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Calm Down: Counterfeiters Can Be Stopped

Imagine taking the Sunday edition of the New York Times, cutting out every single word, one by one, and stacking them in a completely random order to form a pile about three and a half feet high. Now add to these other words in a language only you know and then create one single sentence from the entire stack by selecting words that only make sense to you.

That is the natural and artificial encryption methodology behind re-sequencing botanical DNA with your own special recipe using additional ingredients. Unless you know the language and the sentence structure and where those additional words in the DNA sequence appear, you cannot hope to clone this hybrid DNA marker.

This is the scientific technique with which Applied DNA Sciences is marking all kinds of valuable goods to protect them against counterfeiters. The process creates a completely traceable path for things like cash-in-transit, materials used in designer clothing, electronic parts, and any other goods that OEMs deem valuable enough to secure against counterfeiting while authenticating the integrity of the original product and source.

I asked the team at Applied DNA Sciences a number of questions in an extended interview. First on my priority list was to find out how foolproof and robust the botanical DNA marker was. Just like many EBN readers, I watch CSI and know that after a period of time, DNA degrades on its own. However, among the patents filed by Applied DNA Sciences is an encapsulation and stacking technique that effectively renders the DNA extremely robust against ultra violet rays and other environmental degradation agents. The stacking structure assures that the DNA can't be tampered with while avoiding detection. There are an infinite number of sequences that can be generated, so the markers are unique per application.

My next question concerned the cost of applying the marker to the materials and the cost of authentication. The cost for applying the DNA impregnated ink, adhesive, or spray is less than a penny per application. A hand-held scanner can quickly detect the presence of the DNA, but if an OEM wishes to authenticate the sequence, the part has to go back to Applied DNA Sciences' Labs for a full lab workup. “Aha,” I said. Here is where things get costly.

In my own research, I discovered the cost for sequencing to be about $1,000. However, because Applied DNA has its own labs and labor force and are interested in high volume deployment, they are able to control costs to make it very affordable. They also indicated that within three to four years, the detection and authentication software and equipment will be managed by a laptop such that it will be very practical for a shipping/receiving department to have the authentication on site as part of their incoming inspection process.

This was all sounding very good to me, so I asked about IP and how they are protecting their patents and processes. Currently, all the authentication work is being performed by Applied DNA Sciences because only they know what to look for to authenticate. I asked if a company using this technology had to send the sample marked part back to them for verification. They said that for now, this was the case.

It occurred to me that there was a hidden business potential, so I asked, “Are you going to set up labs around the world?” Bingo! That is just what they are planning to do to increase their market reach and make it more viable for companies around the world to use their services. But the laptop-size equipment is on the way and it will be linked to the cloud for rapid marker authentication. So, the IP remains the IP of Applied DNA Sciences. The servers that will link to the cloud will be under Applied DNA's control.

I am beginning to think that this is the anti-counterfeiting strategy of the future. If the cost and access of authentication continues to drop, and the botanical DNA can truly not be cloned, along with the fact that there are little to no restrictions on the kind of surfaces associated with various application media — including metal — to which the marker can be affixed, and we have virtual environmental ruggedness, then who is to say that this won't be the straw that breaks the counterfeiter's back.

I indicated in an earlier article that I would give the bad guys something to worry about in a subsequent article. I think I have kept that promise: Applied DNA Sciences is already proven by the military, selected manufacturers like Altera and Micron, and tier-one distributors, which have tested and endorsed botanical DNA marking as an effective countermeasure. So far, the testing has been 100 percent reliable, and now it is only a matter of time before we see widespread deployment of this technology. I like it when the good guys win.

49 comments on “Calm Down: Counterfeiters Can Be Stopped

  1. oseymour
    June 26, 2012

    No anti-counterfeit method is 100% secure. All it needs is exposure to the market and for the bad guys to get enough time at it. The minute we start thinking that we “won” is the time we lost.

  2. owen
    June 26, 2012

    Maybe not, but I have yet to see an alternative that shows more promise at an affordable cost. I look forward to its' deployment across multiple verticles and will hold final judgement until then. Sounds like they're onto something big.

  3. bolaji ojo
    June 26, 2012

    The premise of your position (that no anti-counterfeit measure is foolproof) led to Applied DNA Sciences' product and will in future lead to others as counterfeiters catch up and anti-counterfeiters make moves to curb them. For some products, the continued vigilance will lead counterfeiters to give up. In other areas, expect them.

