No Laughing Matter

Fisher Price's Tickle-Me Elmo is an icon of the Christmas rush. Always in high demand - it frequently sells out. Now, shoppers have the opportunity to buy a fake instead. This news item shows just how brazen the counterfeiters are. They've changed the name from "Fisher Price" to "Handsome" and called it (rather unimaginatively) "the Laughing Toy"... but it's a clear knock-off. The BBB rather curiously explains that copying trademark and trade dress is not illegal unless the Trademark holder pursues it.

These Batteries are HOT!

Once again, counterfeit laptop batteries are making news. This week, IBM filed a lawsuit against an online retailer, ShenTech, that sells replacement laptop batteries over the Internet, claiming that the batteries are knockoffs that have a tendency to catch fire. Our review of the site found some batteries claiming to be Lenovo (which purchased IBM's laptop business in 2005), and others being "Replacement" IBM. IBM says it did a sample purchase of 12 batteries from the site, and claims they are all fake. It was following up on an instance of a customer's laptop battery overheating.

Elsewhere on the ShenTech site, one can purchase an iPod Nano alike MP3 player ... that looks a lot like an iPod Nano ... but of course isn't.

In the past, IBM has recalled batteries in the past for overheating. In 2005, for instance, there were four notebook battery recalls--from Dell, Hewlett-Packard, Apple, and Battery-Biz. These weren't necessarily counterfeit - only incorrectly manufactured.

Tiffany vs. eBay ... what next?

Each side has presented its closing arguments. Although the Judge gave little indication of how he might rule, he pointed to legal precedents that have found that if a distributor continues to supply a product knowing it is engaging in trademark infringement, that distributor is "contributorily responsible" for any harm done as a result of the deceit.

If Tiffany prevails, then eBay is faced with the challenge of verifying the authenticity of products on its site (or ban their sale). There's no way eBay can guarantee the authenticity of products its customer sell online, but a number of possibilities are:

- insist upon the seller showing a receipt of purchase (of course the receipt could be fake, too)
- have a third party physically inspect and authenticate the product (expensive, and currently there aren't trusted third parties who do this), such as an escrow service
- authenticate the products internally, and be the trusted third party (expensive, tough to scale and not core to eBay's value proposition. There is a company that is trying this: elady.com)
- Provide sellers with a means to display to buyers some other form of authenticity (this would require Tiffany to provide its customers with some kind of proof of authenticity, such as a secure code or certificate)

All the News (and QR Codes) That's Fit to Print

Today marks a watershed in QR Code history. There's a QR Code in the New York Times, as part of a Blue Nile ad.

Now, the QR Code has been around for years, of course, and is fabulously popular in Japan (where it was invented by Denso Wave - who made the technology freely available, but still own the trademark). Something like 50% of the installed base of cell phones in Japan can read the QR Code, and it shows up on bus schedules, magazine ads, McDonald's wrappers - even the sides of buildings. Scanning barcodes has been tried a lot in the US (this blog has a good history), but as of yet, there's not been much traction. The main stumbling block has been the tight control that cell phone operators maintain over the handset design and applications.

Now it looks like things may be changing. Nokia has launched a couple of (high end) handsets that work in the US and can read barcodes, as well as a microsite devoted to barcode reading. Even more significantly, the NY Times ad the first sign that Google is dipping a toe in the water. It makes good sense - now Google can detect whether someone responded to an Ad posted in 'dead tree' media. A model like AdWords is conceivable - the advertiser pays one amount to publish the ad, then again every time someone clicks on the QR Code. There's a long way before QR reader adoption reaches critical mass in the US - but Google's GPhone will likely support development of QR Code readers (to enhance the value of the ads). Maybe the next gen iPhone will sport a macro lens and barcode reader too? (that's just wishful thinking, of course).

As a cautionary note, let us not forget the hapless CueCat ... but the difference now is this uses a cell phone, not a cat-shaped barcode reader.

(In case you're wondering - the QR Code conbtains: http://google.com/gwt/n?u=bluenile.com)

Watch this space...

