What's In Store for RFID?

It's been a tough month for RFID advocates. Hot on the heels of the revelation at the RSA show that RFID chips can be eavesdropped with a modified cell-phone... the FDA sent a message to the industry that it was disappointed with the slow progress of RFID trials. Many industry observers have been saying that the FDA is unrealistic about the cost and complexity imposed by RFID. Pfizer's Tom McPhillips, vice president, U.S. trade group was at the FDA meeting. He said, “It would be possible to implement RFID tagging for higher risk products in three to five years. It would take several years beyond that before all drugs could get tags.” That makes 6-9 years at least from now before unit level tagging of pharmaceuticals is widespread. The problems facing RFID are not insurmountable - but they are fearsome, and include:

• cost of tags, readers, infrastructure and systems integration
• consumer privacy fears and backlash
• lack of security in low cost chips
• lack of standards (tags, China)
• reliability and physical robustness

The latest threat is that the RFID tag could potentially carry a virus, that could infect a database. Although this scenario is unlikely, it's one more battle the RFID boosters have to fight.

Scott Gottlieb MD, Deputy Commissioner for Medical and Scientific Affairs, in a recent speech to the PDA, emphasized his enthusiasm about RFID, but reiterated that there are other technologies, such as 2D barcodes, that can be used for product authentication. Indeed, manufacturers may gain much of the benefit, and a lot of the learning, about unit-level coding and authentication from solutions that don't suffer from some of the technical challenges facing RFID. At the very least, these technologies will provide the bridge for the next 6-10 years until RFID is ready and the kinks have been ironed out.

Mixed Messages
A recent article in the "Stars and Stripes" helps US military personnel find the best counterfeit goods in the Czech Republic, including how much to expect to pay for a carton of fake Malboros (20 euros). The irony of this (beyond the fact that the manufacture and sale of fake cigarettes and apparel are known to be associated with terrorism and organized crime) is that the article was published the same week that the US House of Representatives passed H.R. 32. The “Stop Counterfeiting in Manufactured Goods Act”.

How To Spot a Fake Memory Card

WCCO-TV Minnesota ran a story today on counterfeit electronics products in the US. Their advice on how to avoid buying a fake:

1. If it's a bargain - be suspicious. (However, fakes aren't always cheap.)
2. Buy from reputable outlets. (But even retailers are fooled.)
   
3. Take a close look at the physical characteristics of the product, including the wording on the label, the size, shape and color. (This, of course, presumes you know what to look for.)

These steps alone are clearly not enough. Secure coding provides a better solution, as the reporter says:

A number of companies are adding ... serial numbers to their products, so consumers can make sure their products are real by calling the company or using a Web site.

Which Products Are Being Counterfeited?

It is a common misperception - particularly in developed markets - that only luxury goods get counterfeited. Everyone knows that the "LV" handbag at the market stall, the "Chanel" perfume on Canal St., and the $1 DVD are counterfeit (we presume). But, few consumers would stop to question whether their Nescafe instant coffee is counterfeit. Or what about soy sauce? Tea bags? Creamer? Cough drops? Shampoo? Household detergent?

The list in fact covers pretty much every brand name consumer good. The question isn't so much "which products are being counterfeited" ... " which products aren't?"

The Emperor's New Handbag?

Luxury goods manufacturers have been adding overt and covert security measures to their goods to allow consumers, police, retailers, and customs officials to spot fakes. But, for fear of alerting the counterfeiters, they're not telling anyone what the security measures are. A report in yesterday's Wall Street Journal (subscription required to view it) entitled "Holograms Tell Fake from Fendi", revealed the lengths and costs some luxury brand owners are going to, to protect their goods, now that :

"Today, many fake handbags are made of good leather, packaged elaborately and sold (usually unwittingly) in high-end accessories stores."

and

"copies of [LV's] handbags are sometimes so good that consumers realize they're fake only when they take them into the company's boutiques for repairs."

But, it's well known that holograms are relatively easy to spoof, and how is a customer (or over-stretched policeman or customs official, for that matter) supposed to know what it is supposed to look like? The WSJ article points out:

"Holograms are better than nothing, but they are already being copied," says Claudio di Sabato, head of security at Italian fashion house Prada Group NV. Indeed, police in Naples said they recently uncovered a warehouse with photocopiers used to create fake holograms -- with the basic design but without the deep colors and multidimensional images -- for counterfeit handbags. And a Fendi saleswoman recently said she had already seen a bogus Fendi handbag complete with a hologram."

If that wasn't reason enough to claim the "emperor has no clothes", consumers say they won't rely on a hologram as a proof of authenticity.


