you know. I didn't really put that much thought into what's on those labels and then maybe they get a letter from somebody. Some attorney that says there's huge liability here. You need to settle with us or we're going to buy us class-action lawsuit. And then there's these really difficult decisions to make because you have maybe, you've got twenty thousand units that are sitting in a warehouse and you haven't even done the the research. You need to do to figure out how you can change these marketing statements. So it's a horrible situation because that's you know if you're going to pull those products back you have to figure out what it's going to cost to get this shipped back to you. How can you change labels? Change boxes? And if it's a small amount of inventory maybe it's fine but it's it always seems to be pretty painful for the business owner and then you got to deal with the lawyer who's making these demands saying he's going to send you. You have to figure out. You know, do I ignore this guy and let him file something or do I negotiate? And then it's a whole you know a bunch of money that you’re going to have to pay on top of the money you have to pay to change the labeling. So this is an example of how timingis so important.
Steve: Yes so I just can't reiterate enough that if you're in that health and beauty space, be proactive in terms of compliance. So I'm a big fan of you know “go quick, launch fast” and “go, go, go”. But in certain categories and that includes health and beauty probably includes toys and other things that are heavily regulated heavily monitored for compliance and so forth, you really have to check off some of the basic buttons. And if you don't know those buttons, you need to pump the brakes a little bit and back up and get it right. Because every one of those packages that Karl talked about, those are evidence against you later if they're done wrong. And believe me those, the opposing attorneys particularly ones that are taking kind of proactive action against people, you know that's their business. They're into beating down guys on Amazon or online that are using these words improperly. They're buying examples and gathering evidence and that will be something that you know cost you money to defend. Cost you money to settle and cost you money to fix and it can have large ramifications for you in terms of your business, your valuation and any potential exit as well. So proactivity is the rule of the day for that. Karl let me ask you this. And you know you've been doing kind of Internet related stuff for so many years. Has there been a big lesson that you've noticed in your journey so far? Anything kind of universal? It's like, “Hey if I could tell entrepreneurs or business people this particular lesson, it would be helpful for them” and ideally for you in the future?
28:59 (Karl imparts an important lesson to entrepreneurs.)
Karl: Wow there's a lot of things I want to say. I think the most important thing, the most basic thing is to have some amount of formality at the very beginning. Especially if you've got partners. So you've got issues with your partners. You've got issues with intellectual property of your business. With your partners it could be great or it can be a complete nightmare if things aren't in rating. And there are some shortcuts that we've put together for people that just don't have time to put together the more complex corporate documents but they want something in place with a partner, multiple partners, moving forward. But that's just so important to get that in place and then the other area of formality, I think would be with with trademarks and copyrights. Especially on online marketplaces where so much depends on the strength of your intellectual property. Especially when your brand starts to grow, you need to be able to protect yourself. You need to be able to take aggressive action in that room on to again protect yourself and go after others who are threatening your brand. If you don't take early action to firm up your intellectual property especially, your trademarks. Then when you really need to take action, it could take months to get things in mind. For example, it takes a while to get a trademark registered. Often it takes six months before it goes into publication and then you get the publication period. So one thing we've been doing recently, we've been filing petitions to expedite which has been fairly successful for us. We are able to shorten that that six month period but still people need to start early and do the basic things in the moment, at Amazon or again it's going to, it's sort of a mess later.
