RFID for Anti-counterfeiting Introduction

1. RFID for Anti-counterfeitingIntroduction Henk Dannenberg, NXP Jens Kungl, METRO

2. Counterfeiting is not a cottage industry! • Callaway Golf Co has found counterfeiters with 3D CAD software and experience cranking out legitimate golf clubs for other brands • "We've had sophisticated technology that took years to develop knocked off in a matter of months," says Unilever marketing boss Anthony Simon • In China, recent raids have turned up everything from fake Sony PlayStation game controllers to Cisco Systems router interface cards • General Motors has come across fake air filters, brake pads, and batteries. "We had to cut them apart or do chemical analysis to tell they weren't real", says Alexander Theil, GM AP director From: http://www.businessweek.com/magazine/content/05_06/b3919001_mz001.htm

3. Counterfeiting business • It is approximately 100 times larger now than it was in 1984 • "Knockoff Incorporated" is now estimated to be twice the size of Wal-Mart There is little today that can't be counterfeited for profit • Tighter integration of the global economy has increased and contributed to sustained growth in international trade. Manufacturing centers all over the world have opened up to the economy and exports have become more diversified: • you can shop for fake electronics and CDs • you can get bogus auto spares • You can shop for counterfeit cigarettes • You can get great deals on knockoff pesticides………you name it! • Centers for counterfeiting exist wherever there is low-cost manufacturing and lax law enforcement • In Israel, Arabs and Jews co-operate to distribute counterfeit products • In Paraguay, investigators discovered a CD pressing plant run by Chinese • In 2005 in Lagos, Nigeria, 17 Chinese entrepreneurs were discovered running an illegal CD pressing plant with 11 lines.

4. The size of the problem • The World Customs Organization estimates counterfeiting accounts for 5% to 7% of global merchandise trade, equivalent to lost sales of as much as $512 billion last year • Seizures of fakes by U.S. customs jumped by 46% last year as counterfeiters boosted exports to Western markets • Unilever Group says knockoffs of its shampoos, soaps, and teas are growing by 30% annually • The World Health Organization says up to 10% of medicines worldwide are counterfeited -- a deadly hazard that could be costing the pharmaceutical industry $46 billion a year • Bogus car parts add up to $12 billion worldwide From: http://www.manufacturingnews.com/news/editorials/phillips.html

5. Making the big bucks • Counterfeiting has become as profitable as trading illegal narcotics, and is a lot less risky • Counterfeiters don't have to cover research and development, marketing, and advertising costs, and most of the expense goes into making goods look convincing, not performing well • Fake Marlboros that cost just pennies a pack to make in China could end up selling for $7.50 in Manhattan • Phony New Balance shoes can be stitched together for about $8 a pair and retail for as much as $80 in Australia, while real ones cost between $11 and $24 to make, and sell for up to $120 • Gross margins for knockoff printer cartridges are as high as 60% From: http://www.businessweek.com/magazine/content/05_06/b3919001_mz001.htm

6. Making the big bucks ctd. • While the counterfeiters are piling up profits, the multinationals are spending ever more on stopping them • Möet Hennessy Louis Vuitton (LVMH - world leader in luxury) spent more than $16 million last year on investigations, busts, and legal fees • GM has seven full-time staffers sleuthing the globe • Pfizer has five people working in Asia alone • Nokia started making batteries with holographic images and 20-digit identification codes that can be authenticated online • Cigarette maker JT International has boosted its anti-counterfeiting budget from $200,000 to $15 million in the past six years, spending the money on a network of investigators, lawyers, and informants in factories suspected of making fakes. From: http://www.businessweek.com/magazine/content/05_06/b3919001_mz001.htm

7. Counterfeiting is a severe and growing issue [VDG] [SWA] • >50% of branded Vodka in Russia & Whisky in Taiwan is counterfeit • 9B$ counterfeit-related global losses for Wine & Liqueurs in 2008 [HVS] [DM] • 6B$ counterfeit related global losses for tobaccos in 2008 • 7B$ Global losses due to counterfeiting in imaging supplies • 12% of the imaging supplies market is counterfeit products [VDG] [VDG] [WHO] • 25% of medicines in some developing countries are counterfeit or sub-standard [IACC] [PISF] • 600B$ The size of counterfeit goods market today • 5-7% of World Trade involves counterfeit goods • Counterfeiting is the fastest growing product related crime WHO = World Health Organization IACC = Intl. Anti Counterfeit Coalition PISF = Product & Image Security Foundation VDG = Vandagraf International SWA = Scotch Whisky Ass. HVS = Havascope DM = Datamonitor

8. RFID offers enhanced counterfeit protection Why RFID? • RFID Technology offers a step-up in protection against copying and tampering RFID + Adv. security RFID + BE security • No line of sight necessary, • