Ebay is actually pretty responsive to this sort of thing. One guy blatantly stole our ad copy - nearly word for word. I called him on it, and also reported him to eBay.
Within a couple of emails, eBay saw things my way and pulled the guy's ad.
They guy ended up contacting me and crying about how he I was taking food out of his kid's mouths (for crying out loud)! He even had the gall to end his message with something about how God punishes bad people, or something-rather. I contacted him back, asking him if he teaches his kid's that it's OK to steal from others, or if God thinks theft is OK.
Long story short, report them.
Also, regarding "protected" pictures - if you're halfway clever, it's very easy to copy "protected" pictures.