Steve: Yeah so this is uh some really great uh gold nuggets as they like to say. This is what the Millennials say #millennial there. We're dropping gold nuggets over here. The first I want to just reinforce is this idea that when you begin in business, particularly if you have partners, this is the time during the honeymoon period to write stuff down. Hey if you want to buy me out or I want to buy you out, what are the terms of that? How are we going to value the company? Kind of getting back to that basic stuff down and any governance and individual responsibilities, all that should be written down because the honeymoon doesn't last forever. And I've had wonderful partnerships with folks and I've had stuff that went sideways and at the end of the day it's the legal documents and the pieces of paper that everybody can rely on. When we've had it and it was tight, it really was more or less amicable even if there was strife in the relationship. When we didn't have it, that's when trouble happens. Ad you know it's kind of like an ugly divorce right. The hiring lawyers and it just gets ugly. So that reinforcement of getting your ducks in our own and adding formalities you called it early on, very very good advice. The other thing I just can't stress this enough, when you really are putting a brand together and you expect this thing to be something that is truly important to you, take the time to get your trademark organized and get your ducks in a row. And by all means please hire professional. People don't realize yes, you can go to the trademark office and you can pay the money and you can write things down on a piece of paper and send it in but the scrutiny that the trademark office has, the enforceability, the preliminary search to see if it's even going to be accepted anyway - all of that people underestimate. And having watched Karl and his team work you know for a very very long time, they add so much experience and value that is far greater than the little Scooby Snack they charge in terms of a fee. So I highly recommend whether you choose Karl's firm which is what I like use or somebody else, just get it right. Get a professional to help you otherwise what you have often is just a piece of paper not that enforceable. Do you think that general principle is fair to say Karl? Even though it may be mildly self-serving?
Karl: I think so. I think that it is helpful to get that initial advice because you know sometimes there are some mistakes that are made and sometimes early filings. I think the most important thing is just to do it. You do have common law protection and outside of Amazon, I think the common law protection is a lot for some people who never register trademarks. When they're out there, outside of Amazon and we filed many cases for companies that just don't have register marks but there are some disadvantages for those companies, you get better, there are certain advantages regarding constructive notice. It's so much more important because in Amazon these days, brands from Amazon's perspective are just not as important to them. And there's such a focus with Amazon with just selling these sort of items, these widgets and I think from their perspective, from the seller perspective it's everything. Especially when you've got factories that are producing similar products for multiple people. They're all settling on Amazon. How do you set yourself apart? Especially when you've got a situation with Amazon where they don't care that much about sellers? It's all focused on consumers so you need to do everything you possibly can to to set those protections up for you as a seller early on.
Steve: Yes, I quite agree. When we come back after this next break, we're going to talk a little bit about my philosophy of having a good legal defense but also having a good legal offense as well as some of the typical Amazon kind of copy related problem, copy related problems that Karl and I have seen along the way. And we'll be right back after this.
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Steve: Ok. We're back again everybody and Karl Kronenberger is schooling us about all things legal particularly as it relates to internet trademarks and so forth. And you know as much as I would rather you know kind of just go count the money and see how many sales they've made today, this is one of those times where I just remind people they need to eat their vegetables right. You got to be able to understand some of the the laws and compliance and frameworks that exist out there both for the government side of it the federal government being the FTC and things like that but also the marketplaces and how they have decided to enforce or require you to fall in line with things. For example Amazon now, for the brand registry program requires you to have a trademark if you want any sort of, I'm going to put “protection” in quote marks there because they imply that if you have a brand registry that you will have less competition on your listing. And as Karl talked about before the last break, Amazon doesn't really focus on trying to protect sellers. They want the lowest price for consumers. So the more people that sell that item, the better in Amazon's perspective and fair enough that's their marketplace concept as a seller. However we look at it and say, if they were selling my authentic stuff I wouldn't have much to say about it but mostly it's guys jumping on my listing selling counterfeit stuff which is a big problem. Have you seen that sort of thing happened Karl? You know fake stuff being sold under people's listings?