  4. Barbara Jorgensen
    June 26, 2012

    This really does sound like it addresses most of the concerns in the electronics supply chain. I am wondering if standarization will be necessary for widespread adoption, though. That might be more of a hurdle than cost…

  5. FLYINGSCOT
    June 27, 2012

    Do you have any more technical info about how the system works and to which products it can be applied?  For instance how does it apply to silicon chips that can be less 1mm x 1mm in size?

  6. owen
    June 27, 2012

    @FLYINSCOT, I can't speak to your particular technical issues, but from my personal research I have learned a couple of things that might be of interest to you.

    .One molecule of DNA is enough to authenticate a product.

    .They are currently in collaboration with the College of Nanoscale Science and Engineering (CNSE) as well as Binghampton University's Small Scale Systems Intergration and Packaging (S3IP) center.

    My understanding is they are working on embeding their “enhanced DNA” into the silicon substrate of chips. Much more info is available at the University and/or Applied DNA Sciences websites. Hope this helps.    

  7. Eldredge
    June 27, 2012

    This seems like a very effective method to address authentification of electronics parts. Is it cost effective enough to be used across the entire spectrum of components, or do you think it will be targeted to more complictaed active devices?

  8. dalexander
    June 27, 2012

    Owen,

    Applied DNA Sciences also has introduced Digital DNA that I believe will replace the standard barcode methodologies for tracking goods in transit. UPS, FED-EX and all the logistics people will be able to transition to this technology with almost no significant adjustments to their infrastructure. I know RFID is also used for this same purpose, but RFID tags are cloneable and therefore not as secure as DNA tags. Because you are interested in this company and topic in general, I would really like to solicit your thoughts in greater depth. Can you research the Digital DNA concept and tell all of us what you think of this technology?

  9. owen
    June 27, 2012

    Douglas, To quote a recent article from GIGAOM “digitalDNA, creates unique plant-based DNA signatures that are encrypted onto QR codes readable by an iPhone app. When phones scan the code, data is analyzed by a cloud database to identify possible theft or counterfeiting. It's mobile meets cloud computing meets big data, with genomics as glue holding them all together together.”

    For anyone interested in more detail here are a couple of links I suggest you follow-up with.

    http://www.adnas.com/sites/default/files/digitaldna_launch_may_10-2012.pdf

    http://gigaom.com/cloud/preventing-counterfeits-with-an-iphone-a-qr-code-and-digital-dna/

    As you might have guested, I am very excited about the company's future. As a “stock keeper”, and in the interest of Full Disclosure: I am Long APDN.

     



  10. itguyphil
    June 27, 2012

    Hey, they say that the best form of flattery is imitation. They also say that emilation of successful things is the best way to succeed yourself. So in some way, the counterfeiters are just trying to follow in the originators' success (albeit the wrong way).

  11. dalexander
    June 27, 2012

    Pocharle,

    I guess it wouldn't make sense to counterfeit a product that wasn't in high demand. This is also a very dangerous practice because some of the counterfit chips find their way into medical devices that when failed may cause the loss of life. Would you buy a counterfeit pacemaker if you had a bad heart? How about counterfeit anti-lock brakes? Make no mistake, these counterfeiters are criminals and some of them have blood on their hands…but apparently not on their consciences. If a mosquito bites me, it really isn't a statement of how good my bood is, but rather a fact that the mosquito lives by taking blood. Counterfeiters are no different.

  12. dalexander
    June 27, 2012

    Owen,

    The phone ap is very cool. Do you think that Applied DNA Sciences will go the distance? I also bought long.

  13. owen
    June 27, 2012

    Douglas, et al.,

    “Under Section 818 (of the 2012 NDAA), the DoD has until June 28, 2012 to implement a risk-based policy to minimize the impact of counterfeit electronic parts. This policy will include ensuring the traceability of parts, inspecting and testing of parts, and taking corrective action to recover costs for replacing counterfeit electronic parts from contractors. At that time, the DoD plans to issue guidance on remedial actions – including suspension and debarment – against contractors who fail to detect or avoid counterfeit electronic parts or who fail “to exercise due diligence in the detection and avoidance” of counterfeit electronic parts”.

    Tomorrow's the day, has anyone seen the “risk-based policy” ?

    Quote from:

    http://www.militaryaerospace.com/news/2012/06/15/united-states-real-parts-dod-continues-to-develop-policy-on-counterfeit-electronic-parts.html


  14. owen
    June 27, 2012

    Douglas,

    They are under funded, as many penny stocks are, and their stock swings of 15-20% in a day are not for the faint-of-heart, but I do believe before the end of this year (after the DoD completes their second round of tests) it will be a winner. 

