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It's not the real thing.

New technologies are making it easier for pirates to stay afloat.

Piracy is no longer confined to the history books or the high seas. And counterfeiters no longer limit their efforts to reproducing dollar bills.

Technological advances enable counterfeiters and pirates to easily and inexpensively reproduce brand name products ranging from software to designer watches to music compact discs (CDs). Their victims include the manufacturers who have invested millions of dollars in building brand names, retailers who are losing sales, and consumers who are unwittingly stuck with low-quality merchandise.

The San Francisco Chronicle recently reported that on a worldwide basis, piracy costs the pharmaceutical industry more than $4 billion, software manufacturers more than $2 billion, and automotive parts manufacturers more than $3 billion. The Recording Industry Association of America (RIAA) estimates that the US recording industry suffered more than $400 million in annual losses from US audiotape, record, and CD counterfeiting. Worldwide, the industry experienced losses of an estimated $1 billion.

The following hypothetical examples of piracy are typical today:

* A security manager for a major software manufacturer is just sitting down for his or her morning cup of coffee when the company's sales manager calls. The service department is being inundated with calls from irate overseas customers experiencing problems with the company's latest software. The sales manager is baffled because the new software has not been released for sale in that country.

* The loss prevention director for a music store receives a visit from its president who is holding a stack of cassettes. Customers have returned the cassettes for exchanges and refunds, but when the tapes were returned to the manufacturer, they were declared counterfeit merchandise.

* The vice president of operations for a large apparel warehousing and manufacturing facility gets a call from a foreman who has discovered that some employees have been using the company's equipment to produce bootleg T-shirts for a popular rock-and-roll band and storing them in a company warehouse.

* A record store owner calls the city's police chief to report that a peddler has set up business on the sidewalk near his or her store. The peddler, it is discovered, is selling counterfeit versions of best-selling cassettes at less than half the price that the record store charges.

AS THESE SCENARIOS BECOME MORE commonplace, it becomes increasingly important for security professionals to keep abreast of new technologies that make counterfeiting easier and others that help to defeat the pirates. Some of the weapons include holograms, high-tech security labels, police sting operations, street vendor alert programs, and antipiracy toll-free telephone numbers.

Companies fight back. Several industry organizations are working to help security professionals tackle the problem. The organizations share information and resources, including updates on technological advances that provide new tools for the security professional.

The music recording industry, which has been particularly hard hit, has taken the lead in fighting back. In 1991 alone, according to RIAA, an average of 100,000 cassettes were seized by law enforcement officials each month. Domestic seizures during that same period totaled 1,452,863 counterfeit or pirated cassettes and more than 18,617,770 counterfeit labels to be used in the production of illicit cassettes.

The RIAA's Anti-Piracy Unit is on the front line. Members of the Anti-Piracy Unit coordinate their efforts with the FBI, US Customs, US attorneys, and state and local prosecutors and law enforcement agencies. The RIAA brings civil actions on behalf of its member companies.

The RIAA also has a Street Vendor Alert Program that provides guidelines for retail security personnel. The guidelines are based on RIAA investigators' experiences with counterfeiters, pirates, and law enforcement personnel. While the program is specifically targeted at the record industry, the procedures are a good model for dealing with almost any type of alleged counterfeit material, be it illicit cassettes or bootleg T-shirts.

The Street Vendor Alert Program suggests that all retailers follow these steps in combating vendors of suspect merchandise:

* Buy a suspect cassette from the street vendor.

* Compare the suspect cassette with the legitimate product.

* Contact the RIAA for an update on the criminal statutes that may have been violated.

* Contact the local police with all information, including criminal statutes violated and an RIAA affidavit.

The RIAA offers a toll-free number (800/BAD-BEAT) for consumers to call if they suspect that illicit records, CDs, or tapes are being sold. (Within the 202 area code, consumers should call 775-0101.)

A call to 800/BAD-BEAT prompted one of the largest seizures ever of suspected counterfeit tapes. More than 167,500 alleged counterfeit cassettes were found when authorities shut down a sophisticated operation in New York City capable of producing 50,000 cassettes a day.

The International Anti-Counterfeiting Coalition (IACC), another frontline fighter, promotes the protection of intellectual property on a worldwide basis through the use of legislation, law enforcement, and preventive actions. Formed in 1978, IACC represents more than 100 member companies, pushing for tougher legislation to create new criminal and civil remedies for counterfeiting related activities. For more information, contact the IACC at 202/232-5728.

The Business Software Alliance, which represents major US software publishers, estimates that in 1991 software piracy cost the computer industry more than $12 billion in lost revenues. The Software Publishers Association (SPA) and Microsoft Corporation have taken leading roles in the battle against software counterfeiters. Consumers, security personnel, or retailers who believe that they have encountered unauthorized copies of software can call Microsoft's Piracy Hot Line at 800/NO-COPYN or SPA at 800/388-7478.