Here's a fake and real hologram from a life-saving anti-malarial drug. Sure side-by-side, one looks suspect - but on it's own, who could tell?
And here's a real and fake hologram on a SONY memory stick. Again, could YOU a consumer tell which one is real?

The physical appearance of fakes has gotten so good, that visual-only techniques such as color-shifting inks and holograms have lost their discriminating power. What is needed is a more interactive way of authenticating a product, that the customer can rely on. Holograms may be "better than nothing", but that's not saying much.

Stealing from the Steelers
The SuperBowl isn't just a great opportunity for advertisers ... it's an irresistable opportunity for brand pirates. Merchandise bearing team logos, such as the Steeler's "Terrible Towel" was widely counterfeit following the SuperBowl. The quality is indeed terrible, the colors run, the products shrink ... and worst, the charitable recipients of the Steelers largesse (a school for retarded adults and children) doesn't receive a penny.

Licensed products are easily counterfeited, and difficult for licensees to control. For example, $6M of unofficial NFL gear was confiscated in 2005 - but the true size of the problem is unknown.

Until license-owners adopt simple ways for consumers to know if they're buying the real thing, and their dollar is supporting their teams and good causes ... the stealing will continue.

Fake Brands Good Headlines Make

The last week saw mulitple headlines regarding counterfeit products - further pushing awareness of the problem into the public domain and psyche. What is interesting is these stories show the scope of the problem - from Tiffany jewelry, through MP3 players, and irons, to toothpaste. Unless the consumer has a reliable way of authenticating a product themselves, they remain at risk.

• Tiffany & Co. is suing eBay for enabling a huge market in fakes and for serving ads that point to fake Tiffany products when the brand is searched. Tiffany's research found an astonishing 95% ... NINETY-FIVE PERCENT... of Tiffany branded products sold on eBay are fake. eBay has a program, called VeRO, that allows brand owners to monitor and shut down trademark infringing sales.
• The San Jose Mercury News ran a cover story today, highlighting the scale of counterfeiting in high tech industry. In it, they quote: The Imaging Supplies Coalition estimates that one in every 20 printer cartridges sold in the United States is fake, with worldwide losses running at $2 billion a year. Perhaps what consumers find surprising is the high tech nature of these fakes - these are not simple devices to copy.
• A massive fake toothpaste bust in the Philippines also yielded a fake L'Oreal, and 2000 bottles of fake perfume.
• This news snippet came to my attention today, too. Back in November, 2005 the Ningbo Municipal AIC in China confiscated over 20,000 infringing irons produced by Zhejiang Jiangxin Electrical Appliance Co., Ltd. The infringer was caught red-handed in two successive raids producing irons with trademarks including “TEFAL”, “BRAUN”, “SIEMENS”, “SAMSUNG” and “PHILIPS”.
• Finally, Transparency International this week released their report on corruption in the global health system. It contains much of the usual data on the terrible scale of drug counterfeiting.
  

Facts on Fakes

We believe one of the problems in tackling fakes, is the lack of data about them. Partly this reflects companies' reluctance to disclose the size of their problem, but perhaps more importantly it is because there's so little feedback from the marketplace to the brand owners.


We can infer the size of the problem (it's big), from culling some recent news items:

• Louis Vuitton - a much copied brand and a division of luxury brand owner LVMH - says its network of 250 agents, investigators and lawyers engaged in the anti-counterfeiting struggle conducted 6,000 raids worldwide in 2004, resulting in 1,000 arrests.
• In any one day, the Scotch Whisky Association (SWA) are prosecuting 50 cases [of Scotch whisky counterfeiting] around the world with people trying to pass products off as Scotch whisky. For example, the SWA estimates that there are 22-30 million cases of counterfeit Scotch sloshing around the Indian whisky market. It is not unknown for producers of allegedly genuine Scotch whisky to give substantial discounts if the bottles and screw tops were returned after use (a simple ploy to circumvent many anti-counterfeit devices on legitimate packaging).
• Counterfeit drugs continues to be the most newsworthy. The Food and Drug Administration investigated 58 cases of drug counterfeiting in 2004, up from four cases in 1998, according to an agency report. Last year, about 1.7 million tablets of fake Viagra, one million tablets of Lipitor, and half a million tablets of Norvasc were seized in China.
  

In other words - millions of people every year are (often unknowingly) buying fake Scotch, fake Viagra, fake Lipitor, and fake Norvasc.