  15. dalexander
    June 27, 2012

    Owen,

    There are three major papers that you may find interesting reads. You also may already have read them.

    1. The new Federal anti-counterfeiting mandate for military electronics: What will it take to comply with sec. 818  The cost of counterfeiting vs. the cost of compliance. By Dr. James A Hayward, Janice Meraglia, Mitchell Miller (Applied DNA Sciences)

    2. Inquirery into Counterfeit Electronic Parts in the Depart of Defense Supply Chain (Report) Committee on Armed Services United States Senate, May 21-2012

    3. Counterfeit Components Avoidance Program, Certification For (CTI) Leon Hamiter (Review of CCAP-101)

    As to the deadline being upon us, let's see what makes the news tomorrow. I suspect we will see a lot of distributors/supplies moving towards certification rapidly.

  16. Houngbo_Hospice
    June 27, 2012

    @pocharle,

    As you know counterfitting has nothing to do with flattery and to counterfeit means to illegally imitate something.  In order word it is a crime – they are aware of that.

  17. Houngbo_Hospice
    June 27, 2012

    @Douglas,

      Make no mistake, these counterfeiters are criminals and some of them have blood on their hands..

    Agreed! Can we say that counterfeiters and people who (knowingly) buy counterfeit products are to be put into the same basket?

  18. dalexander
    June 27, 2012

    @Hospice,

    If there is no demmand, there is no need for a supply. People who knowingly buy counterfeit items perpetuate the problem, but many buy counterfeit parts without knowing it. Today I was helping a fellow CE looking for a tantalum capacitor that was rated at 125C at 15V in a C-Size case. The distributors were out, but guess what, I found a broker who had 927 pieces in stock at 10 bucks each. I gasped audibly and he said… wait for it…wait for it… “What do you want to pay?” I said thank you anyway and moved on. He did not have them in stock but he knoew where he could get some. I think there was a big chance that they were counterfeit. I read recently that passives, especially tantalum caps were being discovered as counterfeit. The paper: Examples of Counterfeit Electronic Components published by Components Technology Institute. There is a great illustration of a Tantalum counterfeit with the caption “Commercial Series repackaged as Low ESR/Multiple Anode Series. The illustrations represent AVX and Kemet both. I was looking for a MIL AVX which had only one other FFF part. You guessed it. Kemet. My client could only buy from his authorized AML and that saves his tucas. My guess, the brokers could easily be passing on counterfeits. There is nothing like real life examples to make a point.

  19. Taimoor Zubar
    June 27, 2012

    @Douglas and @Owen: The app does seem a cool feature but I'm wondering it can really prevent counterfeiting. Once the QR code has been generated, it's pretty easy to duplicate it and stick it to a fake product. I don't the detector can catch this then.

  20. Taimoor Zubar
    June 27, 2012

    @pocharlie: Counterfeiters can, at times, increase the availability of a certain product and can help in making the original product more popular. In that case the original manufacturer may benefit from counterfeiters.

  21. dalexander
    June 27, 2012

    @TaimoorZ,

    Recently, I spent a day at Design West, an event produced by UBM, parent of EBN. While there I talked with a connector manufacturer booth guy about counterfeiting issues. He said that indeed their connectors were being counterfeited and they found out because they began to receive a significant number of customer complaints involving failures. The connector OEM had their customers return the connectors (RF) and as soon as they examined them, they found the company markings were poor copies and the plating formulation was significantly different than their own. They had to move quickly to inform their customers of the bogus part infiltration into the supply chain. They saved their follow on business by being proactive and notifying their customers, but it could have gone the othe way too. They could have lost their good reputation and key customers as a result of counterfeit parts. The thing common to all counterfeiters is that they don't really care about long term reliability or quality. They want to make the sale, pocket the cash, and dissappear before they or their parts are detected. There is just no defence for counterfeiters. If they could manufacture the same product with the same quality and reliability, then it is going to cost them pretty close to the same cost as the licit OEMs cost. In that event, they can open under their own name and not steal the name of the original OEM. Why not? If they can produce the same quality product for a cheaper price, then they can undersell all competition and establish their own reputation and acceptance around the world.

  22. bolaji ojo
    June 28, 2012

    A counterfeit doesn't have to be poorly produced. It can be as close to the original as possible and still pose a problem to the supply chain. A counterfeit can be an exact copy and it would still hurt a member of the industry. When a firm has spent money on R&D to develop a product, it should be able to enjoy the fruits of that effort. By faking the product, the counterfeiter defrauds the original firm. This is a problem beyond what has been treated here already.

