Blockchain: on the anti-counterfeiting frontline

“Consumers are increasingly confused about whether a product is authentic or not,” says Luis Berenguer, spokesperson and head of the communication service at the European Union Intellectual Property Office (EUIPO).

The EUIPO’s “IP Perception Study” showed that last year, 10% of EU consumers (roughly 43 million people) were tricked into buying a fake product. Over one third (35%) of consumers also expressed uncertainty about whether they had purchased an authentic or counterfeit product online.

In response to the prevalence of counterfeits, the EUIPO created a competition that elevates the potential of blockchain technology used in supply chains to prevent counterfeiting.

“The overarching idea was to develop an infrastructure where anybody interested (producers, consumers, transport services, etc) would be able to check the authenticity of any product openly and easily, as well as having the possibility to alert rights holders to fakes,” explains Berenguer.

Blockchain technology was initially designed as a way of handling the Bitcoin cryptocurrency. It offers a decentralised way of sharing information through ‘blocks’ which are linked using cryptography (code encryption).

The contest

Eleven teams took part in the ‘Blockathon’ competition in June. The competitors were tasked with creating a series of anti-counterfeiting blockchain solutions for three key groups: consumers; customs enforcement authorities; and logistic operators.

Berenguer says that consumers worry about whether a product is genuine; customs want better ways to assess and track shipments; and logistics operators want to ensure their part of the distribution chain is free of counterfeit products.

“The idea was to provide a solution that linked all their particular concerns together,” he says.

The EUIPO will be looking into how the blockchain solutions identified in the competition can be developed further.

In the meantime, WIPR decided to catch up with Cryptomice and Fides, the teams that finished in first and second place, respectively, in the Blockathon.

The Cryptomice crew

When asked about his motivation for working with blockchain, Thomas Rossi, team leader of Cryptomice in Milan, Italy, says it’s really quite simple: “We want this technology to have an impact in the real world.”

He explains that currently, different businesses need to interact with each other to create a secure supply chain for the brand owners. But this is based on businesses having to trust the parties who operate within the production and distribution chains.

In the future, Rossi says that “this trust will no longer be needed” as companies integrate blockchain into the supply chains.

Rossi explains that, so far, blockchain is being used in the financial services sector but not so much elsewhere. The Cryptomice crew are keen to use blockchain to enable brand owners to trust their production and distribution chains without having to first have a good faith relationship with each entity within the chain.

At the Blockathon, Rossi’s team comprised computer science engineers Valerio Vaccaro and Luca Vaccaro, and user experience designer Fabian Niedekofler.

Rossi and Niedekofler used to work for consulting firms affiliated with luxury fashion brands in Milan, and both the Vaccaros dealt with the supply chains of other companies.

“Working for luxury brands, the problem of protecting luxury goods from counterfeits is one we knew lots about,” Rossi explains.

According to him, the financial damage that fake goods cause businesses through lost sales is essentially “a really high tax that we’re paying”.

However, blockchain offers brands and IP owners the opportunity to prove authenticity in a mathematical way. “It’s like putting a mathematical lock on who owns what,” Rossi explains.

By changing the physical properties of goods (for example, by adding a chip), brands are merely raising the bar of how difficult it is for an item to be counterfeited; by using blockchain technology, IP owners can prove that the information associated with a product is unique and has not been modified.

“It doesn’t just raise the bar—it changes the playground,” Rossi says.

He adds that someone who could break into or clone an object in blockchain would have a very refined level of cryptography. “It’s military-level encryption—if you can do that, you have far better things to be doing than cloning a fashion item.”

Since the Blockathon, Rossi says, the EUIPO has put Cryptomice in touch with a “great network of mentors in the sector”, as well as helping the team to refine their blockchain solution. “We went to the Blockathon with an idea, and the mentors helped us to refine it,” he says.

He adds that the EUIPO is also assisting the team with regulatory challenges and technical challenges, including privacy issues.

The EUIPO will next meet with the crew at the end of September by which point, Rossi says, the team will have officially set up their blockchain enterprise as a company—but it won’t be called Cryptomice.

“That’s our name for hackathons,” Rossi explains.

Although the name of the company has yet to be determined, the team are already in conversations with luxury brands in Milan about working with them to prevent counterfeiting.

The Fides team

Championing consumer empowerment is the core motivation of Nathan Anderson, CEO and co-founder of ScanTrust and leader of the Fides team at the Blockathon.

Anderson spent many years living in China where, he said, he was forced to “scrutinise and think twice” about his purchases on a daily basis to avoid fake, low-quality, or misrepresented goods.

When he met Justin Picard, who would become his co-founder and CTO of ScanTrust, Anderson says it was like “meeting a rock star”.

Picard had long been working in the anti-counterfeiting and security industry, and he was also a member of the Organisation for Economic Cooperation and Development’s Task Force on Countering Illicit Trade.

“When he came to me a few years later to tell me that he had left his former company and had an innovative new idea, it took me all of one second to say I was on board,” Anderson recalls.

Since then, anti-counterfeiting champion ScanTrust has been a “global” startup. It has a team dedicated to enhancing the firm’s core technology based in Lausanne, Switzerland; with an office in Shanghai, it also has a strong presence in China.

Big brands and government agencies use ScanTrust’s services to prevent counterfeiting; current clients include chemical company Dow and the National Seed Institute (INASE) in Argentina.

ScanTrust uses “copy-proof” secure QR codes and a mobile app to provide a simple method to protect against counterfeits, increase visibility in the supply chain, and drive direct consumer engagement.