Countering the counterfeiters

Imagine your delight upon opening the beautifully wrapped Christmas gift from a loved one and discovering what you have been dreaming about these past several months – a magnificent Franck Muller Casablanca Chronograph in pink gold with a beautiful handmade alligator strap (approx. retail value $55,000). “Oh, darling, you shouldn’t have.” “It’s OK, dear. I bought it at a special sale.” “Well, that’s all right then.”

A few days later, noticing it needed a slight adjustment, you take it to your local Franck Muller boutique, where the sales assistant welcomes you with a smile and open arms, “What can I do for you, sir?” “My watch – a Christmas gift from my wife – is losing around two minutes a day.” “No problem, sir. If you’ll just have a seat, this will only take a few moments,” says the sales assistant as he disappears behind the iron-barred, steellocked doors to the work-room. Upon emerging a few minutes later with a slightly disconcerted look on his face, he says rather curtly, “We cannot fix this. It is a fake.” “What? That cannot be. Why, I have here the Certificate of Origin.” Examining the “certificate” with not a trace of a smile, the sales assistant says, “This is also counterfeit. Is there anything else we can do for you?” he hastily adds with a sharp glance towards the door.

If you think this scenario is farfetched, then you may be in for a shock when you look at the numbers regarding the counterfeiting of luxury brands. In fact, our erstwhile luxury watch aficionado was fortunate in leaving the shop with his “Franck Muller” still in his hands, as the law requires the confiscation and destruction of counterfeit goods.

The counterfeiting numbers

The total annual global sales of luxury-brand goods are estimated to reach US$ 1 trillion by 2010, with the top-level companies enjoying operating margins to the order of 60–70%. Not a bad round figure, even considering the current financial crisis.

However, the sector is plagued by counterfeiters; in fact, counterfeiting represents the biggest threat these brands have to face and is a major concern of most manufacturers. The overall figure is indeed staggering: counterfeiting represents some 5–7% of all world trade – and it is increasing every year. In 2007, according to the latest figures, the number of seizures of counterfeit goods in the European Union increased by 17% to reach some 43,671 incidents. Not surprisingly, the sectors most affected were the jewellery and horological sectors (an increase in seizures of fake goods of 89% over the preceding year; around 1.8 million items) and the beauty products sector (seizures of counterfeit items up 264% over previous year; more than 6 million items).

Furthermore, according to the Chamber of Commerce and Industry of Geneva, the annual global cost of counterfeit merchandise has risen to approximately US$ 650 billion and industry analysts estimate that this is likely to double by 2014. Given these figures, a country such as Switzerland, for example, is losing around $10 billion in sales due to the counterfeit “parallel” market.

Clearly, the inroad made by counterfeit merchandise into the luxury goods sector is no small potatoes. This is due in large part to the increased sophistication of counterfeiters. In times past, it was easy to spot a fake Louis Vuitton handbag or a false Hermès scarf; but the times have changed – it nowadays most often takes an expert to detect the false among the authentic.

Is there nothing to curb this intrusion into the lives (and purchases) of the millions who crave the finest the world has to offer in luxury goods? Or for that matter, is there no way to protect and minimize the increased risks shared among investors/collectors who relish the acquisition of such items for possible future high returns on their investments? Yes there is, if a major player in the area of numeric identification and security of information has anything to say about it.
The WISeKey solution



Just try counterfeiting this …!
As a world leader in its field, WISeKey specializes in the secure protection of information and the identification and authentication of persons and objects by developing and utilizing network infrastructures and the Internet to guarantee secure communications and electronic transactions – without compromising the highest level of confidentiality.

Based on its extensive experience and technologies, WISeKey has devised a system – which at first glace seems utterly simple and logical, yet belies its underlying high-level technology – that is capable of safeguarding and verifying the authenticity of luxury goods, at a cost that is a small fraction of the amount of sales lost to counterfeiters.

In effect, every product made by a luxury goods manufacturer – whether a watch, a handbag, a piece of jewellery or whatever – would, in addition to its “Certificate of Origin”, be accompanied and sold with a fully customized electronic version of the certificate of origin or unique object identity containing encrypted details of the product, such as registration number, bar code, date and place of manufacture, etc. Manufacturers, sales outlets and purchasers would then be able to use the object identity to verify instantly via the Internet the authenticity of the product using WISeKeydeveloped technology – namely, WISeAuthentic (for which Swiss and international patents have been filed).

“The technology,” explains Carlos Moreira, WISeKey CEO, “is based on digital identification encrypted in each product’s object identity. What we provide is the service by which this can be used to access the manufacturer’s website and gain access to a special area of the website where the product can be identified as part of the company’s inventory. If the encrypted information on the object identity is not recognized, access to the website’s special area is denied.”

As with bank cards, the manufacturer itself produces a product’s information-encrypted object identity and then pays a nominal fee – in the case of a high-end watch, for example, WISeKey estimates the cost per inquiry at around 0.05% of the overall value of the watch – each time the manufacturer’s website is accessed – using the licensed WISeAuthentic technology – to verify the product’s authenticity.

The technology is virtually failsafe, as the encrypted digital information, within, for example, a smart card’s chip, is impossible to replicate and will remain so for the foreseeable future, according to analysts, mathematicians and academic experts who participated in the development of WISeKey’s technology.

Not only would the WISeAuthentic Service object identity combination provide a fail-safe system for manufacturers and purchasers, but it would be a boon to police and customs authorities (not to mention e-Bay), who would be able to verify the authenticity – or non-authenticity – of a truckload of hundreds of cases of, say, Cartier jewellery in a matter of a few clicks on the Internet, thereby negating the use of expensive machines currently used for this purpose.
Counterfeiters beware

While initially WISeKey is pursuing the development and implementation of WISeAuthentic within the luxury goods sector (WISeKey plans to make an announcement at the World Economic Forum in Davos next January regarding the first global implementation of this technology), the beauty of the concept, according to Moreira, “is that it can be utilized for any product requiring certification of authenticity and be used anywhere in the world through a single Internet connection or even via a phone with Internet connectivity.”

Whether it be watches, jewellery, pharmaceuticals, beauty products, haute couture and even food (caviar, as just one example of a top-grade comestible susceptible to falsifying) or more exotic items such as jet aircraft engines or high-tech automobile parts (yes, even these are being invaded by counterfeiters), whatever the product requiring certification of origin, the WISeAuthentic technology can be used for verification purposes.

In short, if WISeKey has its way, counterfeiters may well have to find new avenues to pursue – but when they do, they will in time be thwarted there as well, and it will most likely be WISeKey