Sunday, June 22, 2003

Prince Robert of Luxembourg wants people to enjoy his wine, not some grapey forgery. So the prince, managing director of Domaine Clarence Dillon in Bordeaux, France, has hired a company that makes euro banknotes to design the label for his Chateau la Mission Haut-Brion wine.

The 2000 vintage label employs several security measures that the private company can use to authenticate bottles, which sell for $400 to $500, and in the process thwart counterfeiters who try to cash in on the chateau’s cachet.

“Whenever you have a product that is highly sought after, there is a way for people to get in and copy it,” Prince Robert said.

Like Domaine Clarence Dillon, companies around the world are turning increasingly to technology as more counterfeiters copy their products, then sell the cheap knockoffs to unsuspecting consumers.

The fakes are not just a problem for luxury goods. Pharmaceuticals, parts for transportation equipment, alcohol and basic consumer goods often are manufactured and sold under a major company name but without quality and safety controls.

“It’s not just about fake handbags,” said John Anderson, director general of the Anti-Counterfeiting Group, a Britain-based association whose members include Bayer, EBay UK and Rolex.

The end result of counterfeiting can be unsafe products on store shelves and money in the pockets of criminal enterprises or terrorists.

No firm dollar figure has been set on the effects of counterfeiting. The National Association of Manufacturers, a U.S. industry group, said a low estimate would be that 7 percent to 9 percent of world trade involves counterfeit goods. Based on World Trade Organization numbers, that would mean that each year a minimum of $420 billion in fake goods is traded globally.

Many of the goods come from emerging economies, such as China and Russia, but they also are produced in the United States, the European Union and other developed economies, Mr. Anderson said.

Beyond the dollar figure, the fakes cost jobs — as many as 17,000 in the European Union — and tax revenue, and can damage a company’s reputation, Mr. Anderson said.

“All consumer-goods companies are fighting the counterfeiting epidemic,” said Raymond De Vellis, trademark counsel for Gillette Co.

Fakes cost Gillette “tens of millions of dollars” each year as knockoff products, especially double-edged and disposable razors, enter the supply chain, Mr. De Vellis said.

“We’re trying to make sure it doesn’t seep into our premium product line,” he said.

Gillette, which makes Duracell batteries and Oral-B toothbrushes as well as namesake grooming products, has invested heavily in technology to stop counterfeiters. On one promising project, the company is working with the Massachusetts Institute of Technology’s Auto-ID Center, a partnership among almost 100 global companies and several research universities.

The Auto-ID Center has devised technology that uses radio waves to identify individual items. A serial number that identifies a product, and other information, is stored on a microchip that is attached to an antenna. The chip-antenna assembly transmits the identification information to a reader.

The reader allows the information, for a palette of goods or an individual product, to be passed on to a computer. The companies can transmit the information through the Internet and use it to determine where its products should and should not be.

Consumer groups have formed to oppose the technology and what they call an invasion of privacy that comes with it. Katherine Albrecht, founder of Consumers Against Supermarket Privacy Invasion and Numbering, wrote last year that Auto-ID would “expand marketers’ ability to monitor individuals’ behavior to undreamt of extremes.”

Although the technology is unproven, Gillette hopes it will have a significant effect on combating fakes, Mr. De Vellis said.

Other technologies being developed by industries and government combine biotechnology and micro-electronic technology, or use cutting-edge nanotechnology. The U.S. Commerce Department, for example, is funding a project at the Oak Ridge National Laboratory in Oak Ridge, Tenn., to assess technologies that could be used in a textile “marker system” that would allow products of U.S. origin to be scanned and identified.

Aside from companies’ bottom lines, anticounterfeiting groups also are posing problems of consumer safety and national security.

Pharmaceuticals are a particular concern, said William Livingstone, director of research and analysis at Global Options Inc., a Washington-based risk-management firm. Global Options published a book this year on terrorist threats to U.S. medical supplies.

“Terror groups are seeking alternative sources of revenue, including the production and sale of counterfeit goods, including pharmaceuticals,” said the book, “An Analysis of Terrorist Threats to America’s Medical Supply.”

Using such medical technology, the groups could mount an attack using pharmaceuticals laced with poisons or pathogens, Mr. Livingstone said.

Anticounterfeit groups hope such threats will raise the profile of trade in fake goods, making it a more serious consideration for lawmakers, and law-enforcement and customs agencies.

The issue is gaining attention.

Rep. Henry J. Hyde, Illinois Republican and chairman of the House International Relations Committee, has scheduled a full committee hearing, tentatively for July 16, on the link between counterfeiting and terrorism.

Mr. Anderson’s anticounterfeiting group recognized on Thursday French customs efforts to prevent counterfeiting. Gillette also was recognized for efforts to prevent fake products from reaching consumers.

Despite the attention and advances, counterfeiting is not going to disappear, said David Peyton, director of technology policy at the National Association of Manufacturers.

“Technology is indispensable, but it is never the entire answer,” Mr. Peyton said. “You’re just buying time.”

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