"IC" Might Mean: It's Counterfeit

A recent article from the IEEE throws wide open the scale of the problem of counterfeit electronic components. The AGMA has estimated that an astonishing 10% of the global technology products are counterfeit. The article rightly points out that the cost is not just lost profit, but also the warranty cost of replacing faulty equipment that may have been compromised by a single bogus component.
Some examples:

• $1.2 million of fake Compaq computer parts - including warranty cards
• Fake GFI outlets - with fake UL logos on them, and without the GFI circuitry
• Fake Philips IC's that Philips thought had been scrapped, that showed up at a military contractor

There are a couple of sites dedicated to tracking counterfeit electronics, including the ERAI as well as GIDEP (look under Failure Experience). What's astonishing is the quantity - and these are those products that have been volunteered. Manufacturers are still reluctant to go public with evidence of fakes - for fear of driving away customers. There are a lot more articles on the subject here. A worrisome lesson is the drive for more regulation in the industry (such as EU lead free legislation) creates new opportunities for counterfeiters to enter and profit.


The IEEE article discusses potential remedies to the problem. RFID is too expensive and lacks standard schemes for anti-counterfeiting, holograms are too easy to fake, taggants can work for some applications but not all. As UID gains ground in certain markets (e.g. DoD and aerospace), we think that unique part marking and scanning is a cheap and viable method. However, the UID must be secure (no serial numbers), and standardized so that anyone can easily validate it.

How Bad is India's Fake Problem?


A recent report in the Daily India claims India is fast emerging as one of the major manufacturing hubs of fake products ranging from cosmetics to electronics, software, mineral water, books, music cassettes. Interestingly, mineral water is one of the easiest products to counterfeit. It is trivial to refill empty bottles, and even acquiring new, tamper-evident closures is a simple matter.

Counterfeit products on an average constitute about 20 percent of the legal market. In case of some products, it is even 50 percent or more,' said Sachit Kumar, director of Globe Detective Agency Pvt Ltd.

We reported here earlier, that up to 50% of the "Scotch" whiskey in India is fake. Between 10 and 15% of inkjet cartridges are reported to be fake.

Fighting Fakes the French Way

The INPI, CNAC and French government have launched a campaign designed to educate the public about the dangers of buying fake goods - and who benefits from the proceeds. In inimitable French style, the website has funky, Clouseau-esque music and even funkier cut-out animation graphics.

Even if you can't read a word of French, the site is terrifically entertaining and well thought out.

Merci!

iPod has been iCopied
Apple has been warning its service partners that fake iPod Shuffles and iPod Nanos are hitting the shelves. The Nanos are pretty easy to spot, but the Shuffles are quite convincing to the untrained eye. Counterfeiters have copied the packaging and a valid serial number (wouldn't it be nice if consumers could type this serial number into Apple's website, and authenticate and register their product?!) By the way, the bogus serial number is 6U545TK2TJT.

NPR Covers Piracy

National Public Radio's Marketplace program is running a special piece on counterfeiting this week. You can listen to archived recordings of the segments on auto parts and counterfeits. Katherine Eban, author of the excellent investigative book, Dangerous Doses, is featured.

Waiter, this wine is ... fake

Counterfeit wine and alcoholic beverages continue to be a growing health and financial problem. Instances of fake wine, liquor, and beer are cropping up worldwide, and it's no longer just fake expensive French vintages.

• Recently Russia has cracked down on imports of Georgian wine, finding that 50-80% of the famous beverage is fake. Often these fakes are alcoholic cocktails laced with dyes and flavors, and perhaps a trace of fermented grape to try to fool the inexperienced nose.
• Fake Eiswein claiming to be from Canada has put a serious freeze on sales in China. Four years ago, China was a promising market for Canadian ice wine. In 2001, one Beijing-based importer was selling 50 to 100 bottles of Canadian ice wine every month, despite the high price of the product. By 2004, the importer's sales of Canadian ice wine have fallen to less than one-fifth of their 2001 level, largely because the pirated ice wines have grabbed control of the market. Furthermore, the poor quality of the fake product has ruined the reputation in this burgeoning market.
• A recent study by the State Administration for Industry and Commerce in China found nearly 60% of "foreign-brand" liquor found in four major Chinese cities is fake. Often these liquors contain industrial alcohol or formaldehyde - and can be fatal. The counterfeiters were able to copy the anti-counterfeit labels, too.