  23. dalexander
    June 28, 2012

    @Bolaji,

    Well stated. They are parasites at best and killers when it comes to life critical applications.

  24. prabhakar_deosthali
    June 28, 2012

    From the discussion so far, it looks like counterfeiting is of two types-

    CASE_I. Producing the exact copy of an authentic part without legal permission to do so and sell it at a much cheaper price .

    CASE-II. Make a substandard ( sometimes even partially working ) copy of an original part and sell it as the original part.

     

    While in the CASE-I , the buyer is benefited by the lower price and same performance but the original manufacturer is at loss . ( This is similar to pirated software or music )

    CASE-II – is more dangerous because the product performance suffers because of the substandard quality and some times it may cause further loss where the product using such parts is deployed.

     

    While the first Case is only of legal nature ( like patent infringement), the second is more of criminal nature and has to be stopped right at the inward inspection by such newly available technologies as DNA sampling.

     

  25. SunitaT
    June 28, 2012

    When a firm has spent money on R&D to develop a product, it should be able to enjoy the fruits of that effort.

    @Bolaji, I totally agree with you. What legal action can the firm take on the company which has done counterfiet.  Are there any new packaging methods available which can help the firm protect its design IP ?

  26. dalexander
    June 28, 2012

    @Rich,

    News Flash Flash: I just received a message from THE counterfeiter. It says, “If you ever want to see the real United States again, you have to meet our five conditions: 1. Your politicians must stop lying and vying for power and personal recognition 2. You must all give up the LOVE of money for it is at the root of all your evils. 3. You must care for your poor with more than just lip service. 4. You must treat others as better than yourself and return to the Golden rule. 5. You must be slower to anger, quicker to listen, and slower to speak. Only then will you have your United States returned to you. In the meantime we must do what we can so you do not utterly destroy your planet and its peoples. X-OR-1”

  27. itguyphil
    June 28, 2012

    I agree. I am more focusing on the initiatives. The fact that they cut corners and use low-quality products is criminal. Those caught doing so in life-and-death industries are the worst since a $ is being put over a life.

  28. itguyphil
    June 28, 2012

    Agreed. But the facts that it's illegal does not remove their motive. It is to make $$ by copying successful products (albeit poorly).

  29. itguyphil
    June 28, 2012

    It is possible but probably not the type of publicity that the originators want. They say bad publicity is better than none but if I was in their shoes, I would pass on that.

  30. Houngbo_Hospice
    June 28, 2012

    @Bolaji,

    Well said, counterfeiting is by no means excusable. Thanks for elaborating on that.

  31. DodgeJ
    June 29, 2012

    You say that a scanner can detect DNA.  I have read this before from ADNAS, but it seems very misleading.  Is the scanner detecting the DNA or something else?  I am not aware of any portable detection device that could isolate and idntify DNA.

  32. dalexander
    June 29, 2012

    @DodgeJ The hand held device only verifies the DNA is present. It does not authenticate the sequence. In my understanding, fluorophores are often used in staining and marking tissues such that light is emmitted when the molecules are excited. The hand held scanners will detect the fluorophores and consequently the presence of the DNA. That was a very good question on your part.

  33. Barbara Jorgensen
    June 29, 2012

    Hmmm, what if the fake US has the same form, fit and function as the old one? Would anyone know the difference?

  34. Taimoor Zubar
    June 29, 2012

    @Douglas: I agree that mostly counterfeit goods are poor in quality and companies can trace them and filter them out of the supply chain. Have there been cases where the counterfeit product has been found to be better than original in terms of design or production?

  35. Taimoor Zubar
    June 29, 2012

    “.. what if the fake US has the same form, fit and function as the old one? Would anyone know the difference?”

    @Barbara: It's very difficult to trace out if the product is counterfeited if it's has been replicated perfectly. However, this is why companies install RFID chips with products and the RFID tag helps in identifying the authenticity. It's not so easy to fake the RFID tag.

  36. dalexander
    June 29, 2012

    @TaimoorZ  Interesting question. However, I would think that if there was a counterfeiting operation that produced a superior product to the original, either their costs would be more, or they could compete on the open market as a serious licit competitor.

  37. Taimoor Zubar
    June 29, 2012

    @Douglas: If they go on the open market, they need to have a solid brand image to compete against the OEM. It takes years to build that up. As far as the costs are concerned, they can keep them down if they don't have overheads like publicity.

  38. dalexander
    June 29, 2012

    @Rich  That is one Cracker Jack of an idea.

  39. ahdand
    June 30, 2012

    I dont agree on this. Its not easy to track down.

