Combating Brand Pirates

Packaging companies work to devise new ways to thwart product counterfeiting and diversion.

By Joanna Cosgrove
Online Editor

The Kyoto range from Dieter Bakic underscores how patented packaging designs can prevent counterfeiting.

Forgery, tampering, unauthorized distribution and back-door trading are just a few of many types of brand piracy and product counterfeiting, a dubious—and lucrative—undercurrent of the cosmetics, fragrance and personal care industry. According to The International Market for Brand Protection Solutions*, a study from West Chester, PA-based Packaging Strategies, the landscape for the product-related crime continues to grow significantly year on year, fueled by trade with China and enabled increasingly by the Internet, as well as a variety of other driving forces. The drain on businesses and on the global economy is significant. Financial losses due to counterfeiting, piracy, tampering and theft amounted to an estimated $610 billion in 2006.

The report also confirmed that although the business of brand protection has been evolving dramatically over the last few years, the market for brand protection solutions amounted to only $3.7 billion. In other words, the total market for brand protection solutions is equivalent to only around 0.6% of the worldwide cost of product-related crime.

Despite the low level of market penetration, parts of the brand protection business appear poised for significant growth over the next few years. The market for brand protection against counterfeiting and piracy is forecasted to have an annual growth rate of 20% from now until 2011, with a value of $3.8 billion. Likewise, the market for tamper-evidence solutions is expected to climb to $2.1 billion by 2011, with an annual growth rate of 7%. Anti-theft EAS tags (for consumables only, excluding reader systems) are also predicted to grow in worth to $719 million by 2011, bearing an annual growth rate of 3%. 

In Europe, the problem is especially prolific, with the European Commission estimating that 7-10% of all products are counterfeit. Although the packaging industry has steadily advised decision makers and buyers to avoid questionable products, the message hasn’t sunk in.  “Consumers and businesses still make shortsighted purchasing decisions to maximize immediate profit, and forged brands and goods find their way into the market,” says Dieter Bakic, designer and president of DieterBakicEnterprises, Munich, Germany. “So far, the wider audience only gets anxious about security-relevant products like pharmaceuticals or car parts.”

Insofar as the awareness of product piracy in the packaging industry, Bakic says that in today’s globalized buying market, design and technology of packaging are counterfeited on a “massive” scale. “The sourcing of a product can be very complex and include many different players,” he says. “This is why many brands might not even know that they have bought a counterfeit, and thus illegal, packaging, and that they are fully accountable for bringing the product on the market. So every buyer should know his responsibilities and take preventive action.”

Another patented packaging design from Dieter Bakic, the Josephine range.

Bakic adds that in Germany, product piracy and design forgery are not pursued; however customs records documented that of the 9,164 registered seizures in 2006, only 1% concerned violation of design rights, while 90% concerned the violation of brand rights.

To that end, Bakic devised a set of strategies to protect against package piracy and counterfeiting that hinges on guaranteeing exclusivity to one’s clients. “DieterBakicEnterprises often grants a license to use a design for a certain market or segment,” he says. “If now the same design is used by a competitor of this client, the whole business model is jeopardized. So DieterBakicEnterprises has put the fight against counterfeiting high up on its agenda. Every client should be able to trust his packaging supplier to do everything in their power to guarantee exclusiveness.”

A key strategy to curb knock-off packaging is to assure the originality of a design. “The first and foremost action of design protection is the registration of every new design with the patent office responsible,” says Bakic, noting that this type of awareness has spread to the trade show floor, with more trade shows employing scouts tasked with searching for counterfeited products. “Starting in 2007, the Cosmoprof in Bologna now supports its exhibitors with a counterfeiting service point, where they collect information and take action if necessary,” he says. 

Another tip is to monitor the market, a task that could be especially laborious for smaller brands and retailers. “Without comprehensive knowledge, one always runs the risk to unconsciously buy illegal packaging,” asserts Bakic. “A trustworthy and capable packaging supplier can offer this service. They know what’s on the market and where it comes from.”

Legal action is also a viable course of action. “Legal action is also important for building up a reputation as strict pursuers of patent infringements,” he says, and adds that his company has won several cases so far, resulting in the destruction of counterfeit tools and products.

