"When you buy counterfeit goods, you support child labor, you support drug trafficking, and you cost your city $1 billion in lost tax revenue," blared the iconic Kodak Jumbotron in New York's Times Square this summer. It was a sign thatwas bringing a proactive, in-your-face attitude to its entry into the anticounterfeiting market, a field where business is usually conducted in whispers.
Kodak's Traceless technology addresses a problem that globalization is only going to make worse. "We're not going back to the days of one-room factories that companies can keep complete control over," says Ben Jones, a director of the Global Secure Summit, an annual brand-protection event. Counterfeiting costs global business approximately $700 billion annually (footwear and pharmaceuticals, sure, but also toothpaste, condoms, and even corn feed). There are also liability issues — 2% of the 26 million airline parts installed each year are fake, according to the FAA — as well as the less-measurable costs of additional customer service and brand erosion.
Traceless is a clever attempt to remedy those woes, relying on Kodak's roots as a photography company. "The underlying technologies of the film business are materials science and imaging," says Jeffrey W. Hayzlett, CMO of Kodak's graphic communications group. "We're creating new opportunities based on our knowledge." Two-thirds of Kodak's $10 billion annual revenue is now from digital products, half of which didn't exist four years ago, and Traceless is emblematic of the company's new approach.
Kodak is an accidental innovator in the world of fighting fakes. Originally, the company was trying to figure out how to secure documents such as passports and visas that use Kodak ink products. Then they realized, "Everything has some printing on it," says Steven J. Powell, GM and director of Kodak's security solutions, so the technique could be used on virtually any product in any industry. Kodak also has personal experience: Its digital-camera batteries have been knocked off. (Up to 60% of batteries sold worldwide are counterfeits.)
The Traceless technology uses an odorless, colorless, virtually invisible powder infused into the ink. "You can't find it with an electron microscope," Hayzlett boasts. The marker can be put into almost any part of a product's packaging: paper, plastic, threads, even the adhesive behind a label. Kodak's proprietary reader is the only device that can read the marker, and the company keeps tight control over its readers and materials, delivering only the amount of marker needed for any production run. That has caused some grumbling in the security industry because it forces manufacturers to use Kodak's scanners, which can be employed at any point in the supply chain to ensure a product's authenticity.
Kodak has more than 200 competitors peddling security inks, holograms, and RFID sensors, so to distinguish itself, the company offers custom tailoring, studying a client's production process to determine what makes the most sense. "We work with companies on everything from setting up a brand protection office to doing an audit of the vendors that do their printing," Powell says.
For clients, the extensive hand-holding seems to overcome any concerns about Kodak's proprietary readers.Cosmetics worked with Kodak for more than 18 months to reduce product diversion (bottles of perfume meant for department stores were mysteriously ending up at unauthorized retailers). "As a brand, you are always trying to stay one step ahead," says Larry Tronco, VP of operations for Liz Claiborne Cosmetics.
Unlike RFID tags, which can require a cumbersome and expensive extra step in the production process, Kodak's Traceless has no up-front fee and charges based on volume. "If you're manufacturing billions of products, the cost is fractions of a penny per," Powell says. "If it's a limited item, like a Napa wine, Traceless adds 5 to 10 cents."
Kodak's willingness to talk openly about the larger issue and its solution has also differentiated it from its competitors. "Companies fear that if they talk about the problem, they'll inadvertently tip off counterfeiters," says Mark Roberti, editor of RFID Journal, which covers an industry that does not want to be covered. Kodak believes talk is exactly what's needed. "Counterfeiters look for low-hanging fruit," Powell says. "They may not bother with a product whose technology they'd have to crack." That message is a spotlight on a shadowy world.
A version of this article appeared in the October 2008 issue of Fast Company magazine.