The Battle to Protect Intellectual Property

Entrepreneurs that make money off of intellectual property – like artists and eCommerce storeowners Meredith Erin and Matt Snow – know that protecting your IP is an uphill battle. Meredith and Matt join us to talk about how they’ve dealt with counterfeiters stealing their ideas and ways we could improve policy to better support small businesses in the US.

We discuss the questionable legality and safety of products coming into the country from countries like China, who enjoy extremely cheap shipping to the US. We also talk about how small businesses in the US often bear the financial burden of these deals, and how they will affect our economy now and in the future.

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(With your host Andrew Youderian of eCommerceFuel.com and Meredith Erin and Matt Snow of Ex-Boyfriend Collection, ElsaJane, and BoredWalkTShirts)

Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.

Hey guys, it’s Andrew here, and welcome to the eCommerceFuel Podcast. Thanks so much for joining me today. And if you’re joining me… I’m about three months into my new publishing schedule here, you know, dropping a monthly episode. And if you’ve been tuning in for those episodes every month, thank you for sticking with it, despite the new schedule. I really appreciate it. And if you just kinda happened to haphazardly come across this episode, it’s wonderful to have you with me as well.

Today on the show I’m joined by one of our top new eCommerceFuel community members, Meredith Erin and her husband and partner in the business, Matt Snow. And they run a number of creative apparel businesses, Ex-Boyfriend Collection, ElsaJane, BoredWalk T-shirts, where just like the name sounds, they create really interesting, funny, unique designs, put those on T-shirts and other apparel, and sell them. And I brought them on to talk about IP, intellectual property, how difficult it is to protect that because that’s an enormous part of what makes, you know, that is what their brand is, it’s almost all IP, and their proprietary designs. And it’s something they struggled with, to protect that, to keep other people for knocking their stuff off, to stem a, you know, kind of a tide of low quality knock offs, you know, domestically and abroad.

So that’s what we’re gonna talk about today and I’ll go ahead and drop us right into our discussion at their offices. Had a chance to swing by when I was coming through Los Angeles recently to meet up with them at their headquarters. Always fun to see members’ headquarters and, you know, see where the sausage gets made, so that was a fun little part. So, without further ado, here’s my discussion with Meredith and Matt.

I think in the forum are probably like the most outspoken person about intellectual property, and stuff getting ripped off, and it’s really important to you and it’s had a big effect on your business. Why is that? Can you give me a sense of, what’s happened over the last few years that’s made you so passionate about this?

Meredith: Well, the main thing that we sell is our intellectual property, we’re turning it into a product like a shirt or a poster or a bag, but the main thing that we have that’s special, that other people can’t reproduce is our creativity and our ability to use that creativity along with our illustration skills, to create something unique and special that someone else doesn’t have and can’t create. We’re the only ones that should be able to sell. For example, our Catnip Freakout design, which is really popular and Matt spent three days drawing that.

You can, you know, on the radio. But it’s got like all these fine details because he drew these three different tabby cats and there was just tons of line work in there. That kind of work takes a long time. So when you spend days coming up with the idea and then creating the artwork and popularizing it, it’s pretty infuriating to see somebody else just rip your art off the internet and start selling it for, you know, less than what you would sell it for, and people are buying it and they don’t even realize they’re buying counterfeit artwork.

Andrew: And where are you seeing, is this mostly other sites springing up and creating their own standalone sites and stealing your stuff? Is it on Amazon? Is it domestic? Is it foreign?

Meredith: All of it. We see our stuff on AliExpress and Alibaba, we see our stuff on Amazon, we see our stuff on those Print on Demand websites. Like, we’ve caught it on Spreadshirt, we’ve seen it on those sites like Teespring and TeeChip. Those are particularly maddening because they make them very difficult to search. So our stuff could be out there and people could be selling, you know, thousands of units of our product and it’s very hard for us to even catch them and they’ve done that by design to avoid being caught. And it’s not just us, it’s every content creator out there that has some sort of visual product. Whether it’s a cartoonist or an illustrator or a graphic designer, we’re all experiencing this.

Andrew: So what if you… Let’s use Amazon because they’re the, you know, the biggest marketplace. If you see someone on Amazon who’s selling one of your products, you know it’s yours because you’re the only one that’s designed it, it’s not you. What do you do? Like, what kind of action do you take to try to get that kicked off?