Karl: Yes, I mean it's a crisis in my opinion and this has always been a big issue for us. Hijacking or just straight-up counterfeiting. In fact, I'm testifying as an expert in federal court in Houston on this issue of hijacking. I think from a seller perspective, the best advice is to get your IP in line as early as possible. Obviously register your trademark. I think also it's helpful to have to file registrations on your product packaging and if you're in a situation where people are jumping on your listing, I think the first thing to do often is to make a test to see what that is. Because you can have a situation where they're copying your logo and your product packaging. But it's the more pure form of counterfeiting and if that's the case, you take before and after photos and we've been pretty successful in getting those those companies shut down pretty quickly. If you've got a situation where the product that shipped doesn't have any any logos on it but the product is very similar to your product, then you get into a sticky situation but I still believe that you've got trademark infringement and counterfeiting there because people are making the decision to buy based on the marks in that product listing. Which are your marks, which is your brand. So we still make both trademark counterfeiting arguments based on those facts. There are many different flavors of counterfeiting and ASIN hijacking but the point is having the registered mark is important. It's also important to have a record of enforcing your intellectual property within Amazon because if you get to a point where you are sending Amazon requests to disable certain sellers on a weekly, daily, basis - you may be in a position to get Amazon to restrict all sales on that ASIN to just your company and those who approve. Some people call this brandgating. It's phrase I really don't like because I feel like it's sort of made up by people outside of Amazon I believe. I don't think it was Amazon who created that, correct me if I'm wrong. It's also extremely difficult to get. I think it's easier to get than it used to be I think with a lot of big brands have restrictions and we've been able to get restrictions after a history of counterfeiting. I know there are people out there that are selling these fixed feed packages will get you brandgated, I'm pretty skeptical of those. And I guess I won't comment too much on them. I just say I'm skeptical about them but our experience is there's got to be a reason, a compelling reason, that's usually a lot of counterfeiting and other unlawful conduct on that incentive by these third parties.
Steve: Yes, that's for sure. The creativity that these guys come up with right, it's always if it wasn't so destructive, it's almost magical to watch how creative these hijackers and guys are because they come up with all kinds of new tactics so when they get shut down on the seller listings often for a certain period of time, maybe in the last 12, 18 months, they would then use vendor express and send the product in as a vendor. And then Amazon's the one selling you the counterfeit items which is even harder to get shut down at times and then now the Vendor Express has gone away. We've seen people actually have vendor central accounts sending in fake stuff with some of our brands and some of my colleagues brands so it is, I don't know where brandgating came from by the way. It’s a little side note on the origin story. I don't know of a better word for it at the moment but I can say it's a really important thing to try to get your brand into whatever moat that you want to think of it as and there are mechanisms within Amazon to allow that. They just don't want to do a wholesale because that removes that competition for the listing concept that they have been really founded on right. Amazon has kind of three founding pillars. One of them is low price and that's driven by you know marketplace, having lots of people in the marketplace to drive down that price. Another one is selection and the other one is service right. So as anybody looks at Amazon, they can always assume that Amazon is looking through the lens of those three things. So when you say, “Hey this brand is mine. I exclusively distributed around the world. Only you know myself, only my company, my team can sell you this product with the approved and authentic stuff.” Amazon's kind of like, “Hey this other guy says he's got it. That's good enough for us.” And so by having that history as Karl talked about of documenting and and creating you know kind of cases and and track record, you can leverage that to tell Amazon you know if you don't start paying attention Amazon, pretty soon that's going to be your liability. I don't know if that's ever gotten to that level but I'd like to see you know a little bit of culpability on the part of Amazon for knowingly allowing some of this stuff to happen.
Karl: One another strategy is just to look at the Amazon policy and to build your case based on that policy. So if someone is going to sell a product on your ace and the description has to accurately describe that product and their examples and Amazon gives in its part in its own policy you know you should be the same manufacturer for example and if so it should be the same UPC codes. If just for those two things, you got a different UPC code and a different manufacturer, I think it should be fairly clear to Amazon that person needs to be kicked off immediately, violating the policy. So that's that's been our methodology.
Steve: I certainly I love that simple easy approach which is to us quite obvious as sellers particularly, brand sellers that are trying to protect ourselves. Karl, can you talk about just kind of the relationship that you have and your firm has kind of built with Amazon? Whether it's a relationship or just an understanding and knowledge about each other? I mean you deal with Amazon all the time. How does that look in real life?
44:47 (Karl talks about his professional relationship with Amazon.)
