Our resident inventors look at some would-be technologies to expose fakes.
What's the problem? Counterfeit goods cost businesses a lot. An FBI assessment from 2002 said that US businesses lose between $200bn and $250bn to counterfeiting annually. According to the World Customs Organisation, counterfeit goods account for up to 7 per cent of world trade. As I write this, I have just received spam entitled 'Prada, Chanel, Louis Vuitton, Gucci, Givenchy'. Even these big brands have difficulty dealing with increasingly professional counterfeiters, who are directly in touch with everyone's customers via the Internet.
Counterfeiting affects anything of value: medicines, DVDs, fine art, banknotes – even engine components. You can't watch a legitimately rented movie these days without a sermon on how copyists are spreading viruses, killing entertainment and supporting terrorism.
There is never going to be a way of stopping fakes completely. The weak link in the chain is 'us' counterfeiters are cunning, resourceful and determined.
There are worrying areas where fake goods have caused deaths, from aircraft parts, pharmaceuticals and baby formula. On the latter, in China some years ago there was a case where hundreds of babies suffered from malnutrition and at least 13 died after their parents unwittingly fed them fake baby formula that had virtually no nutritional value. In this case, the people responsible also paid a high price: they were executed. An even more worrying (unofficial World Health Organisation) report, estimates that as many as 100,000 people may die every year, because of counterfeit drugs.
It seems a little odd that we use the word 'counterfeit' to describe fatal as well as fashion fakes. I can't see anyone being executed for stealing someone else's dress design.
Yet some authors and software engineers claim that giving away their product makes it significantly easier for them to make money from special editions and related services.
We also have to recognise that not all cultures fully accept the idea of intellectual property protection. Shanzhai is a Chinese term that refers to counterfeiting that is good enough to take genuine pride in.
There are rare occasions were counterfeiting has had some positive impact, maybe in penetrating the market in a bigger way, for brand owners to exploit later. But the damage fakes do far outweighs any good.
Although I am very wary of the figures bandied about on what counterfeiting actually costs businesses, I read recently that fakes are in real terms the biggest brand on the planet due to the increase in sales opportunities provided by the Internet. Some estimates have sales of counterfeit goods at $650bn annually (a lot more than your earlier figures, but who really knows?).
So, there's the problem. What are the possible solutions? There are three basic approaches to limiting counterfeits that I've come across: legal restrictions, technical countermeasures and commercial tactics.
Smart businesses are having to adopt a mix of all three to protect their products and brand investment. It's getting particularly challenging now that a lot of value resides in software, which is inherently copyable. Soon, the designs for hardware will be just as swappable online and executable by your domestic 3D printer. A micron-perfect Rolex may become just as accessible as a knock-off copy of Windows is now.
There are a lot of reasons why your micron-perfect Rolex would not work. Materials and the complex assembly, for example. But for simple plastic type products, 3D printing is the start of something major. We are becoming the 'maker' ourselves, which will have the same dramatic effect on manufacture to what the Internet has on information-based goods and services.
A word first of all about legal restrictions – patents and copyright and trademarks. These rights can be very powerful if you have the cash to obtain patents and pursue infringers around the globe. I tend to agree with Arthur C Clarke: "Getting a patent is just a way to get sued". The Internet is shortening product lifecycles so that the standard approach to obtaining patents is now too slow anyway. Even national governments have withdrawn granted patents when they failed to provide the expected benefits.
I think we should all stop acting as if ideas were property – in the same sense as cars, land or jewellery. Aside from global corporations, SMEs are often the source of really game-changing inventions but patents, for example are virtually useless as a defence against counterfeiting, unless a company has access to the significant funds needed to police and defend them.
You missed out design and registered design rights which can be just as powerful as any of the other intellectual properties you mentioned.
I must also say that I disagree with Arthur C Clarke's quote, and would change it to: "Getting a patent means you can sue infringers, or license out this option". As you are aware, I am no champion for the patenting system. A system that I had, and have, no say in, and which is expensive, self-serving and often unjust for the small guy. That said, because I have patents, I have been able to sell licences globally and have fought off a number of infringers, so it is not all bad.
Actually, I do see my inventions as my property. I have worked long hours, made sacrifices and spent a small fortune on them, and need and deserve to make a return on my investment. It is a business after all and businesses need to make a profit. Anyway, part of the patenting process is that I give my invention away, to the world, after a paid monopoly of up to 20 years.
In relation to your comment about SMEs not having access to significant funds to defend themselves against the large companies. I agree there is a real problem. Something I would like to see is a 'Patent Defence Fund' set up by the government (as proposed by the SME Innovation Alliance). This could even up the playing field and stop the, often foreign, corporations knowingly infringing because they believe they will get away with it as small SMEs cannot afford to defend themselves.
Okay, so let's talk about the technical countermeasures. To limit counterfeit goods, the genuine article needs ideally to be easily identifiable as such, preferably to a buyer. The identifying features on the other hand need to be hard to replicate by a copyist.
Software, electronic content, and suchlike can be hidden within various hardware devices (digital rights management technology), and code obfuscation makes reverse engineering less than cost-effective, even if automated cracking tools are used. Conditional access technology (smart cards, encryption, and so on) limits the ease with which a hacker can gain access, but in practice, very few companies can invest enough per product to stop counterfeiting.
Counterfeit documents are a special category in themselves. Here are a number of recent exotic attempts to limit illegitimate copying: glowing bacteria in steganographic watermarks, paper fibre fingerprinting and patterns formed within the text on naturally fluorescent paper.
Hardware products are harder to hide from reverse engineers. Here, genuine products may carry overt features such as holograms and codes or covert features such as embedded images and DNA tags. Intelligent chips embedded in certain components can signal their authenticity to a system they are correctly connected to. These also enable items to be traced back through the supply chain.
Some complex electronic products even make use of 'wires and gravel' techniques, whereby they contain surplus circuit components in order to confuse a reverse engineering team.
Tamper-proof packaging is a popular solution for pharmaceutical and food applications.
In my field, packaging, nothing is described as tamper-proof, or even childproof. If someone is determined enough they could get past any system. For this, and I suspect legal reasons, we call it tamper-evident and child resistant. These pack functions do not help prevent counterfeiting unless the closure technology is really difficult to manufacture and/or expensive holographic labelling (where you tear for access) is used.
So, let's consider commercial tactics. Possible routes to competitive advantage which don't require startups to have a small fortune on hand include making sales and reinvesting any income in future product and brand development.
I recently bought some running shoes which turned out to be fakes. The solution was to turn the branding approach against the copyist. Ironically, he is terrified that his Ebay seller reputation will be harmed by negative reviews and provided a full refund.
Designing products using tailored components may increase costs but can limit counterfeiting. Similarly, working with suppliers of specialised capital equipment to create a barrier to entry has some merit.
Some companies are now using their brand to supply services, rather than having to worry so much about product counterfeiting. Personally, I favour investing in trust-based supply chain and customer partnerships, as well as in employees, to maintain as secret any special know-how.
Having a clear strategy to enable policing and to deal with accusations of infringement is also essential.
I agree, to varying degrees, that most of your commercial tactics have some merit. But the trust-based approach is very naive. When money is involved, corruption follows.
Naive or not, a few car companies have already experimented with trust-based sharing between engineering teams. No paperwork means even competitors can generate new products together – fast enough for everyone to stay in business. *