Meredith: Well, you send a DMCA takedown request and they may or may not respond in a timely fashion, which they’re legally required to, but that doesn’t mean they will. And they may even argue with you and say, “Well, you have to, you know, prove it and order a sample,” which is ridiculous. Now I’m supposed to spend my money to prove to you that something’s shipping out of China that I know is mine, is mine, but it’s a fake?

So sometimes they’ll make requests like that. That’s not really in compliance with the DMCA. But the main problem is, I can send them a takedown request and they could do what they’re supposed to do, which is take it down, but take it down doesn’t mean keep it down. That counterfeiter can put that thing right back online the next day and I’m back to square one.

And when you’re dealing with thousands of people doing this, it’s an impossible game of Whack a Mole because you can’t keep up with the rate at which people are posting illegal copies of your work online.

Andrew: What do you do? I mean, like, what’s… Because if you can’t go after everybody, have you just at this point kinda given up on that front?

Meredith: No, I go after instances that I find, but it is an overwhelming amount of work and I go after every instance I can find, but I can’t spend 24/7 trolling the internet for copies of our work. So, I do try and shut down instances that I am able to find, but I’m not able to find them all. Sometimes there’s some back and forth of trying to get stuff actually taken down, and like I said before, even if I get something taken down, it doesn’t mean it stays down.

Andrew: So, what percentage of your week, like, how many hours a week or a month do you think you spend?

Meredith: We really have to try and moderate how much time we spend. We could literally spend, like, hundreds of hours every week just trying to police our work. We don’t. We have subscribed to a couple different services to try and…like, one we use is Pixie, but it hasn’t gotten great, but it’s one that we’ve tried.

We do go through periodically, you know, a couple times a month looking for dupes, but it’s not something that we try to spend all of our time on because you don’t make money on that. It’s more just about protecting your brand and protecting your intellectual property, and preventing other people from just completely ripping you off and making tons of money on your work without paying you.

Andrew: Let’s maybe talk about ePacket a little bit. This was something we…a discussion we talked about in the forum. And before we talk about the nuances, can you describe what ePacket is?

Meredith: So, ePacket is this deal, in part… It’s a little convoluted. In part, it is something US and China have built upon with each other as far as I understand it. But also another component of is the UPU, which is the postal union. The whole world basically is involved with and it helps set rates for shipping overseas.

The ePacket deal, the way it works is, China is given extremely cheap rates to ship into the US. It’s not a reciprocal deal, like, they can ship here for, I think it’s like less than $2 to ship here, like, a package. I can’t ship a package there for less than $2. Like, it starts around $13 and change, and that’s for a parcel I wanna say, under eight ounces. And then like, 8 to 10 ounces it’s like another, like, twenty something and change for me to ship.

So it’s not like it’s a reciprocal deal and I can ship as cheaply there as they can ship here. And in fact, they can ship here less expensively than I can ship around here. So, it would cost me more to ship a package to Phoenix than it would cost someone in China to ship a package to Phoenix, even though I’m only a few hundred miles from Phoenix.

Andrew: So, when we first started talking about this I, you know, when I learned about ePacket I was like, this is potentially really interesting because, you know, US merchants could DropShip in…fairly cheaply from factories into the US, they could test things more easily, they could get product over here. I have a drop shipping background, and so, the idea at a high level to be able to potentially make my product at the source, at the factory, and individually ship to the customers sounds potentially great, right? But why, like, especially from your perspective, where’s the problem?

Meredith: There are a few problems. One problem is that the rest of us are paying for that and so you’re basically forcing all the businesses that are operating here to subsidize the businesses that aren’t, which I think most people if they understood that, wouldn’t love that. So that’s part of the problem. The other part of the problem has to do with regulation. You can’t enforce product safety laws, you can’t enforce intellectual property laws.

Now I understand you’re describing an example where somebody isn’t breaking any law, they are complying with product safety, they are complying with IP law, and that’s definitely preferable. But we have no way to make sure that that’s the case with these small packets coming in, and we would need some kind of protection against that for bad actors, and we are currently have that.

So, it’s two problems. Part of it is that, the rest of us are paying to subsidize that business model, which we shouldn’t have to do. And then the other part of it is, the legality of what’s coming into the country.

Matt: Yeah. It’s not just about the legality of it, but I think also a big concern is that, if they’re able to ship into the US for less than we are able to ship within the US, that’s already a competitive advantage that they have over people that are shipping within the US. But the other thing is, that means that they can actually, especially given the cost of goods over there, they’re able to undercut us on price.