This week, Tiffany & Co. is suing eBay, Inc. in a New York court. (see article here) This case will likely set a precedent whatever the outcome. Tiffany maintains that eBay should be responsible for policing its site for counterfeit goods. eBay maintains that it does everything that it is obligated to do to prevent counterfeits being posted, and provides brand owners with a mechanism (VeRO) to take down suspect postings.

In our opinion, this case highlights the problems facing brand owners - that there is currently no way for anyone (Tiffany, eBay, or the end consumer) to quickly and confidently determine the authenticity of a product. No matter who wins in this case, the problem of detecting counterfeits will remain. If eBay were to lose, then it is hard to see how they could possibly check the authenticity of the millions of items posted every day on its site. The best example of how this can be achieved is on eBay Motors - where every vehicle is checked against a third party VIN database - thereby determining its authenticity, and whether it is a lemon. Unfortunately, there aren't currently equivalents to the VIN database for any other products. But, perhaps this could be a lesson for how to protect products in future?

Infringing, Moi?

We've occasionally shared photos of bad fakes on this blog. This French website has some great photos of appallingly shameless Trademark infringements.

Here's my latest favorite (unless of course Google is indeed branching out into fragrance):

Exploding Phones, worm-infested chocolates and Chisco

In the last week we've seen news on exploding fake Nokia batteries in India. According to The Indian Cellular Association more than 75% of the cell phone batteries sold in India are fakes. Even more disturbing was this news clip of Taiwanese brand chocolates that turned out to be counterfeits that had a filling of moth larvae. [warning: not for the squeamish]. Finally, a new term: Chisco - which refers to the ever-increasing appearance of counterfeit Cisco equipment from China. This article gives a convenient "how to spot a fake" guide.

Here are some images:

Is your food un-COOL?

With the continuing acrimony over contaminated or dangerous products coming from China, it's perhaps not surprising that Consumer Advocacy Groups are demanding more information for shoppers, such as country of origin labeling, or COOL. Not so fast. Industry players such as food processors, packers and grocery chains are resisting the requirement to provide this information - claiming that it would be 'onerous'.

An amazing 82% of U.S. shoppers want to know their food's country of origin, according to a survey released in March by the consumer advocacy group Food and Water Watch. And a Consumers Union survey in June found even stronger sentiment: 92% of respondents said imported-food labels should identify the country of origin.

This recent article in The Washington Post details the complex wrangling over several different bills, and the inconsistent application of COOL (e.g. fish vs. chicken vs. peanuts vs. produce).

Simultaneously, but independently, the Chinese authorities just announced a new mark, the CIQ mark, that will supposedly help consumers tell the difference between real and fake food.

The "CIQ" mark, which stands for China Inspection and Quarantine, guarantees that products have passed quality tests, according to a regulation unveiled by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

It's not yet clear to us what would prevent the counterfeiter simply copying this mark... watch this space!

Questionable Virginity


An article in this week's New Yorker magazine by Tom Mueller digs into the widespread problem of Italian olive oil adulteration - and downright counterfeiting. Lamp oil masquerades as 'extra-virgin', hazelnut oil as olive. As the number of food contamination and adulteration instances increases, this one is particularly interesting - as it has been going on for years ... thousands of years, in fact.

Amphorae from 211AD show evidence of extensive anti-fraud measures: each was painted with the exact weight of oil it contained, along with the name of the farm where the olives were pressed, the merchant who shipped the oil, and the official who verified this information before shipment.

So it seems that ePedigree and food traceability is not a new thing. In fact, it looks like the ancient Romans took more steps to prevent fraud that the Italians do today.

Putting the Brakes on Counterfeit Truck Brake Parts?


Among the world of fake products, probably one that grabs the imagination best is counterfeit brake parts on big rigs and school buses. Substandard fake parts are a serious problem for legitimate manufacturers - who also have to tackle 'will-fit' aftermarket parts that are not technically counterfeit, but are widely used.

