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Counteracting Counterfeiting

NEW YORK — Montblanc is fighting mad. Eight pallets of product were stolen about a year ago, and recently some of the luxury brand’s writing instruments ended up at Costco.<br><br>“They bought it from somebody, but if you are a...

NEW YORK — Montblanc is fighting mad. Eight pallets of product were stolen about a year ago, and recently some of the luxury brand’s writing instruments ended up at Costco.

“They bought it from somebody, but if you are a consumer, and buying products from unauthorized sources, you just don’t know what you are getting,” asserted Karsten Martens, president and chief executive officer of Montblanc North America, a division of Compagnie Financière Richemont AG.

Now Montblanc, Cartier and other divisions of the Richemont luxury group are intensifying efforts to combat gray marketing, as well as counterfeiting, which is estimated at being a $500 billion business.

Before the raiding parties hit the counterfeiters and unauthorized dealers, a lot of legwork and investigation is required to get the goods on the bad guys, and that’s where the new technology comes in. A company called GenuOne, based in Boston, has two divisions, GenuGuard and GenuNet. With GenuGuard, “We make legitimate products recognizable in a covert way,” said Tom Taylor, director of GenuGuard.

It’s kind of like fingerprinting the real products while they are still in factory production. For example, GenuGuard puts special inks or dyes, which can be visible or invisible, in the fibers of a label, or on the product itself, or on the packaging. Then there is a handheld reader that shines an ultraviolet or infrared light on the item or package and measures a reaction. The GenuGuard marking system costs “pennies per unit,” the company said.

Other methods of detection for different kinds of products also are provided by GenuGuard. With Cartier, said Taylor, the back of a watch might be infused with a kind of “nano bar code,” or small metallic markers with identifying information.

The fight against diversion often involves keeping track of merchandise, and that’s done by serializing each unit and tracking that unit to find it, Taylor said.

“You have a covert serial number embedded in the product, or it could be right in front, like in the tongue of a sneaker. Once the shoe is found, say, in a flea market, where it is not supposed to be sold, then you buy the product and use the serial number to track where its previous distribution point was. That way you can find the culprit. Serialization gives you the ability to track where you sent it, the channel of distribution and the type of store or geography,” Taylor said.

Taylor recounted a case of a sporting goods company that sold only to pro shops, but found its merchandise in a mass merchant as an end-aisle display. The sporting goods company bought the product, looked at it with a reader, found the serial number and determined which pro shop was recirculating the goods. The pro shop had excess merchandise and was dumping the goods at the end of the season, its executives figuring the margin obtained by selling to the mass merchant was more than they would have gotten by slashing prices to clear out the goods themselves. Serial numbers, recorded at each stop in the pipeline, can help deter such diversion.

The Internet can be a big channel for any fencing operation. But, according to Jeffrey Unger, president and ceo of GenuOne, there are new features in his firm’s GenuNet service that save customers time and money by automating many of the processes associated with identifying, tracking and responding to brand infringement, counterfeiting or product diversion on the Internet. GenuNet software is designed to find every instance where your products are being sold on the Internet, he said.

“It will help you learn about the site where it is being sold, who owns the site and the selling price,” which could be undermining the brand’s true selling price, Taylor said. “For this, all you need is Internet access and a browser, and you go to GenuNet’s Web site,” said Unger.

According to Suneer Maheshwary, product manager for GenuNet, his company’s “crawler technology” mines the Web for specific information. The service starts at $400 and can go up to $1500 per month, depending on the complexity of the service package or number of modules ordered. Modules monitor different types of infringement violations.

GenuOne recently signed an agreement with eBay, whereby the GenuNet Marketplace Tracking module queries eBay, providing customers with advanced search and filtering capabilities, e-mail alerts and the ability to send item listing discontinuation notices and warning letters directly to sellers who infringe on a company’s property rights.

Aside from Richemont, GenuOne said New Balance, Titleist, Bacardi and Kodak, as well as consumer electronics, computer hardware, textiles, apparel and pharmaceutical companies, purchase its services.

“GenuNet creates monthly reports [that reveal who is selling a company’s products on the Internet],” Martens said. “There are no authorized sales of Montblanc or Richemont products at all on the Internet,” Martens said. “Yes, you find unauthorized products and fakes on the Internet. The fakes are so good that you can’t tell the difference when you see it on the Internet, or even with a photo. So we are buying product to determine if it’s real or not. In any case, it’s not supposed to be there. If the product is real, then we use serial numbers to find out how it got there and identify the source.”

But, he added, “technology is not enough. You need private investigators to track down [the illegal diverters and counterfeiters].”

Montblanc also has worked with Netsearcher, another technology that searches the Internet, as well as Berkeley Intellectual Property Services, which is part of Richemont. Martens said that in its campaign against counterfeiting and diversion, Richemont has shut down 175 fake sites. However, when one is shut down, sometimes the same people open up a new site. “We are going after them with private investigators. The most difficult thing is to find out where the site is coming from,” he said.

“The Internet is the fastest-growing sales and distribution channel, so it is critical for companies to proactively protect this new channel from illegal and unauthorized activities,” said Jeff Kessler, senior analyst at Lehman Bros., in a statement.