To many people the growth in the market for counterfeit goods means the chance to buy cheap jeans or perfume.
But the reality is much darker. Last year alone mouldy rice, bleached with cancer-causing chemicals to look fresh, was repackaged and sold to consumers in China, while an illicit vodka containing methyl alcohol killed at least 60 in Estonia.
The International Chamber of Commerce’s Counterfeiting Intelligence Bureau estimates the global market for fake goods is worth at least $350bn (£240bn) a year, or around seven per cent of world trade. Companies such as Microsoft and Nike spend millions protecting their goods from counterfeiters.
But it is not just software and clothing that are being targeted – counterfeit food, alcohol, pharmaceuticals, car tyres and even aircraft spare parts are sold to unsuspecting customers throughout the world.
Advances in technology have enabled counterfeiters to produce better copies of products and packaging, while the internet is helping criminals discover new developments and sell their products online. But new technologies, using holograms, chemicals and new materials, are also being developed to fight the counterfeiters and are becoming increasingly tough and expensive to copy.
Demand for these technologies is likely to take off following a court case to be held in the US this summer. A counterfeit version of the AIDS drug Serostim was circulating in the US in late-2000, which was ineffective and caused painful skin irritations.
Two of those who bought the fake treatment, Robert Lynn and Kelly Burke, have now filed a lawsuit against the drug’s maker, Serono, claiming the firm should have foreseen that fakes would be produced and taken precautions to prevent it. Should Serono lose, it could have huge consequences for manufacturers, making them responsible for protecting the public by preventing the counterfeiting of their goods.
Until now some companies have seen counterfeiting as an unfortunate fact of business life – an inconvenience but far too costly to tackle. But with the rise in liability claims against manufacturers, companies can no longer afford to ignore the problem, says Gilbert Smith, principal scientist for Opti Lock & Key, a new anti-counterfeiting device developed by technology specialist Qinetiq. ‘Companies might be able to afford to lose 10 per cent of their sales, but they cannot afford a large number of lawsuits,’ he says.
The Opti Lock & Key technology is based on a pair of optical filter devices, which allow some wavelengths of light to pass through, while blocking others. These filters appear clear, but when overlapped and held in front of a light source they combine to give off an intense colour.
It is an unusual effect, and one that is not easy to replicate using dyes. This makes it extremely difficult for counterfeiters to copy, says Smith. ‘It would be very hard to replicate large numbers of locks and keys without access to very expensive machinery, which is a strong disincentive.’
A variety of keys can be used with the same lock to gain different effects, while the filters can be designed to change colour as the angle at which they are held is altered. The device can be designed to include patterns or logos, making it attractive to firms looking for a security system that does not limit their advertising space.
The device could be used in product labelling, security documents and banknotes, says Smith. Qinetiq is producing prototypes of the system, and talking to potential partners interested in developing the technology for different markets.
Another method manufacturers use to combat counterfeiting is tags based on radio-frequency antennae. These are produced by applying an etch-resistant pattern to a metal-coated substrate. The substrate is then dipped in acid and etched to remove any unwanted areas, leaving behind the desired pattern. But this process is complicated and costly, and cannot produce patterns in very fine detail, so the tags can’t be miniaturised.
A Qinetiq spin-off, Qinetiq Metal Printing, has invented a method of printing metal directly on to most flexible and rigid substrates, including synthetic paper (used in Australia for banknotes), polyester, ceramic and glass. A range of metals, including copper, nickel, silver and gold, can also be deposited using the process. The system can also be used to print an RF antenna on a tiny tag, which can be sewn into clothing. The antenna can be detected using an RF reader – at the point of sale, for example – providing a cheap and simple method of tagging products to protect them from counterfeiters, says Chris Coomber, director of QMP.
Companies can also send information to the tags, helping them in the fight against the growth of the grey market, he says. ‘Nike may tell its manufacturer it wants 2,000 pairs of trainers made, and the company then makes 20,000 and sells the rest on the grey market. Using this technology Nike could supply the manufacturer with the tags, each with a unique identification number.’ The device could then be tracked as it moves from the manufacturing plant to the shop floor, and even to the customer.
Companies are become increasingly concerned about the erosion of their brand value, says Alex Laurie, materials science chemist at technology development firm Generics. ‘We rely on brands to drive the consumer market. If companies can’t protect their image they can’t make a profit, and they are becoming increasingly heavy-handed about shutting down counterfeiting operations.’
Generics has developed a peel-back labelling system that uses oxygen-sensitive dyes. The device can be attached to the plastic packaging of products such as cigarettes and compact discs, allowing consumers to tell immediately if they have bought genuine goods. Chemicals on the label react with the air when the protective layer of film is pulled back, revealing a hidden colour image.
Using dyes that are colourless until they come into contact with oxygen places a number of barriers in the way of fakers, says Laurie, its inventor. ‘The counterfeiters would have to reverse-engineer the device to find out which chemical is being used. It is possible they could do that with time and money, but by no means simple.’
The labels would then have to be processed in a controlled environment, while the oxygen-sensitive material must be protected by a barrier film throughout manufacturing. Most polymers do not exclude oxygen, so finding a film to protect the material would be another expensive and time-consuming task. ‘If a manufacturer were putting the device up for sale it could recoup its costs through a variety of possible markets. But the counterfeiter has to get his money back from one scam, and that is a much taller order.’
While professionals can recognise a counterfeit product, consumers rarely have the genuine article to compare it against, so they have no way of knowing if they are being ripped off. ‘Many consumers may not care if the products they are buying are authentic, but if you are paying full price for something, you are entitled to get the genuine article,’ says Laurie.
The traditional approach to deterring counterfeiting was to use hard-to-copy watermarks or graphics. But the weakness is that each is identical for a particular product. Banknotes all have the same watermark, so that once a criminal has copied one, he has copied them all, says Hans Schokkenbroek of Dutch technology firm Unicate. The company claims it has come up with a fail-proof alternative, using microfibres.
Unicate has developed a production process that imitates the way nature randomly produces unique fingerprints. By virtue of random elements in the control of the production process, each 5mm square Unicate token is unique in a population of 1036.
The 3D token is scanned from two angles by a reader unit. These images are then combined and translated into a unique digital code, says Schokkenbroek. Valid codes are recorded during production and can be checked by a scanning process when the product is sold. ‘The technology starts with something created by a natural process, whereas other systems are created by man, so they can be broken.’
Even if someone could crack the system, there would be no point, as they would only be able to generate one marker, and would have to start all over again to copy the next, he says.
The company is now hoping to commercialise the technology, and is focusing on the perfume and spirits markets, after developing a technique to integrate the material into glass. ‘A number of systems apply the technology to the packaging or surface of the bottle, so it can be removed. Our markers can be integrated into the glass itself, so they are ideal for the perfume industry,’ says Schokkenbroek.
Counterfeiting is a particularly serious problem in the pharmaceuticals industry, where fake goods are not just hurting company profits, but costing lives. The World Health Organisation estimates that counterfeit drugs account for around 10 per cent of world pharmaceutical trade. In the US at least 17 people died between May 1999 and January 2000 after taking counterfeit gentamicin, a powerful antibiotic.
Other recent cases include a meningitis vaccine made up of tap water, paracetamol syrup made of industrial solvent and contraceptive pills made of wheat flour.
Many fake drugs contain ingredients that are harmful to health or the environment, says Dr John Davies, chief executive of UK anti-counterfeiting technology firm Biocode. ‘If you are producing a counterfeit, you want to do so as cheaply as possible, and you are not going to be too fussy about what goes into it. So there are serious safety issues from a health and environmental point of view.’
Biocode has created a forensic fingerprinting system, in which a chemical coding ‘marker’ is incorporated into the ingredients or coating of a drug, or even into the ink printed on to the tablet.
Lateral flow immuno-chromatographic assays, similar to home pregnancy-testing kits, enable products or packing to be field-tested for the marker anywhere in the world – with initial results achieved in minutes.
Biocode, formerly part of Shell, originally developed the technology to help the governments of East Africa to recover lost tax revenues on fuel. Countries such as Kenya export fuel untaxed to neighbouring states. But much of this finds its way back into the domestic market, costing the governments millions in lost tax each year. The Biocode system allows a marker to be added to untaxed fuel so that government agencies can test the fuel sold at petrol stations throughout the region. The company is now hoping to repeat this success in pharmaceuticals, as well as tobacco, wines and spirits.
For as long as brands such as Nike, Levi and Marlboro fetch a premium price, there will be counterfeiters hoping to make a quick buck out of copying them. But it is not simply the companies that are losing out. Consumers could be risking their health and even their lives by using fake cosmetics and taking ineffective or dangerous drugs. And with liability claims against firms on the up, the money poured into new technologies to fight forgers should rise dramatically over the next few years.