Elgar Fleisch

15
Auto-ID Technologies and their Impact on Counterfeiting Elgar Fleisch Institute of Technology Management (ITEM-HSG), St.Gallen University Department Management, Technology, and Economics (D-MTEC), ETH Zurich MIT Convocation January 23-24 2006

Transcript of Elgar Fleisch

Page 1: Elgar Fleisch

Auto-ID Technologies and their Impact on Counterfeiting

Elgar FleischInstitute of Technology Management (ITEM-HSG), St.Gallen UniversityDepartment Management, Technology, and Economics (D-MTEC), ETH Zurich

MIT ConvocationJanuary 23-24 2006

Page 2: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 2

Ag e n d a

• The Need for Secure Authentication Technologies • Research Questions and Anticipated Challenges• Preliminary Results

Page 3: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 3

Counterfeiting is a severe threat to the economy

Impact on users:– Physical injuries – Financial losses

– Less secure environment

– Possible short-term financial benefit!

Impact on the economy:

– Impact on foreign investments– Impact on employment– Loss of tax

– Important source of income for some countries

Impact on companies:– Loss of revenue– Unjustified liability claims– Quality perception

– Negative impact on the brand / loss of goodwill

– Negative impact on the ROI of R&D

0

2000

4000

6000

8000

1990 1992 1994 1996 1998 2000 2002 2004

0

100

200

300

400

500Worldwide Merchandise Trade [bn USD]

Counterfeit [bn USD]

Page 4: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 4

Future authentication of identification documents can be seen as a best practice in averting cloning attacks

• High level of security using a combination of high-tech non-electronic and electronic techniques

• Extremely difficult to duplicate• Secure match of document and entity to be authenticated• Privacy must be maintained• Key management is an issue

Low-cost solutions for objectswith a sufficient level of security allowing for automated authentications are not yet available.

Page 5: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 5

Mission

“The Special Interest Group Anti-Counterfeiting will identify the true potential that RFID / EPC technology offers to combat

counterfeiting”

For the Anti-Counterfeiting Initiative is interesting for many reasons:

- Business Impact

- All Network Issues

- Focuses on currents shortcomings of the EPC Network, e.g. Security

- Cross Industry

Page 6: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 6

Agenda

• The Need for Secure Authentication Technologies • Research Questions and Anticipated Challenges• Preliminary Results

Page 7: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 7

How can Auto-ID technologies reduce illicit trade?

ProblemDescription

Impact ofIllicit Trade

Requirementsof a Technical

Solution

Impact of Auto-ID

Technology

Q2:How to quantify the impact of illicit trade?

Q3:What are requirements for a solution based on Auto-ID technologies?

Q4:What is the impact of an Auto-ID based solution?

Q1:What is the economy of illicit trade?

Research questions and practical challenges:

Page 8: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 8

Agenda

• The Need for Secure Authentication Technologies • Research Questions and Anticipated Challenges• Preliminary Results

Page 9: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Page 9

Strategies to combat illicit trade

• Illicit products “encounter” at least two licit actors: End-users and Customs

An efficient strategy to combat illicit trade should utilize at least one of these actors

Factory

Pack Center

Distribution Center

Retail Backstore

Retail Shopfloor

Consumer

Illicit Manufacturer

Packaging

Distribution

Illicit Retail:Illicit Stores,Flea Markets

Consumer

Licit trade

Theft

Licit gray trade

Illicit gray trade /smuggle

Counterfeit /piracy trade

Luxury Goods

Intended Suppy Chain Licit Gray and Illicit Market

Return flow

Retail Backstore

Retail Shopfloor

Retail DistributionCenterCompany Boutiques

Illicit Retail: eBay,

Internet Shops

Specialsales to

employees

Source: Thorsten Staake, Auto-ID Lab St.Gallen/Zurich

Page 10: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 10

Reasons for buying faked products

3.5%10.5%

12.3% 15.8%

5.3%12.3%

12.3%

8.8%

8.8% 12.3%

19.3%29.8%

28.1%15.8%

28.1%31.6%

42.1%50.9%

22.8%17.5%

3.5% 1.8%5.3%

1.8%

Good cost-performace ratio

Original tooexpensive

Just for fun Spontaneousbargain

Strong impact / main reason

Considerable impact

Moderate impact

Some impact

No impact / no reason

Not answered

• In case of perceptive counterfeiting, cost of the original product as well as a good cost performance ratio of the counterfeit are the most important motives for buying fakes

Source: Own survey, N=152

Page 11: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 11

Reasons against buying faked products

• Bad expected quality and no purchase due to missing opportunity are the main reasons for not buying faked products

4.5%13.6%

18.2% 18.2%

31.8%18.2%

13.6%

27.3%

18.2%

18.2%27.3%

13.6%

27.3%

27.3%

36.4%

13.6%

31.8%

18.2%

18.2%

4.5%

No purchasedue to bad

quality of fakes

No purchasedue to missing

guarantee

No purchasedue to missing

opportunity

No purchasedue to attitude

Strong impact / main reason

Considerable impact

Moderate impact

Some impact

No impact / no reason

Source: Own survey, N=152

Page 12: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 12

Q4: What is the impact of an Auto-ID based solution?

Automated product authen-

tication

Revenue

Liability

Reputation

Return Number of

faked products

High res. data on illicit

actors

Frequencyof checks

Cost per check

Optimized enforcement

strategies

Optimized product

strategies

Standardprocedures to

treat cases

Outsourcing(AC service

provider)

Cost peraction

Better relation tocustoms

Extended competitor

strategy

Page 13: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 13

Two solutions based on RFID

1. Basic EPC tags– Track & trace data allows to

assemble a products’ history

1. RFID tags with secure authentication mechanisms

– Based on challenge response authentication

Cost to break a feature >> Financial gain (or possible harm) due to a counterfeit within the products lifetime

DigitalFinger-

print

Product History

One infrastructure for various levels of security!

But: What does this mean for the Network?

Page 14: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 14

Secure Authentication Mechanisms

• The EPC network forms the IT infrastructure

• The EPC network has to be extended by an authentication service (EPC-PAS)

• The communication infrastructure does not have to be updated

ID K = Key(ID)

A = f(K, RAND)

A

RAND

B = f(K, RAND)

A = B ?

Tag Channel Server

Manufacturer Distributor Retailer

EPC-ISEPC-DS

EPC-PAS

Local ONS

Root ONS

EPC-IS Product with EPC+

Request / Response

Address Update

2 13 1

DigitalFinger-

print

Page 15: Elgar Fleisch

MIT Conv ocationElg ar Fle isch

January 2006Pag e 15

Auto-ID Technologies and their Impact on Counterfeiting and Product Piracy

Thank you for your attendance.