  40. Anna Young
    June 30, 2012

    Interesting clip Rich!!!  At least before the whole planet is counterfeited, Douglas' article has just assured that there's a ground breaking anti-counterfeiting strategy of the future. I think it's great. Just hope the cost will not be a problem?

  41. owen
    July 2, 2012

    Posted on PC Pro 7/2/12 – “The majority of fake components sold into the electronics and technology industries are not manufactured in backstreet factories in Asia, but are reused parts that have been cleaned up”.

    Read more: http://www.pcpro.co.uk/news/375508/counterfeiters-slipping-used-parts-into-new-gadgets#ixzz1zSdnC986

     

  42. DodgeJ
    July 5, 2012

    I think you have been slightly misled by ADNAS.  What they are detecting, it seems, is the fluorophores themeselves, or other types of light responding material that they add with the DNA.  If the scanner was simply detecteting the presence of DNA, it would respond to anything that had DNA in it – blood, skin, etc.  They seem to be opearting in  a very gray area of truth in their marketing and advertising .  The key to their system (the field detection portion anyway), seems to be the addition of another marker or chemical, which they probably don't even manufacture themselves.

  43. DodgeJ
    July 5, 2012

    This type of technology is not ground breaking.  Companies have been using moelcular markers and otehr types of chemical additions to products for years.  The drawback has always been, and continues to be, the fact that you must send them back to a lab for testing.  It is a great layer of security, but due to shipping costs, test costs, and the need-to-know desire form industry, it will remain as a very good final authentciation feature.

  44. dalexander
    July 5, 2012

    @DodgeJ  I did write that the detection element was a fluorophore. Applied did not mislead in any way. I also mentioned that the forensic identification was still at the lab level. I also indicated that the cost for authentication in a few years was going to be significantly less than it is today and that tabletop equipment would access the cloud for the remote authentication. Please re-read my earlier response to you. Please do not vilify the company by saying they may have mislead me. If anything, it was a bad choice of wording on my part. I am sorry if I mislead you. They did not.

  45. bolaji ojo
    July 5, 2012

    @DodgeJ, In other words, this technology may not be for the mass market?

  46. DodgeJ
    July 16, 2012

    Actually, what you say in your article is “A hand-held scanner can quickly detect the presence of the DNA”. 

    That is my point of contention.  You do not mention fluorophores at all in the article, which is what most people will read.  I am also now aware that ADNAS is being sued for patent/IP violation by another DNA company. 

     Vis-a-vis fluorohpres, they can be easily sourced online and introduced to a variety of materials, so creating a situation where numerous false positives are generated is very simple for the counterfeiters.  I have seen this happen in my own supply chain when we have attempted to introduce basic security that depends on a simple yes/no detector. 

  47. DodgeJ
    July 16, 2012

    As is stands today, this is only approriate as a layer of technology, but should not be couned on by itself, especially with the basic yes/no handheld detector they are purportedly using.  This is an expensive and time consuming method of detecting counterfeits, and should be used as a final step, when validation by a court of law is required.  Otherwise a more robust taggant & reader system should be used.

  48. DodgeJ
    September 11, 2012

    Any thoughts on the pending lawsuits against ADNAS for patent infringement?  Pretty ironic.

  49. dalexander
    September 14, 2012

    @Dodge, Thanks. Here is the company's respone: disclosed in the Company's Current Report on Form 8-K filed on June 26, 2012, on June 6, 2012, a complaint for patent infringement was filed against the Company by Smartwater, Ltd. in the United States District Court for the District of Massachusetts in an action entitled Smartwater, Ltd. v. Applied DNA Sciences, Inc., No. 1:12-cv-11009-PBS. The complaint alleged that the Company infringed one or more claims under two of plaintiff's patents by selling or offering for sale, manufacturing and using certain of the Company's products, by inducing others to infringe and by contributing to infringement by others. The plaintiff sought injunctive relief with respect to the patents as well as awards of damages and attorneys' fees. The Company had not been served with the complaint and on August 24, 2012 the plaintiff voluntarily dismissed the complaint and refiled a similar complaint in the United States District Court for the Southern District of Florida, No. 12-CV-61660-Zioch/Otazo-Reyes. On August 30, 2012, plaintiff served the Company with the complaint. The refiled complaint seeks injunctive relief with respect to one of the patents as well as awards of damages and attorneys' fees. The Company believes that none of its products infringed any claims under either of plaintiff's patents and moreover notes that one of plaintiff's patents has expired. The Company denies the allegations in the complaint, believes they are without merit and intends to defend the action vigorously.

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