Auction Blocks: Criminals Unload Counterfeit and Stolen Goods on eBay

Criminals use online auctions as a place to unload stolen, diverted and counterfeit products. EBay does little to stop them, creating more work for CSOs. Here's what smart companies do.

By Sarah D. Scalet

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"It's kind of like what the music industry is doing [to crack down on pirated music], but we haven't filed any lawsuits," she says. "We haven't yet, anyway."

A Sprouting Industry

Limited Brands' CSO scoffs a bit when he hears about WWE's fledgling program. As a collector who has spent about $20,000 buying professional wrestling memorabilia on eBay, Jones has a pretty good idea of the number and nature of illicit WWE goods showing up on the auction site. "Their trademark is so violated now," he says. "I think they're just scratching the surface."

The fact is, a company can devote as many resources as it wishes to patrolling online auction sites. An entire industry has sprouted around them. Companies such as Brandimensions, Cyveillance, ICG and MarkMonitor gather intelligence about where stolen, diverted and counterfeit goods are appearing online, including on auction sites. GenuOne even sells a piece of software called GenuNet Auctions that was specifically created to monitor and shut down illegitimate auctions.

Other less specialized software tools can be used as well. Rogers says that companies can build databases of current and past sellers, then run software against the databases to look for nonobvious relationships between sellersperhaps to track down someone who has opened up shop under a new name. Infoglide has a product along these lines. Another is Analyst's Notebook from i2 (an investigative analysis company in Springfield, Va., not to be confused with the Dallas-based supply chain management company).

An easier option is for brand owners to hire a specialized law firm. In addition to working for Rolex, Brokate says that his firm currently patrols the Internet for 20 other clients, and serves two or three lawsuits each month for copyright infringement involving eBay. At deKieffer & Horgan in Washington, D.C., another set of attorneys keep a vast database of people who have engaged in trafficking stolen and diverted goods in the past. They look for matches among people who are currently selling suspicious goods that carry their clients' brands.

For businessmen such as David Saenz, vice president of worldwide security for Levi Strauss & Co., it's a more cost-effective way to deal with the problem. "It's a lot of time spent looking at a large volume of data, and really, the actionable data is quite small," says Saenz, who relies on outside partiessuch as deKieffer & Horgan's Don deKiefferto notify him of perhaps five problematic sellers each month. The service helps him track down gray-market sellers who are breaking their retail sales agreements with Levi Strauss and serving as wholesalers, something that neither law enforcement nor eBay would ever be able to determine.