Fake Tamiflu Starts Its Own Epidemic
The trickle of fake flu drugs I blogged about here a few weeks ago has become a river ... or at least the news of it has. A couple of days ago, the FDA released a Statement, which included these sobering observations:

it is often impossible for unsuspecting consumers to differentiate between these products and those that are not genuine

and

advertised products may be counterfeit versions of genuine products, or impure, contaminated, sub potent or super potent products.

The FDA continues to champion adoption of RFID for supply chain security - but this is of modest help to the consumer. Currently, one of the only resources to consumers is SafeMedicines.org which provides news alerts on instances of counterfeits, and advice on buying pharmaceuticals over the Internet.

Technology Fakes

Much of the counterfeit news is dominated by fake drugs. However, PC World recently investigated the prevalence of fake consumer electronics. In keeping with our efforts to report on actual data, PC World found the following:

• Alaska: 20,000 suspected fake Memorex USB memory key thumb drives from Asia
• Miami: 900 allegedly phony laptops
• Three of the top ten items that US Customs agents seized in 2004 were consumer electronics, batteries, and computer hardware
• PC World purchased seven hard drives, seven memory modules, and ten cell phone batteries online, using pricing search engines to find low prices. We then asked vendors to authenticate the gear. Of the two dozen products we bought, four (all cell phone batteries) were counterfeit - Nokia, Motorola, and Kyocera. 40% of the cell phone batteries purchased online in the US turned out to be fake!
  

At least Nokia had provided a method for consumers to check authenticity. They included a hologram and unique serial number under a scratch off panel. The counterfeiters spoofed the hologram but didn't bother with the code - images here.

PC World hit on the major problem facing consumers:

Regardless of where a fake comes from, you probably won't know it's bogus until you try to get the nominal maker to service it.

Nokia is unusual in providing its customers a way to check the authenticity of their products. This powerful tool is what YottaMark provides brand owners.

UK TV Program Exposes Problem of Fake Drugs

An investigative report by the UK's ITV which ran on 9th Jan used investigative reporting techniques to expose just how easy it is to infiltrate fake drugs into the UK's retail and hospital supply chain.

IS YOUR MEDICINE FAKE? A TONIGHT SPECIAL: Fiona Foster presents a report on the illegal market for counterfeit drugs. She investigates how potentially dangerous forms of medicine can enter the supply chain for the NHS - and even be sold in high-street pharmacies. (ITV1, 8pm)

In July 2005, the UK's BBC had run a similar program on Fake Drugs. Both referred to the discovery of a fake Viagra plant running in a warehouse in a London suburb.

What made the ITV program unusual was the successful, and purposefully deceitful, application for a wholesale drug license from the MHRA using fake identities and a rented office space. The MHRA immediately responded with a press release, indicating that it was within its rights to investigate the ITV programmers for making a false application. The program probably villified the MHRA unfairly, and the 'made-for-television' sting with hidden-cameras and disguised faces smacked of grandstanding. However, the problem is real - and the program demonstrated to a comfortably-numb TV audience how pervasive it could be.

Especially telling, was the number of times middle-men and patients said they looked at the packaging - even had it 'inspected' - and figured it was authentic. Only when one patient went online to find out which lot numbers of Lipitor had been counterfeit, did she go to her doctor. A better system which allows users to differentiate between real and fake by looking at the packaging is required - one which can be more proactive and informative than holograms or security inks.

More Fake Tamiflu Arrives ... But How Can Consumers Tell?
Another couple of shipments of fake Tamiflu have been intercepted coming into Chicago and New York. Without a doubt, this is only the tip of the iceberg that the US CBP have been able to catch. The problem, is: how can a consumer tell if they're getting the real thing or a fake? At $200 for 10 tablets online, and a panicked market - it's an target-rich environment for counterfeiters. There are some common-sense tips:

• Make sure it has the right FDA label,
  
• There is no such thing as "generic" Tamiflu,
• Buy only from VIPPS online pharmacies,
• Be suspicious if the text is in a foreign language (it could be a diverted product, if not a fake).
• It should look like this.
  

In the long run, however, a more reliable and consumer-friendly method is needed for allowing patients to authenticate the products they buy.
This is a situation where YottaMark's solution is more effective, and easier for consumers than any of the above methods.

Viagra & Chips

Pfizer recently announced the start of its trial of RFID tagging bottles of Viagra in the US, to prevent counterfeiting. It is worth noting that the tags are for pharmacists to check (although very few pharmacies have RFID equipment yet) and the pills would be re-packed into amber vials for consumers - to avoid privacy concerns.

The RFID tag will contain the EPC, which can be checked against a database of issued EPCs. This can help prevent fraud and diversion. Importantly, however, RFID tags are not themselves counterfeit-proof, and can be copied - so Pfizer is probably using a one-time use database, that can only be accessed by authorized users. Pfizer will be including a 2D datamatrix in the event that the RFID tag fails (how many pharmacies have 2D datamatrix readers?).