Karl: Well it's definitely adversarial. We've never represented Amazon but we do handle arbitrations against them. I feel like it's adversarial but it's very cordial, very professional. We're very selective about the cases that we take. We get inundated with leads, people with problems on Amazon and they want our help but there's a lot of sketchy stuff going on out there. We’re very selective. We feel like we've got a reputation to uphold. We also often go through the normal channels in Amazon. We do have relationships with you know a bunch of attorneys there. Eventually things they can get escalated into those attorneys but this is one thing that I just want to emphasize. I think it is important to go through those correct channels, the initial channels first. That email that you said complaints. To start with those. The essence there is going to be these people on the front line that may not have that much experience but I think our experiences, you know it's been a lot more effective. We never get quicker results by going that route as opposed to immediately going to their announced counsel. That's just our strategy and I should emphasize that because some people think that we have some special relationships with Amazon. I guess we do, we generally don't rely upon those for initial correspondence. We rely upon very clear succinct, simple arguments to get our point across very quickly, on our letterhead that hopefully.
Steve: Yes, that makes a lot of sense. I do want to kind of reinforce this point that you know we shouldn't feel ourselves get triggered when we have a situation and kind of hit the nuke option right off the bat. Working the th system and kind of cooperating with Amazon with their own system is fine as long as that you know kind of works out and then if it doesn't you keep following the system until it is escalated to whatever level it needs to be to be resolved. Because I don't know, I have a bunch of relationships with Amazon, really great people. They're trying to help sellers, they you know many of these people really do have genuine empathy for sellers out there and they realize that behemoth that is Amazon is kind of like a machine. And the machine is often just whacking guys left and right, is running over them as you know many cases inadvertently. So as I have told Amazon, this idea that they are trying to you know drag the net through the water to catch the bad smelly fish that are cheating and doing all the bad stuff, all the blackhat stuff is great. We support that. All seller should support that. The problem is the Dolphins, that's us, we get caught up in that net too often and you know stop getting the Dolphins. That's want we want to tell Amazon. But even when people call me and they say, “Hey I've got this problem.” I'm not going to generally call Amazon directly or make an introduction to Amazon directly on that because they need to work the system. Itl will burn through any resource that really has the empathy and understanding and desire to help us if we just simply call it you know them every time it just won't work. It's not sustainable so I do appreciate the fact that you know we should use a system and work the system as best we can. So Karl when you think about you know this concept of you know everything from hijacking, one, let's talk about listing suspensions and things like that. Have you come across where a listing or an account has been suspended and had to kind of interface with that at all?
Karl: That's probably bulk of the work that we do is dealing with that. And a good amount of it is this another crisis I see where people are making intellectual property claims from free email addresses or even email addresses from free services in China. One email to Amazon brings down a list. It's the most frustrating thing that I've seen in quite some time and we've seen waves of it. I saw you know way maybe six months ago and I thought it got better but we've been seeing a lot more that these days. So we're helping people respond to Amazon because Amazon usually says work it out with the intellectual property owner. But this is just some random Yahoo address. Who is this person? They're not responding too so that is a big problem and we generally been able to get on top of that I think. The problem is it doesn't happen immediately. It doesn't happen often same day and every day that goes by there's important revenue that's is lost and those are all sort of momentum. If your listing is down for a while, it moves back up, momentum was lost there. So that's something that is a great concern of ours. We do deal with account suspensions from time to time. Frankly, we're pretty selective with what clients we take on with account suspensions because a lot of times they count suspensions for good reason.
Steve: Take a minute everybody and remember that you know you go take a poll at the prison, everybody there's innocence right. And I've heard a lot of sellers come to me, “Okay I didn't do nothing.” Right and then you go, “Yes but didn't you send out you know 10,000 review requests or review reimbursements or whatever?” Yes I did that but you know what's that right? So let's remember that there should be a level of enforcement that is reasonable and as long as it's consistent and fair, then we should have no problem with it because that's the only way to regulate something.
Karl: So that's a very good example with the reviews. Just a few weeks ago, we have this person who had 7, 800 reviews that she had obtained on her product that she just launched about a month before and it was all done through various Facebook groups where people would buy it and be reimbursed through PayPal afterward. Just a complete you know clear violation of the Amazon rules, obviously a violation of regulations and the person calls us as if we can help her get her account. Actually the account wasn't suspended, they just removed other reviews. I think I found probably they'll be suspended and we passed on that so and I'm not sure you know if that person ever got representation. I think that there's certain lines that people with Amazon businesses just shouldn't cross, that they should not get involved in that egregious behavior. It can backfire big-time on Amazon but there's also federal law out there that prohibits that.