So they have two competitive advantages just in terms of price, and there isn’t really anything to prevent them from sending subpar materials or sending subpar items over here made with subpar materials, that in a lot of cases can be dangerous. It’s not unheard of for a lot of these knockoffs to come over in ePacket from China and Hong Kong, reeking of formaldehyde and other chemical smells and stuff like that.

And that could pose significant danger especially if you’re buying children’s clothing. I mean, we have to make sure that all the materials that we use with the production of our shirts are CPSIA compliant to make sure that there’s nothing carcinogenic or otherwise toxic to, you know, small developing bodies, when we’re doing that stuff.

And so, I think if we reclassified the most prominent bad actors that are exploiting ePacket like China and Hong Kong, and force them…because right now, they’re classified as a developing country and I feel like at this point, they no longer qualify for that designation.

And if they have to play by the same rules as the other more developed countries and have to ship in at the same cost internationally to get their stuff into the US, then they…even if they do win the buy box on Amazon to use that as an example over us with their knock offs, the cost of the shipping added to that, if they actually do have to pay $14 to get something into the US.

Then that eliminates that competitive advantage and then our price becomes much more, you know, in line with what their total cost is. Since when we were selling on Amazon, we did free US shipping. And so I think just making the…leveling the playing field and having to force them to operate in a more fair manner, would eliminate a lot of the problem, right off the bat. Even if they are still infringing on other, you know, people’s intellectual property.

Andrew: Any, you know, we’re kind of in an environment the last, you know, six months especially, where a lot of protectionist talk, right? Like, a lot of close the borders, anti-trading. For someone who’s, you know, I think most businesses are very…it scares a lot of businesses. We’ll talk about like the border adjustment tax here in a minute. Do you think you run the risk of potentially like adding fuel on the fire if you, you know, given the fact that’s kind of the climate right now?

Meredith: My main concern is product safety and intellectual property law more than trying to prevent free trade per se. I am pro free and fair trade. The USPS is losing money on this ePacket deal. So, the rest of us, our rates are going up and up and up to ship within the US because the USPS is trying to make up for the shortfall. It’s got a lot of problems to it. It’s not that my goal is to prevent free and fair trade. Entrepreneurs in China are creating their own intellectual property and they’re complying with US product laws, I think they should be able to ship here, but I think they should have to pay what it actually costs to bring their products here.

Andrew: What about… One thing you mentioned too when we had this discussion was talking about the tariff limit. So like, right now if I understand correctly, products that come in with a value of less than about $800-ish are exempt from tariffs, is that correct?

Meredith: I believe so.

Andrew: Or exempt or at a minimum, they get hit with a lower level of tariffs. And why is that potentially a bad thing as well, at least for your business?

Meredith: Well, again, there’s a couple of reasons. Part of it is that, again, it makes it just more attractive to sell goods into the US that shouldn’t be sold here, either because they’re violating product safety laws or intellectual property laws.

I mean, it’s just…it makes it cheaper to do that. But the other problem is that, in order for us to have all the stuff that we have that makes our society function, you know, our law enforcement, our fire departments, our roads, our schools, we need a tax revenue. And we depend on sales tax, among other forms of tax to be able to fund all of the stuff that we rely on. And when goods are being sold into the US that aren’t being taxed, that’s revenue that states, the federal government, our local governments are losing out on.

I mean, it’s a kind of a domino effect when goods are counterfeited because it sounds like, well, it’s just our problem because our goods are being counterfeited, so we’re the ones that are being hurt. But it’s bigger than that, because when we lose sales of our products to somebody in China that’s selling a knockoff of like, Catnip Freakout, it’s not just that we’re losing that revenue and it’s not just that our reputation for our brand is suffering, we now have those sales, but we’re out, that we’re not spending money with our suppliers, the people that make our shipping materials, the people that make our manufacturing materials. We’re not able to spend as much with them because we’re being deprived of our revenue and our whole company is being deprived of that revenue. We’re not able to pay as much in taxes. We’re not able to hire as many employees.

And the same thing will happen to our suppliers, is that little bit less that we’re spending with then, it might be a drop in the bucket when it’s just our business, but it’s not just our business that’s experiencing this. And when thousands of businesses around the US are experiencing this, and we are all spending a little bit less with our vendors, and we’re all paying a little bit less in taxes, cumulatively, it affects the whole economy.