A recent article in Fleet Equipment magazine discussed the challenges facing the manufacturers. The remedies proposed were focused heavily on tightening purchasing guidelines (to prevent knowingly purchasing cheap knock-offs) and legal remedies, such as patenting a part number. We believe that, given the counterfeiters ability to make convincing look-alikes, the manufacturers should take steps to enable customers to more easily spot fakes.

Counterfeit Drugs Claim a N.American victim

While counterfeit drugs have long suspected to be in the system, and causing problems from contamination or lack of efficacy, this is the first news report of a death in N. America definitively linked to purchases of counterfeit drugs online.

Specifically, the victim had

dangerously high levels of metals, including aluminum (15 µg/g), phosphorus, titanium, tin, strontium, arsenic and other metals in [her] liver.

Is there a sudden splurge of fake toothpaste ... ?

... or are we just more aware of them now?

Fake Sensodyne toothpaste contaminated with DEG was found in the UK today. Counterfeit Colgate toothpaste has shown up in 6 US states and Canada (the counterfeiters conveniently misspelled "SOUTH AFRLCA" so that it was easier to spot them) - forcing the company to put up a warning site.

There is even a shrill website dedicated to the crisis (www.faketoothpaste.com) - which helpfully warns its visitors:

"Please THROW AWAY ALL YOUR TOOTHEPASTES and re-buy some more TOOTHEPASTE, non-toxic, WE DON'T WANT TO DIE!!!"

Pity about the spelling.

Chances are, counterfeit toothpaste (along with many other CPGs) have long been sneaking into the gray supply chain through dollar stores, car boot sales, flea markets, and the internet. But now the public radar is up about 'contaminated' products ... and "toxic toothpaste" makes a heck of a headline.

Can you sell virtual counterfeits in Second Life?

This is definitely out of our domain - but too convoluted and fascinating to ignore: an avatar (an online representation of a real person) in Second Life is attempting to sue another avatar (but in real life) for counterfeiting an online virtual 'product'. (Read Wired's coverage). It's not at all clear what law may have been broken, if any, or even in which country the lawsuit would apply. One problem (of many) is that the defendant avatar, Volkov Catteneo, is, of course, not using his real name. And no-one knows his real name. We won't reveal the counterfeited virtual product ... but it sells for 46 real US dollars, apparently. Confused?

The World's Easiest Product to Counterfeit

Sometimes counterfeiters go to extraordinary lengths to make fake products - such as Cisco products or re-marking microprocessors. But sometimes they just literally turn on a tap. Fake water. With the growth of bottled water (a $15bn industry in the US) worldwide, it is an obvious target for fakers. Harvest some empty containers from the trash, get new closures, and ... bingo ... you're in the water business.

Indeed a recent survey found that 50% of the barreled water in China (similar to bottled water, but specifically for coolers) is counterfeit. Suffice it to say, there are no controls on water contaminants or bottling cleanliness.

US bottled water is far safer ... but it is surprisingly easy to buy 'tamper evident' closures that can be used to cap refilled bottles.

One solution is to put a security code on a tamper evident label across the closure - thereby detecting illegal recapping. One water company in the US already puts security codes on its 5 Gallon tamper evident closures.

"NOT Made in China" is the new differentiator

With all the panic breaking out about the deluge of counterfeit, contaminated, toxic, and otherwise unsavory products coming out of China, it was only a matter of time before some manufacturers took matters into their own hands ... and advertised their total lack of Chinese content. This may work for some, but globalization is here to stay - and manufacturers will need to sustainable ways to source safe goods and assure consumers of such. For those who have followed this blog, you'll know that this is not so much a sudden surge in fakes, but the scales falling from consumers eyes to the threat that has been there and building for several years.

Here's a roundup of recent news about fakes:

• The Semiconductor Industry Association (SIA) in conjunction with Semiconductor Equipment and Materials International (SEMI) have launched a standards task force to define the use of security codes to protect components and assemblies from counterfeiting, re-marking and repackaging. YottaMark is proud to be a part of that effort.
• No-one can accuse China of soft punishment for counterfeit drugs. The (ex) head of the FDA was executed this week for taking bribes that lead to counterfeit drugs reaching the market and leading to the deaths of at least 10 people. However, worldwide, the penalties for counterfeiters are widely considered to be too light to deter the crime.
  