Steve: As it relates to reviews, this is where that testimonial requirement kicks in. There's so much that you can do that's just pure wrong right. And the reality for me is that everybody under state of three, four years ago said maybe it’s even five, six years ago now. They said, “Gosh if we get a lot of reviews and the reviews are you know keep us at that four and a half star level or above, our conversion rate goes off the charts.” You know they could see it and they then they say, “Well gosh, solve for X. How do I get more reviews? Well let's let's just pay people for reviews right.” It seem so obvious and then of course all these review services started coming out and then when you actually see is a company and you see here's a company and they just sell reviews. That's all they sell that sounds perfectly like a solution for you. And you're like, “Hey, I'm you know sign it up.” But the fact that Amazon hates that and there's a review purge happening right now in the summer of 2018, that is catastrophic and I personally believe there's a bunch of false positives in their algorithm. I have seen you know people that I know are basically very passive business owners they do almost nothing with their their listings or products or active kind of review enhancement type of techniques and they've watched you know a thousand or 2,000 or 3,000 reviews just disappear. So they're I do think those false positives, those Dolphins are still getting cut in the net but by and large if we try to avoid those hacks which are short-term tactics that will never work long-term, Amazon will always hammer that out then I think it's easier to to carry on with business. And as Karl said you know a discerning law firm is not even going to want to represent somebody that has probably been in violation of the rules to begin with. Karl have you ever faced a situation where you know somebody has had maybe have encountered this but somebody's had like legitimate reviews to disappear on them?
Karl: Well in this summer, we have had some clients that have lost reviews and we have often gone to Amazon regarding bad reviews by competitors. But this is sort of a new thing where we're going and asking for good reviews to be reinstated and we've made some attempts but we don't have enough, I don't have enough data there to tell you how successful we have been. Because it's still happening right now. This is just, it's fairly new for us.
Steve: Yes, this you know, the frontier keeps changing. This is probably why Karl likes the internet kind of space so much right because it's quite dynamic. Things are always changing. You know where cybersquatting was a giant problem at one period of time and then the next thing is you know some other you know DCMA takedowns or DMCA digital media. How often are you dealing with DMCA takedowns at this stage?
Karl: If we can make them, we can absolutely make them because it is the quickest way to get something down and that's why when people do test buys because if someone is using your product packaging that should copyright. And if you have a registration for that copyright it makes the argument a lot stronger for Amazon. So if we can make it we absolutely do. And you get really quick action from Amazon.
Steve: I think that's an important one. And can you just give us the thirty or sixty second summary on what DMCA is for those who don't understand? I know that's a whole legislation and not a 60 second blur but what it is real quick and what’s a DMCA takedown?
Karl: Well DMCA stands for Digital Millennium Copyright Act and it gives immunity to ISPs from copyright infringement that arises from the actions of their their customers if the ISP follows the rules. And in this context, Amazon is going to be considered an ISP or service provider under the DMCA. So if someone is infringing on your copyrights on Amazon under the statute, you can give Amazon notice that there's infringement going on and you can request for it to be taken down. Amazon has to follow the statute and if it's a properly formatted request, they will take that content down. Now that means they're going to be immune from liability. Now the supposed infringer has the ability to do what's called a counter notice and if you do that counter notice then Amazon can put that content back up and not be liable for it. So the way it works with Amazon, you can do formal DMCA notices but the way they format their online form, it is essentially a DMCA takedown notice because it uses the same language as the statute. So I think it's a lot more effective than some sort of trademark demand because it's the separate statutory scheme. And also it's pretty clear if we have a strong case. We have side by side photos that show that obviously they're copying it and it's sort of a cheap reproduction and we show Amazon that copyright infringement. That's pretty effective.
