We got hit with the same issue just a month ago, and were actually completely kicked out of the Shopping Feeds. We were finally able to talk to the right person

We got hit with the same issue just a month ago, and were actually completely kicked out of the Shopping Feeds. We were finally able to talk to the right person at Google and get reactivated for a two week extension to give us a little more time to become compliant...at which point we then just removed all but the newly unwatermarked images from the feed and for the past 4 weeks have been doing nothing but recreating non-watermarked images for all of our products and slowly building up our feed again. I understand all the arguments...but when you're a company who IS trying to protect hard work in shooting great high def images in-house, it is very personal.