• A fake Sanyo cell phone battery exploded in China - killing the phone's owner. Exploding cell phone batteries have been heard of before - but this is the first time it's been fatal.

Bogus Online Pharmacies Competing with ... other bogus online pharmacies

We received this spam email recently ... among the many for online pharmacies. What caught our attention (other than the poor grammar) was the the fact that it tries to use reverse psychology (and official sounding titles) to bait consumers.

US NATIONAL MEDICAL ASSOCIATION

Do you buy pharmaceuticals online? The US NMA was specifically established to protect the consumer. Our experts check every online shop for bogus medicines. The blacklist of unreliable or simply fraud shops is updated every week. We strongly recommend to visit our site before buying any medical products online.

The common ways of online cheating are:
- delivery of low quality or fraud products.
- an enormous delay (up to 2-3 months) in delivery of products.
- shops obtain all the credit cards numbers and other credit information and then simply send nothing.
- shops sell unlicensed products they know nothing or very little about.
- shops themselves don't have a license to sell the pharmaceuticals.

Please check our blacklist of unreliable and fraud shops before buying any medical products online!!! Protect your family and yourself.

Fakers' Favorite Drugs

In 2006, the most popular targets for counterfeiters were Pfizer's blockbuster drug Viagra (sildenafil citrate), Eli Lilly's Cialis (tadalafil) and Bayer's Levitra (vardenafil) - all products for the treatment of erectile dysfunction.

Preliminary laboratory analyses by the US FDA on various drugs purchased via the internet have found counterfeits of: Lipitor (atorvastatin calcium); Diovan (valsartan); Actonel (risedronate sodium); Nexium (esomeprazole magnesium); Hyzaar (losartan potassium-hydrochlorothiazide); Zetia (ezetimibe); Crestor (rosuvastatin calcium); Celebrex (celecoxib); Arimidex (anastrozole) and Propecia (finasteride).

Add to this internationally the widespread counterfeiting of many anti-malarial, AIDS retroviral, and anti-TB drugs.

Now even the raw materials are under attack. The Synthetic Organic Chemical Manufacturers Association (SOCMA) of the US and the European Fine Chemicals Group (EFCG) banded together to demand increased regulatory inspections of foreign facilities manufacturing active pharmaceutical ingredients (APIs).

"Made in China" ... but made of what?

There's been a recent explosion in news about fake products manufactured in China - some exported, and many sold domestically. Not flimsy golf clubs or shoddy Olympic 2008 T-Shirts, but potentially fatal fakes:

• Fake plasma used in hospitals that contained no protein
• Fake Toothpaste: Colgate-Palmolive said counterfeit "Colgate" toothpaste that may contain a toxic chemical had been found in discount stores in four U.S. states.
• Petfood that contained Chinese wheat gluten contaminated with melamine is responsible for more than 100 pet deaths amongst nearly 500 cases of kidney failure

When Good Food Goes Bad - redux

We blogged a while ago about the problem of food traceability, particularly for fresh produce that is 'field packed' (like berries, tomatoes). Today we launched HarvestMark - an easy way for anyone to trace produce.

Consumers Look for Safe Food Amidst Expanding Recalls

Ironically, on the same day, the recall of suspected contaminated beef expanded dramatically.

How Good Are the Counterfeiters, Really?

This recent article in BusinessWeek contains a lot of data we've blogged about here already - but leads with an intriguing sub-headline: "Faced with a tidal wave of counterfeit goods, companies are turning to secretive sci-fi technology. But crooks catch on fast". This raises a good question: how quickly do counterfeiters really copy or beat new technologies?

"The half-life of a security system is a year or six months before someone is nipping at your heels," says the director of business development for JDS Uniphase Corp.'s Flex Products Group (which makes color shifting inks, such as those used in banknotes) in this article. Doesn't it seem like the security industry is doing itself a dis-service by making sweeping statements about how vulnerable solutions are. Where's the data?

