Software is the latest weapon in the battle against counterfeiters

Nearly every company with a successful product is a potential victim of unscrupulous merchants looking to sell counterfeit versions of name-brand items. Now software vendors are giving brand owners some tools to fight back.

New Balance, the Boston-based shoe and apparel manufacturer, is especially vigilant. A statement posted on its Web site documents the company's efforts in fighting counterfeiting, which include raids conducted at more than 75 plants in which suspected unauthorized versions of its products were being made.

New Balance also adopted a brand-protection solution from a company called GenuOne. New Balance turned to GenuOne after falling victim to a fraud scheme known as “The third shift.” Here's how it works:

A company outsources production to a partner, giving them all the intellectual property, material specifications, and supply sources to fulfill an order—say for 20,000 pairs of shoes. Working two shifts a day, the factory makes and delivers the 20,000 items ordered. It also deploys a third overnight shift to make another 10,000, using the same specifications and materials.

Once these unauthorized products hit the market, they are indistinguishable from those made legitimately—except for the selling price.

New Balance's final line of defense for “the third shift” scam is a Web-based application called SourceGuard, from GenuOne. Outside suppliers making New Balance shoes must embed in each shoe a coded security tag that is read electronically. Whenever New Balance places an order with a supplier, that order is fed to the SourceGuard portal. Suppliers also are required to place orders for the security tags via the portal. “If a factory orders more tags than that required to meet its orders, an alert is triggered,” says Jeffrey Unger, CEO of GenuOne.

While litigation against at least one perpetrator continues, New Balance Chairman and CEO Jim Davis nevertheless declares himself “very encouraged” that the tagging solution will prevent the third shift from starting up elsewhere any time soon.

New Momentum also offers a brand-protection solution, but it primarily targets electronics manufacturers. “While global outsourcing has numerous benefits, it escalates problems with counterfeiting and unauthorized sales of intellectual property and finished products for manufacturers worldwide,” says New Momentum CEO Stuart Clifton.

New Momentum blended a database of market data with sophisticated search technology to help electronic manufacturers improve business processes ranging from inventory management to product pricing—in addition to brand management, Clifton says.

A New Momentum customer looking to protect its brand would enter information such as the part of a particular product, and the search engine would uncover a history of transactions related to that product anywhere in the world.