EBay beats Tiffany, but TM law is very much alive and well …

The Wall Street Journal announced today that EBay Wins in Fight Over Tiffany Counterfeits.

eBay finally wins one, and it’s about time. EBay (and other e-commerce companies) won decisively against Tiffany and other trademark holders, which are trying to hold Internet companies liable for the sale of counterfeit goods. The issue involves burden of policing trademarks on the Internet, and Tiffany argued that eBay doesn’t do enough to police its network. The court held that eBay removes content once notified by Tiffany, which is the extent of its legal burden under US Trademark Law. Tiffany wanted eBay to police its network regarding Tiffany trademarks, much as it does prohibiting firearms.

Technically speaking, it wouldn’t be a problem for eBay to police its network as Tiffany desires. The problem is, it creates a slippery slope for eBay in several ways. First, by doing this for Tiffany, it would create a precedent for eBay to do it for all valid trademark holders (or at least those who requested this from eBay). Additionally, it suggest some form of liability to Tiffany, should eBay make mistakes. Finally, such action would cause a disservice to eBay’s customer base, as there are valid holders of Tiffany products. For example, I happen to have a couple of silver cufflinks from Tiffany, and if I want to sell them, I should be able to do so without seeking some form of permission from Tiffany.

It sounds like Tiffany isn’t going to give up. I expect them (and other significant trademark holders) to seek additional rights at the federal level. The problem is, they are overstepping their bounds, and definitely infringing on my rights as a holder of Tiffany goods should I desire to sell them. If we give rights to trademark holders to hold eBay, Craig’s List and the classifieds liable for counterfeits, I will no longer have an opportunity to sell my old Dell laptop, my Logitech mouse, iPhone, Tiffany earrings, my wife’s Louis Vuitton purse, etc, etc, etc.

Don’t think for a minute, that trademark holders are powerless with this decision. It simply reinforces the burden of policing the trademark (i.e. monitoring where your trademark is being used), and once a trademark holder identifies (or thinks they’ve identified, even if they are wrong) improper use of their trademark, an Internet company would be wise to immediately respond to any notice received by taking down the offending material. Otherwise, it becomes an easy case for contributory trademark infringement against your company.

When I was COO & Corporate Counsel for FatCow Web Hosting, I received numerous trademark infringement claims against our customers. The problem for us, is that our 30,000+ customers hosted their websites with us, some websites having many thousands of pages or products, with only one page or product containing the offending material. As a company, we can’t go in and modify a customer’s database to remove the one row (or page) containing the trademark problem. We have to take down the entire website. Therefore, it was our policy to contact the customer first, apologize about the predicament we were in as a hosting company, and explain the options to our customer. Often, those options were:

• Remove the offending material (usually within 72 hours);
• Resolve the matter with the complaining party;
• Obtain a court-order to keep your website up; or
• Have us take down your entire website.

More times than I can remember, I would receive a call by either the customer or their attorney, demanding that we leave the website up and basically trying to plead their case to me as though I’m a trademark judge. Unfortunately, in US Trademark Law, there is no safe harbor for an Internet company or ISP against contributory trademark infringement claims by a valid trademark holder. This means, as an Internet company or ISP, you must take down any material that is alleged to infringe a valid trademark otherwise you risk exposing yourself to a contributory trademark infringement cause of action, which will be difficult to win given the notice you were provided by the original complaint and the fact that you derive revenue from your customer.

In other words, Tiffany didn’t lose anything in this case against eBay. Trademark law is still alive and well for trademark holders.

Comcast may receive financial penalties for managing its TCP/IP traffic

The Sacramento Business Journal had an article today discussing how the FCC Chairman is recommending punishment to Comcast for “violating commission principles meant to protect consumers’ access to the Internet.” In particular, Comcast started regulating BitTorrent Inc. file-sharing traffic in June 2008, and has been accused of creating network changes that have disrupted some users of Vonage VoIP phone service.

I’m both a Comcast and Vonage user, and I’ve never experienced any trouble with Vonage myself, although I’d raise hell with Comcast if they tried to interrupt the ports or connectivity associated with my Vonage use. Vonage is a great service, and I cannot recommend it enough. Internet VoIP is definitely the wave of the future. It’s inexpensive, flexible, highly configurable and most importantly, portable. I can keep my old phone numbers, no matter where I am on the Internet. I can also have phone calls routed just about anywhere.