Steve: How about the you know the fact that people will often steal somebody's images? You know we've kind of having images professionally taken occasionally, they'll edit them or flip them or you know reduce them in size in some ways. But if somebody takes the pictures, I know they have kind of the common law protection but if they take the extra step of filing for copyright registration on those pictures or even their title or their copy, does that allow them to use the DMCA to you know get people off their listing or to prevent that people from selling against them?
Karl: You do not need a copyright registration in order to make a demand on the DMCA. If you have one, I think it's stronger because the thread is more real to the service provider but you don't need one. If you're going to sue anybody later for copyright infringement, you need a registered copyright before you file your lawsuit and if you fought, if you've got obtained a registration and the infringement happens after you obtained the registration that means you can see what's called statutory damages of up to $150,000 for intentional infringement and you have the right to request attorneys fees. You cannot get statutory remedies for attorneys fees if you see the infringement and then you decide to register, operate. So that's why if you've got a popular product something you're making a lot of money from, it's sort of a no-brainer to get copyright registrations on all your photos. You know all your product packaging.
Steve: This is a perfect segue into my philosophy that having a good legal defense is just as a having a good legal offense, just as important. So the the legal defense side of the equation is what we talked about at the top of the show where we said you know get compliant with FTC regulations and if you're in health and beauty make sure you're not making claims that are going to be a problem right. That's getting your defensive wall in order but in my mind by setting up a quarterly copyright registration process for your company, assuming you're doing a lot of product development or things are happening on a regular basis - content creation, videos, photos, whatever the case may be. Just setting that process up so that you get these registrations on file gives you so much more opportunity as an offensive measure to go out and put the kibosh on some of these things. Because now you have teeth. It's one thing to say stop doing it or I'll get mad at you right. That's kind of a common law copyright letter versus getting stop doing this by the way now that you've done it I'm going to come after you for the 150k statutory plus attorneys fees. And boy we've got a bunch of attorneys and they make a ton of money so good luck to you right. And that kind of offensive measure can really help set the tone where people will stay away from your listing because people stay away from your copyrights and trademarks. We've had many cases of people stealing you know. I remember in one case, we had somebody stole fifteen thousand images from us. They descript our site and they made their own site with all of our images and of course we did you know DMCA them and we had everything registered through Karl's firm and it was a slam dunk. They were gone and that seems like a pain, it seems like extra steps but you don't know that you need it until you need it. And so I think this is my effort to try to make people aware of these things. Karl, do you have anything to add to that? Am I out of my mind? I might just be one of those crazy litigious people.
Karl: No I think there's definitely a role for that sort of aggressive action. There's also other things that we've done. You know this applies to businesses that have gotten to a certain point where they've got some significant revenues. If someone is out there falsely advertising, if you've got a unique product and someone doesn't have the same product but they're using obviously marketing line listing marketing claims and they're just straight-up false statements and you feel if you could take out one or two people you could there's going to be significantly more revenue generated, then you do the math at a certain point. It makes sense to litigate those false advertising claims so if you've got registered intellectual property that may come into play as well. But I think it's something that people don't do enough of in the Amazon Marketplace because there's especially in these niche areas where they're not very many players. But I think that there are like, for example another strategy is, if you know with a certain let's say health and beauty product, that a certain company is saying that their product contains a certain level whether it's vitamin C or whatever that whatever it is you know it's not true. We've helped clients buy that product and send it to the lab and then at that point you're in a position to sue them. Sue them or threaten to sue them, just to take them out of the marketplace in a very high volume products that makes sense from a financial standpoint.