"Viagra was selected for the RFID project because it has been a major target for counterfeiters,"
Pfizer said in a statement.

The company plans to spend about $5 million on the project for RFID labels.

No Surprise: Counterfeiting Damages Brand Value
A newly released survey confirms what we may intuitively have known all along: counterfeiting damages brand value - particularly in the eyes of the most valuable consumers. What perhaps is more interesting, is that 25% of these luxury goods buyers have difficulty spotting a fake, and they think the problem will be getting worse.

Engaging Consumers in the Fight
It's a courageous way to tackle counterfeits ... empower the consumer. We're beginning to see more public acknowledgment of the problem (for example recent Glaxo ads in press, Nokia's user-authenticable cell phone battery), and now the Italian government has launched a counterfeit 'whistle-blower' hot-line - for customers or retailers to call in suspected fakes.

This actually makes a lot of sense. Consumers care about brand integrity and safety for many products - and want to be able to either check the authenticity of a product, or offer a sort of 'neighborhood watch' on the marketplace. Vendors such as HP, Kingston, and Motorola say they usually learn about counterfeiting problems as a result of consumer complaints.
Counterfeits flourish in dark corners - a bright light on the problem - and greater consumer awareness - will benefit legitimate manufacturers in the long run. In China, ironically, the QBPC is very active in educating consumers about fakes. In the US, on the other hand, the "No Trade in Fakes", STOP initiative, and other such programs sponsored by industry groups are aimed more at legal recourse and manufacturer education of IPR, than consumer empowerment.

The Scourge of Fake Drugs on Fighting Malaria
Continuing our search for fact-based analysis, we compiled this data on the challenges facing global health organizations battling malaria. Worldwide, 645 million people are at risk from malaria. Prompt access to treatment with effective, safe medicines, such as artemisinin-based combination therapies (ACTs) and insecticide treated nets, saves lives:

• A recent study in The Lancet concluded that up to 40% of artusenate products (the most effective drug against malaria) contain no active ingredients.
• A study conducted in South-East Asia in 2001 revealed that 38% of 104 antimalarial drugs on sale in pharmacies did not contain any active ingredients. There were forged holograms on fake artesunate blisterpacks bought in Vietnam and Cambodia.
• The WHO reported that in 1999, at least 30 people died in Cambodia after taking counterfeit antimalarials
• According to the "Roll Back Malaria Partnership", counterfeit insecticide treated nets are now proliferating, due to the difficulty of obtaining the real thing.

What is lacking is an effective solution, appropriate for these countries, and the level of education available to NGOs and consumers.

Fake Flu Drugs
It was inevitable, given the fear about an avian flu pandemic and subsequent panic buying, that counterfeit Tamiflu has been found in the US by US Customs. Apparently, 1000 Exxon-Mobil employees were recently given fake vaccines. Roche, the manufacturer of Tamiflu, recommends consumer use the color and taste of the drug, and packaging info to help identify authentic product.

‘Tamiflu is contained in a distinctive yellow and light grey capsule and the powder has a very bitter taste. Also the batch number, expiry date and manufacture dates need to match up on the outside packaging and the blister pack.

How Big a Problem?
There's an oft-repeated quote, attribtued to various sources, that counterfeits make up 7-8% of world trade. Rather than rely on a top-down, hard-to-validate number, we look for bottom-up, recent fact based evidence.

• Michelin estimated that 50,000-70,000 countfeit tyres have been sold in Europe in the last 18 months at half the price of those made by Michelin. They plan to take action against any distributors found selling fakes as Michelins. It's not clear how they will police the 5,000 distributors or detect fakes.
• Denso estimates it has losses of several million dollars a year from counterfeit spark plugs .
• This data rich report reviewed worldwide counterfeit enforcement activity (investigations, raids, seizures, arrests, charges, convictions, sentences, civil litigation ) for October 2005. This data is new:

"... 18 million pirated items originating from China worth $13 Million were seized from 120 consignments in the 10 day period. If the operation was to continue year round, it would equate to 175 fully loaded Boeing 747 cargo aircraft entering the EU annually with goods valued at $500 Million. If customs organizations would release reports on individual seizures, the public would be more informed about the scope of the problem and dangers that items such as counterfeit drugs, sunglasses, mobile phone batteries and razorblades pose to the public."

Kicking Off YottaBlog

Welcome to the YottaMark blog. We'll post news and information about global counterfeiting and the technologies available to tackle it.