The answer is: no-one really knows. But where there's evidence, it's not overwhelming that the counterfeiters are that good. The best public example is the multiple iterations of fake holograms on counterfeit Guilin artesunate ... they are somewhat convincing, but by no means perfect. The trained eye can spot them. We've seen a lot of fake holograms, and when compared to the original, it's usually possible to spot the fake. The latest holograms with advanced features - such as those from Kurz or DuPont - have yet to be copied at all convincingly. Nanotechnology is certainly extremely hard to fake .(but it's also impossible to check for ordinary users). The point is ... it doesn't have to be perfect to fool most ordinary consumers, only good enough.

The BusinessWeek article rightly makes a lot out of the emergence of unique, encrypted codes, such as those proposed by AstraZeneca for Nexium. These have the advantage of being unique at the unit level, and databases can easily determine whether a code has been copied and read before. However, it pays to be precise when talking about them. While the article quotes AstraZeneca's director of product security as saying: "We believe [the numbers] cannot be copied," this is either a misquote or misleading. The numbers themselves are trivial to copy ... what cannot be done is (one hopes) generate valid numbers without having to collect and copy thousands of valid numbers. By combining codes with other features on the packaging - AstraZeneca should be able to deter, diminish and measure counterfeiting.

The appearance of unique codes on products is a very good thing... as long as they are thoughtfully deployed and very securely generated. There are already too many broad-brush statements made about the size of the counterfeiting problem which is understandable given the paucity of data collection; however, the industry should strive for more accuracy when talking about the strength (or weakness) of countermeasures.

This is NOT Donald and Minnie

Some counterfeit efforts are so egregious that they beggar belief. This state-run amusement park in China was billed as being "closer than Disneyland". Too close, it turned out, in terms of IP similarity. When challenged on the unlicensed use of Disney characters, park officials claimed that this was not, in fact, Minnie Mouse ... but a cat with very large ears. Right.

After a visit from Disney lawyers, the park began to remove and demolish the most offending items... such as the statue of a dark-haired woman surrounded by 7 short men carrying pick-axes ...

Lying About the Size
We have heard of counterfeit condoms before - often being made from substandard materials and leading to health risks. But this is the first time we'd heard of the fake condoms claiming to be larger than they really were. Counterfeit Trojan Magnums, an extra-large brand of condoms, were smaller than the actual brand. They were also wrapped in plastic, rather than the authentic foil.

Putting Some Teeth into Anti-counterfeiting Law
Congress is considering a new law that imposes stiffer fines and sentencing on counterfeiters - particularly if the fake product potentially causes harm to life. The lack of teeth in US law to punish counterfeiting has been a thorn in the side of brand owners - who recognize there is very little consequence to getting caught for the crime.

They Canna Handle the Stress Capt'n ...

A recent news report highlighted the danger from counterfeit bearings. Bearings are often used in safety critical situations, and operate under high stresses and loads. Companies such as SKF, Timken and NSK manufacture their bearings with specialty materials and to tight tolerances ... suffice it to say that the counterfeiters don't bother.

Formula 1 driver Mika Häkkinen had to retire early from the San Marino Grand Prix in 1998, when he was leading the race. The reason was found to be a counterfeit ball bearing that did not survive the stresses of the race. "Häkkinen was lucky that things didn’t turn out worse," Schulz says. "He climbed out of the car unhurt."

The German tool manufacturing trade body estimates that each year 3,500 industrial accidents are caused in Germany alone by fake products.