Bar(code) Brawl

Lawyers have their knives drawn in a patent dispute over the public domain 2D datamatrix technology. Originally invented by RVSI (now part of Siemens), the venerable datamatrix has been promoted as an open standard, is covered by ISO/IEC16022, and has been widely adopted as the symbology of choice by manufacturers due to its high data density, ease of marking, excellent error correction characteristics, and widely available scanners. Datamatrix is widely used on e-stamps (stamps.com), electricity bills, mailings, pharmaceuticals, UID, medical devices, auto parts, etc. etc.

Therefore it was disturbing to the industry to hear that a little-heard of legal firm was out demanding licensing fees for use of the datamatrix. A number of companies -- including Adidas, AMD, Nokia, and Boston Scientific -- have signed license agreements rather than litigate. But why, surely it’s public domain? The legal firm is allegedly seeking licensing fees in the vicinity of $400,000 -- a sum considerably less than what it would cost those companies to defend themselves in court. Therefore it’s easier to settle than to fight. This is familiar to anyone who knows the Lemelson case - in which a firm was able to extract over $1bn in license fees from companies using barcodes.

Not so fast!, says Cognex - an industry leader in machine vision - who would have a lot to lose from its customers shying away from the 2D datamatrix. “We strongly object when questionable patents are used to extort payments from companies that do not have the expertise to challenge the patents, or who, for business reasons, decide to submit to licensing demands rather than to undertake costly legal challenges," said Dr. Robert J. Shillman, Cognex's Chairman and CEO. Cognex is well positioned – they beat the Lemelson case, and believe the patents being used by Acacia are far weaker.

If Acacia is successful in “extracting” a tithe on the datamatrix, then it would be a boon to makers of proprietary code symbologies, such as VideoJet’s “Snowflake”, ORBID’s 2DMI, or Code Corp’s “GoCode”. Given the installed base and strength of the datamatrix case, however, … it looks like Acacia will be on the defensive.

Recent news on fakes

• The latest countefeit drug to be found on the internet: the anti-obesity drug rimonabant (which will be marketed as Acomplia). This drug has yet to receive EMEA approval - but is already available via the internet. It joins 169 other fake drugs already identified as being readily available on the internet in the EU.
• Cigar Aficionado reported a recent of cigar counterfeiters seems to have finally shown some teeth in federal prosecution of such cases. The counterfeiters had boxes and bands to make millions of $ of fake stogies... including: Cohiba, Hoyo de Monterrey, Montecristo, Partagas, Romeo y Julieta, Trinidad, Saint Luis Rey, Bolivar, San Cristobal and H. Upmann cigar brands. Altadis U.S.A. owns the U.S. rights to many of those brands. General Cigar Co. owns the U.S. rights to Cohiba, Partagas and Bolivar.
• GSK joins the list of pharma companies piloting RFID-tagging of high risk drugs. GSK is running a pilot on Trizivir, its anti-AIDS drug, and joins Purdue's OxyContin painkiller. Pfizer is also testing RFID to authenticate and track shipments of Viagra in the U.S., while distributor McKesson is also using the tagged Viagra in its own RFID technology pilot. These pilots are intended to iron out some of the technical and standards issues facing unit-level tagging. One issue is what information will be in the EPC tag. To protect consumer privacy, the drug name will not be stored in the tag - which will only contain a randomized serial number that references an external (secure?) database. Major drug companies met recently in Rome as part of the Healthcare User Group (HUG), to discuss the issues they're facing and to try to establish standards. Several of the presentations (which are on their public website) are very informative.
  
• Squeezing the balloon. Xiang Yang market infamous for selling fakes has been closed in China, following on from the closure of Beijing's Silk Market. However, word is already out that the new place to get fakes is in a place called Lou Yang in southern Shanghai. Watch this space.