Counterfeiting in Retail could be solved using Blockchain

Efforts to combat worldwide counterfeiting have stalled due to industry inertia driven by a lack of relevant technologies.

Illegal retail counterfeiting is a thriving sector for individuals who ply their trade on the black market. Given the nature of the subject, solid data on black market operations rely on broad estimations, however, some estimates imply that 10% of all branded retail goods may be counterfeit, and that huge firms surrender $600 billion each year to inexpensively copied knock-offs of their products.

According to the UK Intellectual Property Office, SEA countries produce up to 40% of all global counterfeits, while other studies put the amount closer to 75%. Despite more than doubling its seizure rate from about 25,000 to 50,000 between 2018 and 2019, the majority of counterfeit exports continue to pass through Chinese ports.

In response to the increasing frequency of bogus exports, the ASEAN accord has taken action. The term “counterfeit” does not appear in ASEAN’s 2004-2010 Intellectual Property Rights action plan, however, it does appear once in the 2011-2015 action plan. However, modifications to the most recent action plan for 2021 include eight distinct tactics for combating the rise of counterfeiting in the region.

So yet, no efficient mechanism for manually checking the legality of branded items has emerged, and getting trustworthy statistics on the scope of the problem is based mostly on seizure rates, which only represent a fraction of the true scale of the black market.

Blockchain: Illuminating the Black Market

Many nations, from the United Kingdom to Vietnam, have already begun to investigate how blockchain-based digital identity can aid in the establishment of national digital ID cards. The capacity of blockchain to track and confirm events transparently and without the danger of manipulation makes it an appealing solution for industries at every stage of the supply chain. Indeed, blockchain technology is expected to save the global supply chain up to $450 billion in logistics expenditures per year.

The same cost-cutting strategies can be used to target the counterfeiting business, where a lack of accountability and verifiability has thwarted any such restorative actions in the past. Furthermore, as observed by Phill Arnold, director at IP rights investigation firm CISAA, in WorldTrademarkReview, a lack of participation by businesses has only compounded the problem.

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“The World Intellectual Property Organization (WIPO) requires brand owners to find their own evidence,” he says. “So it is not up to the government to go out there and find counterfeiting unless it poses a public safety risk; it is up to brand owners.” But brand owners sit in their recliners with their cigars, expecting the counterfeiting problem to go away if the government takes a stand,” Arnold added.

Despite a lack of action by major corporations, intrepid blockchain explorers have begun to overcome communication gaps between businesses, regulators, and the end customer by using transparent, verifiable tools to the counterfeiting problem.

Blockchain technology functions as a decentralized ledger that is controlled by no one and is secured by hundreds of computers continuously executing and maintaining its database. These decentralized characteristics make it a reliable resource for autonomously confirming a transaction or event without the need for third-party middlemen.

Developing “Digital Twins”

Some blockchain initiatives have begun to develop technologies that link the registration of physical goods to a digital identity marker on a public blockchain, which can subsequently be inspected by the end user to confirm the authenticity of their products. Companies verify their identity on the blockchain network before scanning their items’ Global Trade Item Number Barcode and publishing it on the blockchain. Once there, the user can authenticate their identity and that they have got genuine goods. If the owner wishes to sell the object, any prospective purchasers can also confirm its authenticity.

Data derived from an authentication process that tracks items from conception to disposal (blockchain could be used to track a product’s recycling status) could be critical in painting a clearer picture of a brand’s product’s lifetime, and data analysis could help narrow the source of counterfeit creations.

Ownify, is an iOS and Android software that marks barcodes as NFTs on the blockchain to create a “digital twin” of the object that can be transferred and verifiably authenticated over the course of its ownership.

Khaled Samin, CEO of Ownify, observed manufacturers’ failure to address the counterfeiting problem but also emphasized the lack of feasible technology that could be applied to it until now.

“Unfortunately, the counterfeiting sector has been allowed to develop due in part to inaction by major industry actors, but essentially because there has been no suitable technology to truly address the problem,” Khaled Samin stated. Bringing blockchain networks to bear on the global retail industry has the potential to solve a global problem and revolutionize the way businesses perceive product authenticity. Consumers will be able to definitively verify the authenticity of their items without the requirement for expert input,” said Khaled Samin.

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While many examples have turned out to be opportunistic sales pitches, blockchain technology still offers answers to many real-world situations where people from different parts of the world who have never met each other can interact and transact in a trusted manner without centralized, costly, manual oversight.

Blockchain has the ability to fundamentally alter the way we authenticate our products, providing a completely new and irrevocable level of confidence between brands, consumers, and resellers that lasts long after the first purchase is completed and continues throughout the lifecycle of a product. That is unmistakable utility.

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