I think that a lot of people don’t understand how important intellectual property is to the US economy. People think it’s kind of a victimless crime to buy or sell counterfeit goods, but our economy is heavily dependent on it. It’s one of those things that really should be a source of national pride in the US. Something that we’re particularly good at is coming up with entertainment, and content, and inventions. You know, people import Hollywood content because it’s great. Other countries aren’t as great it as we are, so if we don’t protect that, we’re really endangering a big part of our economy.

Andrew: Yeah. I think that the future of our country is completely dependent upon services and IP, right? Like, it’s one of the most valuable exports we have and one of the things we’re most, you know, known for in the whole world. And you look about, you know, where we are right now. You look across the world and the US, there’s a big divide between, you know, people that that’s their career and that’s their not, and you can’t have everyone. Everyone cannot start Microsoft, right? But I think if collectively for out country to be successful in the future, we’ve gotta be able to say, hey, we’re not gonna be China making widgets, right? Like, that’s just not the future for America.

Us being able to collectively come to that realization and for the people who, you know, maybe they’re not gonna be able to start Microsoft, they’ll take them along, I think it’s gonna be really important for us to do well in the next, you know, in the future.

Meredith: Yeah. I think that it’s hard for people to see the ripple effects that intellectual property crime has on the economy because it doesn’t directly affect them and maybe they don’t work at like a graphic design business sort of like we do or they don’t work at a movie production studio, so they don’t personally see, like, that it’s hurting the business they work for.

But cumulatively, you know, if the production studio isn’t making enough money on their movie because everyone’s buying bootlegs of it, and now they can’t afford to make more movies, now they can’t afford to hire more people, those more people can’t afford to go to your restaurant, they can’t afford to go on vacation at your hotel. It really does ripple out, it’s just that people don’t see it close up because they’re not necessarily working in those industries where they understand where the ripple is coming from.

Matt: And to that point, with regard to the IP, when you think about, okay, every Marvel movie, every big tent-pole blockbuster, it’s not just about box office sales. So there’s a lot of other stuff that goes into. It’s not just the IP that you think of when you think of IP because it affects everything that we kind of take for granted as the stuff that our lives are made up of. And I know that sounds very materialistic and capitalistic, but we do depend on all sorts of really random, seemingly innocuous things in our day to day lives, that I don’t think a lot of people realize that, like, intellectual property plays into all of it.

Andrew: One thing I thought was interesting was when you mentioned was lobbying, like, talking about like, hey, maybe we can get a group of stores together to lobby congress on the issue. And I always think… It was interesting to me because I think…you think lobbying first, you think, it’s got a very negative connotation. No one is like, “Oh, I wanna go and be a lobbyist.”

And secondly, you think of like, Exxon Mobil lobbying, right? Like, you think of enormous multinational corporations lobbying, but the fact that you proposed that, I thought was really interesting. So can you, I guess, maybe what made you think about that and what did you find out when you looked into you found something that was feasible for a group of, you know, kind of smaller businesses, high six, seven figures stores to do?

Meredith: I’ve talked to some of my reps here, both in our district where our businesses are based and also where we live, and kind of what they said to me is basically, you do need to hire a lobbyist. They didn’t say it in so many words, but that was the gist of what they were saying. There are a couple of reasons that you would want to have lobbyists working on this. First of all, they’re not as expensive as people assume. You know, they can be few thousand dollars a month, which I know sounds like a lot of money, but if you have a handful of small businesses paying for that, that’s not a whole lot of money to get something important done.

I think the advantage of working with a lobbyist is they have the expertise, they have the experience to get things done that we as small business owners don’t have, and they also have the hours to do it. We’re very busy running our business and we don’t have the hours to constantly be calling our lawmakers, visiting our lawmakers. We don’t have a personal relationship with those lawmakers. If we had a lobbyist working for us or a lobbying firm working for us, they would have those things built in. They would have the experience, they would have the relationships, and they would have the hours to devote to this, so that’s why I think that it’s something that will eventually be a necessity to really get some real change on this issue.

Andrew: So what do you think, kind of wrapping up the IP side of things, how do you see this playing out? Do you see it coming to the point where there’s so much stuff getting ripped off that we really have to endure a lot more pain and collectively, people kind of have to really suffer before I think it’s done? Or do you think there’s something that you could proactively do?

