Counterfeiting and the Butterfly Effect

May 21, 2010 § Leave a comment

If a butterfly flaps its wings in some dank Manhattan alleywhere tourists trade crumpled bills for counterfeit handbags, will the breezecreated by the insect cause a tornado in Texas?

Now, you probably expect to hear this type of question late in the evening at some artists commune, but while it may seem a bit off the trodden path, the question actually has to do with a theory that is very relevant to our anticounterfeiting work known as the Butterfly Effect.

The Butterfly Effect is a way of explaining unpredictable behavior in otherwise predictable systems. As with all theories, it can seem quite complex, but at a more simple level it tries to make sense of how slight differences in a system’s original state can cause a plethora of different outcomes, as in “Would you say that I have a plethora of piñatas?”

For instance, when a raindrop lands on your forearm, the direction that it will fall depends on a number of factors. If a single hair is pointing in one direction, the drop will slalom in a certain way, but if that same hair is moved just a bit, the water will trickle in a completely different direction. There are many factors that determine the outcome, even in a smaller “system” like our droplet’s whose course is also affected by things like skin temperature, and the pulse of the vessels just beneath the dermis.

Unless you’re wearing a coat of body paint for an Avatar-theme potluck, raindrops shouldn’t be a concern. But, we should be worried about what goes into our larger personal “system.” Just like a particularly coarse arm hair, if you include a fake in your mix, it will have a significant effect on those around you.

If you willingly sport the cheap, oozy leather of a fake handbag, it is crucial to know that the consequences reach far beyond a poor aesthetic choice. When you spend money on a fraud, it encourages whoever is cooking the poison to keep the fire burning. When you buy fake, the message to the criminal manufacturers and distributors is clear: make more and continue with the abuse.

If your “system” has a corrupt set of original factors, it will alter the way you act with others, and just like a droplet sitting on top of a coarse arm hair, a counterfeit in your life will change your outcomes.

As you recall the ground-breaking research of Dan Ariely and his colleagues that demonstrated how wearing fakes makes a person less likely to behave ethically, you understand how important it is to pick the right factors in your life and exclude the fakes.

So, consider two things: (i.) each item you include in your daily routine has an effect on the outcome of your day, and (ii.) your behavior creates a domino effect that influences the behavior and experience of countless others.

With so many of our interactions, events, goings-on, and general high jinks affected by unseen factors and shaped by those items we have in our lives, why risk those around you knowing that fakes poison a system the very moment they enter it.

The purchase of counterfeit goods perpetuates abuse. And it puts your friends and family in jeopardy as well. It would be easy to write this off as an insignificant, unlikely slice of sensationalism, but I’m not talking about an average person transforming into some thug because they bought a fake broach. This is about behavior that is slight, occurs in increments, and is insidious. This isn’t blunt force behavioral trauma. The change is gradual and deceptive. So make your choices wisely.

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Guest Blogger: Frederick W. Mostert, Chairman of the Authentics Foundation

May 13, 2010 § Leave a comment

Innovation in Brand Protection

With the total number of websites on the Internet exceeding 205 million in March 2010, counterfeiting is a growing industry, especially since more valuable items have entered the scene. In fact, the Internet is the top destination for counterfeit sales. According to the Annual European Anti-Counterfeit report published recently by PriceMinister, 80% of counterfeit goods were purchased online in 2008. This situation causes serious downstream crime as well, as it is not uncommon for counterfeiters to be involved with organized crime and child labor practices. As a result, innocent third parties like distributors, retailers, and auction houses can unknowingly become involved in the risky aspects of the industry.

On the Internet, it is difficult for customers to spot fake products and it is hard for them to know if the seller is legitimate. To avoid being victim to counterfeiting, retailers must take extra caution to embed very specific markings in their products that distinguish fakes from legitimate originals. Despite elaborate branding measures, labels and markings are still subject to duplication, only to be spotted as fake by those in the industry with a sharp eye for detail.

