Do Cutting Edge Anti-Counterfeiting Technologies Really Work?

Edible bar codes.

Plant-based DNA strands embedded in military hardware.

Iridescent nanotechnology inspired by butterfly wings.

These are not science fiction topics.  They describe recent developments in anti-counterfeiting technologies that are capturing mainstream news headlines for their creativity in tackling a trillion dollar a year problem facing many industries, ranging from pharmaceuticals to children's toys to military hardware.

The primary purpose of these developing technologies is to assist brand owners with better detection of counterfeit products as they infiltrate the supply chain.

For example, recent studies have discovered a "flood" of fake military hardware components making their way into the U.S. armed forces' vehicles and planes.  The safety threat posed by substandard military grade parts is unimaginable.

Using the new technology, if military hardware components are counterfeit, they will not possess the correct embedded plant DNA, which can be detected with a special inspection tool.

Similarly, the pharmaceutical industry can use edible bar codes to allow for easier tracking and authentication of pills and verification of drug packaging.  Spending by pharmaceutical companies in the anti-counterfeiting tech marketplace is predicted to exceed $1B per year in coming years.

But, while they are clearly effective at detecting counterfeits, are these cutting edge technologies addressing the deeper issues behind the continuing scourge of fake products?

Unfortunately, the data demonstrates that, despite the increasing use of advanced technologies to detect the presence of counterfeits infiltrating the supply chain, the steady supply of counterfeit products continues to skyrocket.

Why?

Because no improvements in DNA-based detection technology can change this simple mathematical equation:  When profits routinely exceed investment, there will be a steady supply of fake products.  Fakes require no research, development or marketing to succeed.  Rather, by passing off a fake product to consumers, a $10 investment can yield $100 in profit, with little or no likelihood of prosecution or penalty.  

This return on investment (ROI) exceeds that of trafficking in the narcotics trade, with less chance of being murdered by the competition or sentences that include decades in a federal penitentiary.

While advanced detection methods are part of the brand protection puzzle, international laws and norms clearly need to become increasingly effective, to deter and punish counterfeiting once it is discovered.

America: Made in China

This image was taken from a real label that was found on the streets of New York.

The economic value of China's annual exports to the United States is estimated to be $417 billion, and growing each year. The number of American jobs lost to Chinese imports each year is likely in the hundreds of thousands. This data may help to explain why the Obama administration has struggled with a nagging unemployment rate of approximately 8%, even as the stock market reaches record highs.

It is no surprise to the consumer that very little furniture, electronics, toys or apparel are manufactured in the U.S. any longer, as these items are increasingly imported from China and other developing nations.

The Wall Street Journal has reported that the negative impact of cheap Chinese imports on the American economy is far greater than previously thought.

Similarly, a Wall Street Journal report in April 2012 found that America’s largest multinational corporations outsourced more than 2.4 million jobs over the last decade, even as they cut their overall workforces by 2.9 million. 

Outsourcing jobs to a cheaper foreign labor pool, and increasing the number of cheaply made products from China makes perfectly sound business sense at the microcosmic level in the short-term. Indeed, Wal-Mart has generated billions of dollars in profits derived virtually entirely from this very business model.

However, as a long-term matter, this strategy has the potential to tarnish brands, lower quality, encourage counterfeiting, and even destroy entire industries.

For example, in Deluxe: How Luxury Lost Its Luster, author Dana Thomas chronicles how some luxury brands have resorted to cheap, Chinese mass-market production methods, and how doing so has risked their previously sterling reputations.

No industry is immune from the effects of globalization, cheap imports and job outsourcing. Ironically, even U.S. patent lawyers have seen previously high-paying jobs outsourced overseas.

10 Strange, But Real Federally Registered Trademarks

Section 2(a) of the Lanham Act, 15 U.S.C. Section 1052(a), bars the registration of trademarks that are deemed “immoral” or “scandalous." However, no aspect of U.S. law addresses the registration or use of trademarks that are just plain...strange.  Here are ten favorites:


10.  JUNK IN THE TRUNK® for trash collection.  To be distinguished from FOR THE JUNK IN YOUR TRUNK® brand of pickup truck cargo liners.
9.  CORNHOLIO®  for t-shirts and baseball caps. One of the stranger facts about this trademark registration owned by South Carolina-based Cornholio, Inc., is that it claims a first use in commerce in 2008, but characters Beavis and Butthead who made the mark famous, went off the air in 1997.
8.  OBESITY IS SUICIDE BY OVERDOES [sic] OF FOOD®  Owned by the Michigan-based Fat Loss E-School Corporation.  Typographical error included on original registration certificate.
7. BACK OFF BABY®  For bustiers.
6.  SLIMY GRIMY®  Registered since 1981 and now incontestable.  For cleaning preparations, namely, boat hull cleaning preparations.
5.  ZOMBIES VS. CHEERLEADERS®  For comic books but recently abandoned.  Not sure who I was rooting for here.
4.  DISGUSTING ANATOMY BRAIN® and DISGUSTING ANATOMY HEART® are both registered for toys "and playthings."  What such playthings that aren't toys are they talking about here??
3.  THE GREASY WIENER®  for restaurant services.  Not health food-specific, I suspect.
2.  FULL CONTACT BINGO®  Electronic Arts recently applied for this title in connection with online computer gaming.  Not yet a trademark, just an application, but I've already ordered my advance copy of the game.
1.  DEAD LAWYER®  For a variety of items, including mouse pads.