What this points out, though, is that ISP’s must be ever more careful how they define services for their customers, as well as how they manage their networks. In the past, ISP’s have often had to make hard decisions in impacting one or more users’ access to the Internet, in order to save or protect the overall network. For example, in Comcast’s case, they are trying to manage overall network performance by reducing BitTorrent filesharing traffic.

In today’s ISP market, we market the value of the service by how fast it is, like when an ISP advertises “6 megs.” Consumers don’t appreciate the different between upload versus download speeds, although there are signs this is changing. ISP professionals will tell you that “6 megs” is really not telling the whole story, since it’s a measure of throughput not overall data transfer. If all customers on an ISP’s network fully utilized their full throughput (i.e. all “6 meg” customers transferred a full “6 meg” upload and download all day and night, 24×7), their networks couldn’t handle it. Every ISP’s network assumes customers utilize only a tiny fraction of their overall bandwidth allocation.

The better approach for an ISP, would be to state upload and download speeds, as well as put a monthly or daily cap on data transfer. This would help ISP’s manage their network, when you have heavy users, as well as provide a mechanism to tier access, therefore providing an ability to charging more for the “heavy users.”

Is the small ISP going the way of the Dodo?

I had lunch today with a the owner of a very well-respected ISP here in New Mexico. He is a very likable fellow, very technical and works very hard at keeping his customers happy.

The problem is, his business isn’t growing.

For years, he benefited from high double-digit growth rates in net residential and commercial accounts. This past year, his net growth rate for new accounts is around 5%. He blames it on the economy, acknowledges a deficiency in marketing, and feels that all he needs to do is offer a new backup storage service to get folks enticed to do business with him.

The truth of the matter is far more sinister. His business, like all small ISP’s, is in risk of extinction. The large players, like Qwest and Comcast, are now competing in a deregulated marketplace. They aren’t giving ISP’s the same access to their networks as before. They are bundling services, and throwing in Internet service as a loss-leader.

His people are disenfranchised. They lost that “spark” that keeps them motivated and going that last mile for customers. It’s a downward death spiral, and it will take some serious changes to turn the business around and compete effectively in this new marketplace. He is stymied, and falling back to what he knows best: Introducing new technical features that will have little appeal, especially when ISP-neutral solutions are readily and inexpensively available.

What he needs to do is:

• Refocus on customer service, and delivering a customer support experience that far surpasses what the big-boys can provide.
• Create a corporate proforma, with realistic goals on number of accounts and value-added service purchases.
• Create monthly financial reports that can be disseminated to the company (and public).
• Publish a monthly executive dashboard of business metrics, to help employees better understand how the company is doing and what is needed to grow.
• Provide the same suite of services the big boys provide, that are easier to use, better and more cost effective. At a high-level, broadband capable voice, data and TV. Also, he should include (at a minimum) email, DNS, web hosting, automatic virus protection and spam filtering, and optionally filter out adult content.
• Finally, he needs to offer services the big boys simply cannot. Because his customers are local, he could offer free “computer checkups” and disaster recovery for clients. He should leverage his local access to clients.

Over the course of the next month or so, I’m going to publish articles that offer specific examples and explain how to create the various tools for the small ISP: Proforma, proper financial reports, executive dashboard, exit strategies, broadband network strategies, etc. Stay tuned!

Michigan legislators: stupid is, as stupid does

Michigan, without fully appreciating the ramifications to small business, decided to recently join the growing list of states placing restrictions on gift certificates. The justification is always consumer protection. (See Gift Cards and Gift Certificates Statutes and Recent Legislation for more information about various state laws).

Both houses in the State of Michigan approved bills amending Michigan law to (1) limit expiration dates to five years or more, and (2) require unclaimed funds to escheat to the state. See the Senate version of the bills, Bill 387 (S-2) and Bill 388 (S-2), covering Michigan’s Consumer Protection Act and Uniform Unclaimed Property Act, respectively.