Not only are counterfeit products a challenge for customers to detect, but retailers often have no secure way of verifying a purchaser’s true identity. E-commerce transactions are extremely vulnerable to identity theft because, aside from credit card information, many sites do not take additional steps to verify the identity of a credit card user. To authenticate transactions from both the purchaser and seller’s end, companies are using technology to help eliminate this uncertainty. Some of the technology-based solutions that help to ensure secure online transactions include: Verisign, RSA, Authentec, Ensure, and Authentify. Despite the development of new technologies to verify genuine products and retailers, ways to override these methods are constantly being created by those that benefit from the counterfeit industry. For instance, in 2009, UK financial institutions lost 14% more than the previous year, due to online banking frauds and accounted for the largest industry segment of total phish attacks, with a 36% growth despite their efforts (UK Payments Administration – March 2009). In order to offer a completely secure exchange, companies must implement a product that resists duplication or misuse.

Authus has been developed as a customer-focused solution for identifying authentic goods. Created by luxury goods company Richemont to protect customers of its portfolio of luxury brands, Authus is verification software that uses two unique ways of confirming the authenticity of both a buyer and seller. First, “The Smart Seal” is a way to positively and securely identify a website to a user. The seal is provided by a brand to its authorized retailers to help customers distinguish between online sellers who are operating with the brand’s permission and those that are unauthorized. The second method of confirmation is the, “Trusted Content Channel.” This refers to certified content from brands, credit card issuers, vendors, and endorsers, which is used to ensure secure transactions for large purchases, online banking, and transferring personal information such as medical records.

Unfortunately, due to the high value of luxury goods, the risk for counterfeiting or scams is high as well. Traffic diversion is estimated to cost online advertisers almost $2 billion while the amount of business lost to online counterfeiters is expected to top $137 billion in 2009, according to MarkMonitor. Authus bridges this gap and acts as an active security agent that, while hardly noticeable to the customer, ensures a secure and easy process for both the seller and the buyer and notifies the customer if an unauthorized party has duplicated the seal. Authus will help eliminate the buying and selling of counterfeit products by helping customers reduce their risk of unknowingly purchasing a counterfeit product, confirm credit card companies’ purchase protection plans, ensure reliable shipping practices, and verify retailer warranties. For online retailers, Authus offers them the ability to distinguish themselves as authorized retailers and build customer trust and loyalty which leads to long-term customers and increased revenue. By helping brands direct customers to authorized retailers and alert them of unauthorized sellers, Authus increases overall customer satisfaction by selling quality, legitimate products, and increases demand for truly authentic goods.

Alon Ben Joseph, CEO of Ace Jewelers Group headquartered in Amsterdam, The Netherlands, after installing Authus into his ecommerce site commented, “The addition of Authus to the Ace Jewelers eBoutique brought immediate response from our customers who recognized the Authus seal as bringing an unprecedented level of security, trust and authenticity to their purchasing with Ace. Authus seems simple, but is actually an ingenious technology that completely protects both the consumer and E-tailer by providing an absolutely secure environment for Internet shopping.”

While the internet has become the main platform to communicate with consumers, reduce cost of sales, acquire new customers and increase customer retention, brand abuse is now a critical business and cost issue. Using Authus will bring high returns on investments as it will not only protect revenues, it will also protect its consumers from fraud and counterfeiting, which will also increase revenues. By creating a safe transaction for both buyers and sellers, Authus guarantees a secure experience for all.

A question of taste and counterfeiting

May 11, 2010 § Leave a comment

It would be a far better world if we all were blessed with a surer sense of our own taste.

No buyer’s remorse to follow you around like a rabid ferret fixated on your ankle and no more of the court martial review board that convenes inside your head over an outfit choice.

Taste is one of those curious abstract ideas like love, where hearing the word causes a very specific reaction despite its uncertain meaning. In the case of taste, while we may not have the slightest idea why certain things toot our tubas, the moment we are asked what we like, most of us will start babbling and it will be days before we inhale.

At its most basic, taste is shorthand for our vast collection of likes and dislikes.

Ask why people have such different tastes and you’ll get the usual explanation of upbringing and associates, of synapses and neurotransmitters, and of means and access. But if Donald Trump has taught us a single lesson, having means does not guarantee taste and conversely, Coco Chanel has shown us that upbringing and access (daughter of a laundry woman and market stall holder who lived in rural France) have very little to do with it either.

