From whence cometh my watermelons?

An article in The Packer today pointed the way to the future of fresh produce ... item-level traceability. Soon, consumers will be able to punch a code into a website or their cell phones and find out whence their melons came, and whether they're affected by a food safety issue. Of course, this also gives the brand owner an opportunity to share their food safety and growing practices in a rich and accessible way.

Watch this space. This is just the thin edge of the wedge. So to speak.


(Disclosure: the item-level traceability coding solution is supplied by YottaMark)

Fake Chips Are Heating Up


Okay, bad pun. Of course, overheating is only one of the threats from counterfeit semiconductors. Fraud in electronics includes: counterfeiting, re-marking, 'pulled' devices of dubious integrity, warranty fraud, FRU fraud, and diverting/gray parts. Statistics are notoriously hard to come by, and in this blog we've highlighted numerous instances (see our Feb 22 blog, for example). Here's some more anecdotal data:

• One of every 10 tech products sold is counterfeit, leading to an estimate of a direct loss over $100 billion a year. Direct losses include recalls, increased warranties, rework.
• High-tech products account for four of the top ten border seizures, according to U.S. Customs.
• Last year, the U.S. and European customs officers seized more than 360,000 fake computer chips in a joint operation. Under “Operation Infrastructure,” the fake goods seized carried more than 40 different trademarks.
• A $2 fake part leads to losses of $20 if detected at the manufacturing board level. It costs $200 if detected in the market.
• KMPG will release a white paper in May that estimates the profits lost due to the gray market. It will be posted here, along with KPMG's previous white paper.

This blog entry on VentureBeat by Dean Takahashi, the former Tech Talk Columnist at the San Jose Mercury News, frames it nicely: "Electronics counterfeiting has hit an epidemic level. Surely, there have to be opportunities for start-ups in fighting this problem."

A recent article in Purchasing magazine found that 42% of procurement professionals felt counterfeiting was now a 'serious problem'.

YottaMark has been working on the SIA and SEMI anticounterfeiting task force to establish an industry standard for detecting fake components. The topic will be covered in a session at this year's Semicon West in San Francisco in July.

Oh No! Fake OMO!

We've been talking about the trend for counterfeiters to target ordinary branded consumer goods - not just luxury items. This news article from Australia is a great example: counterfeit washing powder.

The general counsel for Unilever, Mary Weir, said the Omo case was representative of a rise in the number of counterfeit consumer products entering Australia.


A recent trademark conference in Sydney, highlighted examples of the rise in fake consumer goods and foods and their risks:

■ Sunglasses made of cheap plastic without the graduated lens to prevent optical damage, causing headaches and blurred vision when worn.

■ Fragrances made with acetone which not only stains clothing but can cause skin allergies and asthma attacks.

■ Toys made with unsafe plastics, rubber, paints, glues, dyes and loosely fitted parts.

■ Clothing. About eight million counterfeit clothing items are brought into Australia annually, costing the local fashion industry $1 billion a year.

■ Food. Battery-farmed eggs labeled as free-range, basmati rice bags diluted with inferior varieties, and false claims on the organic status of fruit, vegetables and meats.

■ Electrical goods. Small appliances that do not comply with Australian standards and which short-circuit, leading to electrical hazards in the home.

Knocking Off Chips

Even 'though manufacturing integrated circuits (ICs) is one of the most costly and complex processes known to man ... chips are still susceptible to counterfeiting. Sometimes devices are painstakingly reverse engineered, other times these are simply cheap devices re-marked to make them look like expensive ones.

EU and U.S. senior officials said on Friday they would crack down on counterfeiting of computer components after they seized over 360,000 fake items in just two weeks in a joint operation at the end of last year. ICs and computer components of over 40 trademarks including Intel, Cisco and Philips, worth more than $1.3 billion, were seized during the operation, the officials said.

All kinds of devices are affected - military spec, consumer electronics, end-of-life products, simple components, complex ICs, assemblies (like Network Interface Cards), and devices (such as phones and routers).

SEMI, the Semiconductor Industry's standards body is developing a global standard to detect and deter counterfeit product. Contact us to find out more about how this will work.

The Latest Hall of Shame

The German Plagiarius Awards call attention to the most flagrant fakes product imitations and raise awareness about the dangers of piracy. In addition to look-a-likes of chairs and salt & pepper shakers, were medical devices, pens, children's toys, and faucets with 200% too much lead in them. This is a wake-up call to those manufacturers who think they're too small, or their products are too complex, to attract counterfeiters.


Perhaps the US Chamber of Commerce, as part of its CACP activities, should do the same?

Fake Pesticides and Fertilizers

For farmers in poor countries, often their biggest outlay is for pesticides and fertilizers. A recent report from the Indonesian Anti-Counterfeiting Society (MIAP) and CropLife Indonesia found that up to around 20 percent of the 1,500 registered pesticide brands fell victim to counterfeiting last year. Not only do the cheaper fake pesticides and fertilizers not deliver the benefits expected - leading to failed harvests - but they can also actually lead the farmers to far greater financial losses, as their produce can contain excessive amounts of pesticide residue ... making them unsaleable.

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.