Getting into the Popular Psyche

In the last few years, the number of articles on counterfeiting in the popular press has seemed to be increasing dramatically (although I haven't measured it). Whether this reflects an increase in counterfeiting activity, or simply an increased awareness of the problem is debatable... but here's a short summary of recent newsworthy items getting air time in widely read media:

• Harpers Bazaar has launched a website to highlight and engage luxury goods buyers in the fight against fakes. They've even launched a competition to design a T-Shirt to vent your concern - click here to enter!
• The New York Times ran a chlling front page article (and 2 page inside spread) on the trail of counterfeit glycerine that's responsible for hundreds of deaths in Panama.
• The UK's New Scientist magazine ran an article (sorry - it's subscription only) on the wide ranging problem of fakes, and some (very scientific) technological solutions. As we have often observed in this blog, several of these required sophisticated lab equipment to authenticate.
• The UK's Independent newspaper ran a scathing article on counterfeit drugs, accusing major drug companies of "turning a blind eye" to the problem in Africa. The WHO held a conference recently in Prague to begin to address the problem and search for solutions. The conference was attended by representatives from several drug manufacturers and Ministries of Health from a range of countries. The WHO estimates that 200,000 of the one million malaria deaths every year would be prevented if all the drugs taken were genuine.
• May's IndustryWeek ran a front page article on the scourge of counterfeits. It included some interesting new data points (always hard to find): Bendix estimated violations of IPR cost an estimated $10 million to $20 million per year in its valves portfolio alone. Worse than the direct revenue loss of course is the potential brand damage and liability from the risks associated with inferior-quality counterfeit parts range from premature wear all the way to catastrophic brake failure.
• In this April article in Forbes, Zippo estimated it had lost a whopping one third of its business to counterfeits, and was having to downsize its US operations as a direct result. Even worse, Eastman Machine, in Buffalo, New York, saw its production moved to China without ever leaving home. A manufacturer branding itself "Westman" reverse-engineered Eastman's $2,000 fabric-cutting machines, even using the same model numbers and paint colors. Eastman has lost more than half its sales and laid off nearly two-thirds of its workforce.
• And just this week, the US Senate voted to preserve current restrictions on importing prescription drugs ... in part because of fears of a flood of counterfeits.

... so, are consumers starting to ask themselves "is this product fake? how can I tell?".

When GOOD Food Goes BAD

There's been a flurry of food contamination recently - raising the important question: how can consumers easily, and instantly, tell if the food they have is safe?

• Botulism in baby food
• E.coli in mushrooms
• E.coli in Taco Bell's lettuce
• E.coli in spinach
• Salmonella in peanut butter

The answer is partly improved manufacturing practices, and partly better traceability. By allowing the consumer to instantly tell whether their food is part of a recall - and to more quickly gather data from suspected products - food manufacturers can increase customer confidence, hasten recalls, and limit the scope of any recall.

We are entering an era analogous to the post-Tylenol scare; when tamper-evident packaging became de rigeur. Perhaps it is time for unit-level traceability to become expected - even demanded - by consumers?

The technology is available today to do it.

Counterfeit Semiconductors

It is well-known that counterfeit semiconductors are causing expense for both OEMs and CMs (contract manufacturers) who have to separate the good from the fraudulent. Often these parts are indistiguishable from the real thing, and will either not function, function poorly, or fail prematurely. This can leave someone facing a slew of expensive warranty claims. The recent requirement to meet RoHS compliance has encouraged bogus claims from cheaper, non-compliant parts. Even the military establishment is not immune. This article by John O'Boyle highlights how and why counterfeit parts are showing up in Iraq. Bogus chips enter the market in several ways, chip executives say. For example, obsolete or defective parts that are scheduled for destruction never actually reach the scrap heap: Second- and third -parties that are supposed to scrap the components may certify that they have been destroyed but instead sell them on the open market. Sometimes old chips are pulled off printed circuit boards, re-marked and sold as new. Analog Devices found out about one chip a counterfeiter had reverse-engineered and sold as an ADI part.

The usual advice to buyers is still "caveat emptor" - if the price from a broker looks too good to be true, it probably is.

There are several sites (1, 2, 3) that list counterfeits as they find them - but clearly, there's no simple way for buyers to check yet. The SIA recently launched an anti-counterfeit task force, which included leaders from the semiconductor manufacturer and distributor industries (inlcuding Intel, TI, Analog Devices, Rochester Electronics).

But perhaps the most novel way to raise awareness I've seen to date, is Rochester's short animation - in which Captain Rochester hunts down and replaces counterfeit components. We live in hope!