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News blog16 September 2022

Use of blockchain to protect against counterfeiting

by Shwetabh Raj, IP Manager EBTC

 

 

Background

Counterfeiting is a massive economic problem that causes heavy financial loss to businesses operating across the globe. Counterfeiting has an extensive negative impact leading to potential lawsuits, consumer injuries, loss of sales and long term reputational damage. A report published by EU commission highlights that in 2018 alone, more than 27 million articles were suspected of breaching intellectual property rights and there were 70,000 cases of custom detentions.[1] India stands as one of the major sources of counterfeits imported to European markets.[2]

EU companies have been dealing with counterfeiting for years, investing time and money to ensure that counterfeit products don’t enter the supply chain and reach the end customers. In many cases, the EU companies have been fighting an invisible enemy as lack of data, network and sourcing arrangements make it difficult to ascertain the origin of counterfeiting and nullify it.

Current method of protection

Manufacturers and brand owners have attempted to deploy various methods and techniques to tackle counterfeiting or smuggling. One of the main anti-counterfeiting methods currently used is to affix holographic stickers or barcodes on the product to establish a product’s authenticity. However, this method is no longer sufficient as due to advancement in technology accessible to counterfeiters the barcodes and stickers can now be copied convincingly as well. Furthermore, while these means can be useful to ensure counterfeiting products do not enter the supply chain since they are checked by sellers and resellers, it is impossible for the consumer to ascertain whether the holographic sticker or the barcode was applied by the brand owner or the counterfeiter along the supply route. They therefore are of little use for the end consumer, who has no realistic mean to ascertain the validity of these marks.

Blockchain technology as a solution

Improved traceability and end to end tracking of the product or shipment can help EU businesses in dealing with counterfeiting. The developing blockchain technology can play a vital role in this mission as it constitutes a shared immutable ledger that records the transaction and movement of the product at every level in a business network.

Blockchain provides a secure tracking system from the beginning of the supply chain (procurement of raw material) to the very end (where the end user gets the finished product) and hence blockchain helps in tackling counterfeiting by identifying products proof of origin.

Companies implement blockchain technology on their product through the use of smart tags which helps them in tracing the products movement along the supply chain in real time along with date of manufacture and other assigned specific information at various stages. Following are the common type of smart tags used by businesses:

a) QR Code: QR codes or quick response codes are the most widely used tags across businesses. QR codes promotes engagement and interaction through a smart phone or tablet. The implementation of QR code on the product enables businesses to transfer information such as date of manufacturer, companies’ website, or customer care number. QR codes further enables the businesses in executing payment and shipment tracking without hassle.   

b) Radio frequency identification tags: RFID tags are the tags that use radio frequency to transmit information to a reader. The reader is a device that emits radio waves and subsequently receives signals back from the RFID tags. RFID tags are affixed to individual products and readers are deployed along the monitored areas to receive signals which enables to track all the movement, in and out of each label or product. Its main drawbacks are the unit cost and integration cost which makes it unrealistic for large deployment of product or consignment.

c) Signatures on metallic or ceramic surface: Laser marking machines incorporate barcodes and graphics onto metallic or ceramic surface. Some such marking machine produce 2D data matrix that users scan with help of a special scanner to perform data collection and product tracing functions.

When any of the above-mentioned smart tag is attached to a product, data of every transaction is sent to the blockchain along with the time stamp which creates a trust layer for data and makes it immutable. This makes easy for the brand owners to track the shipment or movement of the product right from the onset.

Since the biggest challenge for the EU companies has always been to ascertain the origin of counterfeiting in the supply chain, the blockchain based platforms provide customisable tools for EU businesses to deal with this issue. Moreover, the blockchain enabled solutions can be easily integrated in any business system and make it more effective.

Conclusion

As consumer demand is increasing, the counterfeiters would want to thrive and increase their market share and presence. In the recent times there has been significant emergence of blockchain powered platforms that provide customised tools to businesses for tackling counterfeiting. However, it is pertinent to mention that blockchain might not be a solution for every manufacturer or brand owner as there are few factors to be considered like the size and complexity of supply chain, the value of target product and level of counterfeiting occurring with regards to the brand. The EU SMEs contemplating to adopt blockchain technology to tackle counterfeiting should perform an in-depth analysis to determine whether the financial benefits of implementing blockchain in the supply chain, especially when dealing with Indian manufacturers or resellers, outweighs the cost and challenges of implementing blockchain technology.

 

[1] https://taxation-customs.ec.europa.eu/eu-funding-customs-and-tax/custom…

[2] https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library…

Details

Publication date
16 September 2022