IN THE PAST, MANUFACTURERS COUNTED on high-quality packaging, trademarks, and retailer and consumer awareness to help prevent product counterfeiting. Tough economic times, and a proliferation of flea markets, sidewalk vendors, and deep-discount retailers are among the many factors that have made consumers more open to purchasing counterfeit products.

Favorite items of counterfeiters and consumers alike are luxury brand name items, such as watches by Rolex, Gucci, and Cartier and perfumes, such as Opium, Obsession, and the Chanel line. Many manufacturers and some retailers are now calling on their security forces to reach out to flea markets and other sites where the products are sold to confiscate the illegal goods or at least make the vendors aware that the companies know of their activities.

Technological aids. For security, the first step in fighting counterfeiting is to find a quick and easy way to identify products, both fake and real. When the police and other security professionals are called in to help seize or confiscate allegedly counterfeit materials and merchandise, they must be confident that their actions are within legal bounds and can be justified. Unique product markings or packaging can provide the authorities with sufficient justification to put a stop to the counterfeiters illegal activities.

One method of protecting merchandise that is easily identifiable is the use of invisible labels. These labels are printed with fluorescent inks that only appear when exposed to an ultraviolet (UV) light.

Manufacturers who mark their products with fluorescent ink distribute UV flashlights to their security personnel and the local police. The flashlight-equipped personnel can then easily identify counterfeit merchandise by its lack of a fluorescent label or mark.

Another popular solution to protecting products is the use of holograms. Large distinctive holograms were featured on the price tags and labels for officially licensed apparel and merchandise from Batman Returns. Accompanying tags and advertising told the consumer to look for the hologram to identify official Batman Returns merchandise.

Holographic security labels are also used by Microsoft and other software companies to provide an extra layer of protection against counterfeiting. Among the advantages of holograms is that they can be readily identified by consumers, law enforcement, and security professionals. Many credit and bank cards sport high-quality holograms for an extra layer of security against counterfeiting.

While holograms vary in shape, size, and appearance, the basic technology that creates them remains the same. A hologram presents a three-dimensional image of an object, created by exposing the object to two streams of laser light. The resulting holographic image shifts and changes when viewed from different angles.

Holograms play a key role in a new approach to stopping counterfeiting and piracy, and they can be combined with electronic article surveillance (EAS) technology, used to stop shoplifting, for added security.

Producing high-quality holograms is costly. This prevents most would-be pirates or counterfeiters from duplicating holographic security applications, but if the value of a counterfeited product is high enough, counterfeiters may be willing to invest the capital and face the risks involved in producing fake holograms to reap the rewards.

Microsoft has already experienced problems with hologram duplication. In September, the company, working with federal and local law enforcement agencies, seized counterfeit versions of its proprietary software worth more than $9 million.

Microsoft reported that 10 sites in California and one in New Jersey were raided and more than 150,000 copies of the company's best-selling MS-DOS Version 5 operating system were confiscated from those sites. As described, each copy was "a perfect facsimile of the genuine article."

The officials loaded 16 tractor trailers with the fake packages of MS-DOS software and the equipment used to manufacture it, as well as additional materials, including manuals, diskettes, holograms, and packaging.

The alleged counterfeiters had been contracted in the past to manufacture legitimate versions of the software, which is included with a brand name computer system. When offered for sale, the counterfeited software was easy to spot because Microsoft does not distribute the MS-DOS as a retail product. All versions of MS-DOS, except for the MS-DOS 5.0 upgrade, are only licensed to computer manufacturers for distribution with their systems.

Antishoplifting technology may also help in the war against counterfeiters through a new process called licensed frequency protection. Today's most advanced antishoplifting labels emit a specific standard magnetic frequency that is recognized by the alarm pedestals at store access points. If the label is not deactivated or removed at the check-out counter, the pedestals will sound an alarm when the merchandise is removed from the store.

According to Chris Brown, market development manager for Sensormatic Electronics Corporation, a security label with a specific frequency could be restricted or licensed to one industry, to a large retailing chain, or to a large group of retailers. Products that are returned could be automatically tested at the sales counter. If the returned item did not conform to the industry's correct frequency, it would be identified as counterfeit.

Counterfeiting has become a substantial problem, affecting almost all manufacturing industries. Fighting the problem may get easier for businesses when tougher criminal penalties take effect. As of this writing, legislation passed by Congress and awaiting the President's signature would make software copyright infringement a felony and impose fines of up to $250,000 and five-year jail terms.

Industry organizations are continuing to press for firmer action against counterfeiters and pirates. Ironically, it may not be laws but rather the rapid pace of technological change that, while allowing counterfeiters to continue their illicit efforts, will provide industry and security professionals with the capability to stay one step ahead.

Lawrence Cottman is a New York-based free-lance writer who often reports on technology and security issues.
COPYRIGHT 1992 American Society for Industrial Security
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:counterfeiting and technology
Author:Cottman, Lawrence
Publication:Security Management
Date:Dec 1, 1992
Previous Article:Shedding light on security problems.
Next Article:Card fraud: discover the possibilities.

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