Taste has an odd relationship with counterfeiting. To say that anyone who owns a fake has taste is ridiculous, but when you consider that the sham buyers make these poor decisions covet a piece of authentic luxury, the verdict becomes a bit more muddled.

Whether or not the purchase of a luxury item suggests taste is a debate for another time, but the fact that a sham buyer has an eye for elegant engineering and craftsmanship cannot be denied.

As I was thinking about this dilemma, I read a passage from Stanley Marcus’s book, Quest for the Best. Marcus was the president of Neiman Marcus, a fine writer, a master marketer and salesman, but above all he was driven to find the highest quality in every aspect of life. One of the requisites of being the “best” in Marcus’s view was that a manufacturer has the finest method of construction.

And this is where the wheels come off the sham-wagon.

Taste requires a deep appreciation of craftsmanship. The beauty of the end product is simply not enough. We need to consider the process that builds a piece: the drawing, the stitching, and the cultivation of the material. In this sense, the product is certainly not greater than the sum of its parts.

So when you buy a sham, you deny not only the authentic product itself, but the inspiration behind it.

It turns out the patrons of the sham arts are not only tasteless, but uninspiring to boot.

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The counterfeiting of the Middle Kingtom: U.S. Trade Report highlights ongoing problems with the fake trade in China

May 5, 2010 § Leave a comment

A recent U.S. report on intellectual property rights reveals that China remains the global powerhouse…in producing fake goods.

The U.S. Trade Representative’s annual “Special301” Report monitors the ability of our trading partners to protect intellectual property rights abroad.

There were several developments in the fight against fakes, but of all the information shared in the report, the most jarring was that China’s practices remain “unacceptable.”

The report ranks countries according to how well they fought the fake trade in the past year. It asks whether a country was able to toss a handful of tacks across the path of their country’s sham parade and give it a limp.

As the report indicates, some countries made the road a bit rougher for the fake traders with initiatives that tore at the soft undersides of their feet – if only they wore shoes with authentic soles – while other countries, it seems, weren’t terribly concerned.

The good news: Several Eastern European countries have made notable progress, including Czech Republic, Hungary, and Poland. Each was taken off the “watch list” because of significant progress curbing the sale of fake goods.

The bad news: China remains at the top of the watch list.

China has been repeatedly encouraged to improve its enforcement standards, and while slight progress was made – this year only 79% of fake goods stopped at the U.S. border were made in China, compared to 81% in the previous year – even apparent improvements can be misleading.

The decrease in the number of seizures of fake Chinese products at U.S. borders doesn’t necessarily mean the amount of fake goods made in China has gone down, though we’d be ecstatic if it was the case. Sadly, this number reflects only the efforts of our border security and the origin of the fakes they were able to stop – kudos for their fine efforts.

At its worst, the decrease means that whoever is trafficking Chinese counterfeits has gotten better at hiding the sham goods from authorities.

Either way, China’s failure to implement stricter penalties for counterfeiting is corrosive.

The question is difficult, but simple: does China have real interest in stopping counterfeiting inside its borders?

The amount of money produced by the fake trade is staggering: over $600 billion a year by conservative estimates. For the global leader in production, this means a huge amount of money that is circulated in the Chinese economy and, regrettably, fuels other businesses.

More cynical thinkers (or, in certain schools, realists) might believe China isn’t overly concerned with the problem because to really confront it would suck huge amounts of cash out of their economy.

It is crucial we understand the amount of money tied to the fake trade, but remember that at the core of our fight is the defense of human rights. There is no price tag for unalienable liberty.

So while we use the watch list as a barometer for progress in the fight against fakes, the figures are irrelevant without awareness of the human lives at the heart of the issue.

Never lose sight of the suffering and injustice behind these numbers.

As the demand for fakes shrinks, so do the dollars. If we shrink this demand far enough, the only thing left standing will be a gleaming exemplar of unfettered humanity.

And that will be a good day.

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