Steve: Well this is really why to me it's important to have both ducks in a row so it doesn't make sense for us to go you know throw shade on somebody. Go hey you don't have a you know enough vitamin C in your product. You know you claim X amount and we went to the lab and you don't have it in there. If you don't also tell the truth right so in the world of truth-telling we should all, put ourselves and others, to the same standard and this is one of those foundational issues for me. If we tell the truth then we do the right thing our cost is inherently higher right. When you do the right things you're putting all the right products. The more expensive stuff goes in and the way guys shave costs. They cut corners, they start cheating the system a little bit. You know sometimes in China they call it product food right. So you know started out it's pretty close to what they claimed and over time it got farther and farther and farther away. Well that's just simply not fair and by the way they’re unfair to the customer most of all but it's certainly not fair to your business. It's you know an unfair trade practice if you will and I do not like, I don't stand for that stuff. Now the first is I gotta have my house in order. I'm not throwing stones at somebody else if I'm doing the wrong thing and the second is if they're unfairly competing and they're misleading customers and they're more or less saying their stuff is as good or better than ours and it's not really, then we should we should be prepared to take it to the street. So I'm a big advocate of that myself and it doesn't mean we want to spend our lives in court but it does mean we need to preserve and protect what we're building in terms of equity in our business. So I appreciate that fact. So Karl as we come to the end of our time together, I've sure enjoyed it, I just wonder if you have any any predictions up on your crystal ball and talk about maybe the Amazon space for the future. You know nobody's going to be right about the future but just on the off-chance though, what do you got for us?
1:05:27 (Karl shares his prediction for the future of E-commerce.)
Karl: This is tough. I guess but my only comment is a generalization and that is there's a certain context where I think brand building becomes you know so much more important. I think that there are certain products that are great to get started on Amazon, develop sales and then go offline but I think that there is going to be these changes, movement, especially in certain sectors where more and more online as opposed to offline. For example groceries or different consumables. I mean I think because of that, I think brands are more and more important so from my perspective just went with me looking at the value of different businesses. By the way I do represent a couple funds that by Amazon businesses so looking at these issues quite frequently, what makes an Amazon business valuable I think for many reasons, it's that strength of the brand and there are many ways to brand. It's not just your trademark registration. It's building it up in a lot of different ways.
Steve: Yes, so I think that is really sage wisdom and you know I talk about this concept often of equity right. Sometimes we create intellectual equity or we're learning things and nobody can take that away from us but when we're talking about building equity into our businesses, those things are fluid right. Equity goes up when we build the brand and we've got big customer list and loyal happy customers leaving us positive organic reviews without you know any incentivization, that's a brand that's growing. And I think it was even Jeff Bezos who said you know “You could tell the power of a brand by what people say about the brand when you're not in the room.” And that's when you have people who are really talking about the brand proactively and they're happy and they're sharing it, making it literally noteworthy. That's a real brand and that's going to create equity and the more people kind of direct themselves towards that versus the arbitrage concept of just knock off this guy and then knock off that guy and and try to keep the machine running, that's a treadmill that will never end and it doesn't really have that much equity at the end of it. So very good advice Karl. Thank you so much for joining us today. It's been a real pleasure and I know your time is super valuable so thank you on behalf of Awesomers for giving us that time today.
Karl: Thank you so much.
Steve: It's my pleasure. As always Awesomers, we'll be right back after this.
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Steve: Well I bet you didn't see all of those subjects coming up today. I always have fun talking with Karl and as you could see he's not just smart and kind of insightful but he's creative as well and this is one of the things that I really enjoy about Karl, is that you know he doesn't just look at things. And you know kind of a typical lawyer response to things is no or it depends. Karl will always give you know his best and most honest advice and the same goes for the other folks in this firm. I regularly recommend this firm. Again I have no personal affiliation. This is just somebody that I think is Awesomer, the team is Awesomer and especially for those involved in the internet world E-commerce and particularly in the Amazon space, this is a firm you need to know. And you're lucky that you are here today to hear it. So this has been Awesomers.com podcast episode number 35 and again as I mentioned at the top of the show, all you have to do is go to Awesomers.com/35 to find the relevant show notes and details. And by the way you can go there, you can leave comments about the episode, you can join the mailing list, there's all kinds of other things you can do to kind of stay informed and become a part of the community. We are now 35 days in a row, dropping in what I think is pretty great content. I hope you agree and I want to reinforce this idea that you are the listener listening at this very moment, you and me are talking together, that we have this opportunity to connect. You can go on to Facebook and find Awesomers.com page. You can go onto our website at Awesomers.com and contribute comments, etc. And of course I always recommend and appreciate when people go and share this online and leave us reviews on Google Play and the like.
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