They were scheduled to take effect on April 1, 2008, but it doesn’t yet appear (as of the writing of this blog article) that they have been signed by the Governor.

What is truly mind-blowing, and shows the depth of ignorance of Michigan’s legislators, is the fiscal analysis performed. They actually say:

FISCAL IMPACT

Senate Bill 387 (S-2): Any additional costs associated with enforcing the Michigan Consumer Protection Act or promulgating any new rules to implement it due to this proposed change should be absorbable [sic] within the Office of Attorney General’s existing budget.

Senate Bill 388 (S-2): The bill would have no fiscal impact on State or local government.

No fiscal impact??!? From a state with the nation’s highest unemployment rate in 2007??!? They would have looked less stupid by saying “should not have any fiscal impact.” What they missed, is the impact to small business, and the further erosion of the economic viability of that tax base.

Michigan is a state that needs jobs. The residents are leaving in droves, with “the likely consequence of a moribund economy that has pushed thousands more people into poverty.” Consumer protection is always a laudable goal, but laws like this — with no rigor in the financial impact of their legislation — indicate that Michigan will experience a significant, long-term decline in its economic base. I can’t think of a better indicator for businesses and homeowners to sell!

I’m guessing that legislators like to look at the large companies, like Walmart, Best Buy, Circuit City, etc, when constructing consumer protection laws. The problem is, being able to sell, expire, recognize and keep the revenue from gift certificate sales are critical to many groups of small businesses. Their survival depends on it, and it’s the small business that pays an inordinate amount of local taxes and employs a large percentage of the population. It’s small business that struggles to survive, especially in the economically depressed State of Michigan.

A good employee is like a three-legged stool

You cannot beat three legs on a stool. Otherwise, it’s next to impossible to maintain the proper balance and center-of-gravity.

It’s useful to think of a three-legged stool, when thinking of employees. Like legs on a stool, each employee needs at least three high-level attributes to maintain the proper balance within a company and the right center-of-gravity. They are:

1. Hard skills - Those skills necessary to do the fundamental job hired for (i.e. answer the phone, analyze financials, run the computer, balance the books, etc).
2. Soft skills - The knack for friendliness and courtesy. Saying “hello, please, thank you and goodbye,” along with the ability to communicate well (i.e customer service skills).
3. Culture fit - Possessing the same work ethic and desire for growth as the company.

It’s easy to focus on hard skills only … “She is GREAT at doing what is needed!” We so appreciate when someone is an outstanding fit for what’s needed, that we forget about two other important features of what makes an employee great within a company: the soft skills and fit within the culture.

Soft skills are important. This is a no-brainer for those positions with customers interaction. Customer-facing employees must be friendly, courteous and represent the company in its best light with customers. After all, customers represent the life-blood of a company: revenue. However, if everyone — including the bookkeeper — maintains strong soft skills, you promote, propagate and maintain a fun, positive and healthy workplace environment, which makes it even easier for the customer-facing employees to maintain great relationships with the customers.

Soft skills include communication skills, and are often overlooked. If an employee cannot articulate him or herself clearly, they will experience difficulties with representing others and the company, problem solving and/or conveying information. They will delay or neglect filling paperwork, time sheets, follow-up cards, etc, if they have trouble writing.

When I see otherwise great companies with great products or services having trouble with customer retention, I almost always find companies whose employees have little or no soft skills. Customers like to be liked, and like to associate with others who are friendly, helpful and courteous. Unfriendly employees, who appear preoccupied or generally lack sincerity, will push customers away and they will never come back.

As it relates to culture fit, consider two different business owners: The first is an A-type personality, who works hard toward a 5 years exit strategy. The second owner could care less about making a profit, and cares dearly about promoting a healthy lifestyle. Is it possible for the same great employee to be successful in both companies?

If, as an owner or manager, you’re constantly working overtime, are you going to be okay with a nine-to-fiver? Or, do you need someone who is willing (without asking) to burn the midnight oil?

Individuals who bring a balanced mix of hard skills, soft skills and culture fit, will be far superior, happier and longer-lasting, than individuals who possess only outstanding hard skills, and lack in the other areas. A hard skills only employee will ultimately lead to frustration and a quick turnover–in that employee, as well as customers.