Meredith: Unfortunately, I do think that there’s going to have to be more suffering before action is taken, which I hate. I mean, I would love to be able to singlehandedly fix this problem myself, but I’m one small business owner and I don’t feel like I have the resources, and wherewithal, and hours, and all of that to do this by myself. So I do need other business owners to care and to be invested, both financially and in terms of, you know, their time to some degree, to get this done. But I do think eventually, there will be a realization that the intellectual property issue is hurting our economy. I worry about how long that’s gonna take because it’s kind of a slow drip right now. All these packages, all these ePackets that are coming in from China that people are ordering things on Amazon, and sometimes they’re getting ripped off, and they’re being disappointed by it, but overall, like, it’s still continuing to drip into the country.

No one is really keeping watch of how much money is being lost by US businesses because of this situation, but I think once the economy really starts to feel the pain, people are gonna start looking at where that money went. And by that point, I don’t even wanna think about, you know, how bad things could get before some action is taken. But I think eventually, something probably will have to be done because at the rate things are going, no creators are gonna make money off of what they’re doing if things continue. I mean, they’ve accelerated so drastically just in the last two years.

When you think about in the grand scheme of things how long the internet has even been around as we know it today and e-commerce has been around as we know it today, not that long in the grand scheme of things. And for things to have accelerated this drastically, this quickly, I do worry about where we’ll be in 5 or 10 years. And if creators can’t make money on their content, whether it’s us designing, you know, funny graphics for T-shirts and posters or whether it’s Taylor Swift creating albums. Like, we can’t just do this work for free. So, if you wanna have more albums from your favorite artists or more graphics from your favorite designers, those people do have to get paid and the danger is that they’re not going to be able to get paid enough to continue to do what they’re doing.

Andrew: I’m gonna totally changed gears. So, I kinda let us run over, so, if you wouldn’t mind maybe just…I’d love to ask these here and just give me your super-fast lightning answers for both of you guys. So, Meredith and Matt, how much money is enough? Like, what would be your number in the bank where you don’t have to stop working because a lot of us love it, but you’d feel good if you didn’t want to and never working again?

Meredith: I would say $10 million.

Andrew: Happy wife, happy life. $10 million for both of you, I like it. How many hours a week do you guys both work?

Meredith: Let’s say an average of 60, very rarely less than that, sometimes a lot more than that.

Matt: That sounds right. Yeah. I would say 60 to 80, closer to 80 during the holiday season.

Andrew: If there was one thing that was gonna bring upon the fall of civilization in the next 25 years, what would it be?

Meredith: I’ll let you do that one.

Matt: Oh, man. It would probably be a combination of access to potable water and automation that isn’t planned for in terms of like, are we gonna tax manufacturers that are using automation in order to replace the missing tax base of people that are no longer working.

Andrew: Interesting. If you had to leave Ex-Boyfriend, you guys’ company, like, you just had to, and you couldn’t start another business, but you could work for any company in any role. What company would you work for if you had to work for a company and you could pick your position?

Meredith: Just in terms of the kind of company it is, I think I’d probably like to work for a company like Costco because I just like the ethos of their business. So, that’s probably what would be appealing to me.

Matt: Yeah, something in that lane.

Meredith: Yeah.

Andrew: Yeah, cool. What do you both spend most of your discretionary money on?

Meredith: Food.

Andrew: Food?

Matt: As the business has grown, our ability to travel far from our home base has declined. But yeah, we are big fans of food tourism.

Andrew: And last question. If you could live anywhere in the world, you know, cost is not an issue. Let’s say someone was footing the bill for all of your housing expenses, things like that, and you could import your family. You don’t worry about family, only thing you’re worried about is purely based on location, expense is immaterial. Where would you live?

Meredith: I’d still be in Los Angeles. I love it here.

Andrew: Well, then that’s awesome.

Matt: Yeah, I’d agree with that. I just feel like Los Angeles has everything, I would never leave Los Angeles.

Andrew: Oh, you guys are lucky then, so. Hey, it’s been awesome. Thanks for letting me swing in and totally, I interrupted you guys’ work day and…

Meredith: Sure.

Andrew: …it’s been good talking about this. So, thank you.

Meredith: Yeah, thanks.

Matt: Yeah, thank you.

Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight knit vetted group for store owners with at least $250,000 in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much to our podcast producer, Laura Serino for all of her hard work in making this show possible and to you for tuning in. Thank you for listening. That’ll do it for this week, but looking forward to seeing you again next Friday.

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