The overriding message of Bakic’s plan is to seek packaging that imbues added value. “Packaging solutions are more than the mere sum of technical characteristics. A team of designers, technicians and consultants supports the industry to create brand values,” he says. “Through customizing, the experts harmonize brand and packaging to create a bespoke look. This is a service that cannot be forged and that will only be available from high-quality suppliers. Consumers demand stimulating cosmetic products that stress allover quality. This need for individuality and differentiation opens long-term perspectives to truly creative packaging companies— even in times of massive design theft.”

Paperboard Security Trends

As companies continue to place a larger emphasis on authenticity features and security packaging solutions, paperboard packaging has emerged as an ideal substrate for anti-counterfeiting. A carton is not merely a carton anymore. As a fiber-based material, most paperboard can be traced back to its original source to ensure authenticity, especially if it was derived from a sustainably managed forest through programs such as the Sustainable Forestry Initiative (SFI). 

A coded holographic label is one measure of product diversion protection.

Richmond, VA-based MeadWestvaco Corporation (MWV) offers a variety of security substrates for a number of high-volume markets that can assure retailers and consumers that products are authentic. “MWV’s goal is to protect its customers’ brands throughout the supply chain—from the sourcing of its materials all the way to delivery in the global marketplace,” says John Perkins, vice president, Americas-MWV Personal & Beauty Care. “MWV can enhance the materials used in its paperboard packaging to make it difficult for counterfeiters to duplicate, due to advanced or proprietary technology.”

These enhancements can include pre-press applications such as adding special fibers that are unique to the product; specialized labels like pattern adhesive labels, holographic tamper-evident labels; customized die cutting and using cosmetic-quality UV offset printing.

Perkins notes that enhanced graphics are another way to ward off counterfeiting. Options include color-shifting inks, micro-text, scrambled indicia, anti-scan/copy graphics, specialized coatings, and debossing/embossing (solid bleached sulfate or SBS board accepts deep embossing as compared to paper wraps on typical set-up boxes).
 
Another security packaging feature offered by MWV is anti-divergent packaging technology. “Anti-divergent applies mostly to premium products and product lines that specify high-end, luxurious outlets where their product can be sold,” explains Perkins. “This covert packaging solution uses barcodes and serial numbers (also know as serialization) for brand owners to track their product shipments to ensure they arrive at their predetermined destination. This technology helps avoid products from diverging off their planned shipping and delivery paths. The high-end fragrance market, where licensing agreements specify exclusive logistics and sales partnerships, is known to invest more in this technology because its well-known products have a higher potential for counterfeiting.” 

For one of its secondary packaging customers, MWV supplied a triple layer of security technology consisting of a barcode applied at the gluing line at item level for track and trace purposes (which is read by any generic barcode reader and confirmed through a database of serialized numbers for track and trace), specialty ink coating applied inside packaging (when UV light is flashed, the ink coating can display an authentication code), and a lot-specific Seal Vector, which is applied on a printing plate and used for anti-counterfeiting specifically at port entries for Customs check (Customs officers have a Seal Vector reader to authenticate the products).

Looking forward, expect manufacturers to increasingly invest in technology in an attempt to get an edge on crafty counterfeiters. The Packaging Strategies study detailed an emerging brand protection trend that can empower end-user customers to verify the authenticity of products that they have purchased. “Given that counterfeits today often simulate genuine products very closely, it should not be assumed that law enforcement officers (such as police officers, Customs officers) however dedicated and informed they may be, will be able to differentiate a counterfeit sport shoe or a watch, or an OTC pharmaceutical product from the genuine article,” the report said, citing a new system offered by Domino Printing Systems which involves mass serialization using 2D matrix codes. “The system operates by means of scanning a matrix code marked on packaging of say, a pharmaceutical product. Special software that has been pre-loaded on to the end-user’s mobile phone handset enables the matrix code number to be read via the phone’s built-in camera. The code number can then be sent by SMS text message to the brand owner’s central database for verification of authenticity (or otherwise). Finally, a reply SMS is sent back to the mobile phone. The code can be encrypted to achieve some level of forensic security, although it still remains to be seen how well such a system will hold up over time in the face of resourceful criminals.”


*For a full prospectus or to order a copy of The International Market for Brand Protection Solutions call Packaging Strategies at 610-436-4220 (ext. 8511) or email: [email protected] or online: www.packstrat.com, then click on Studies.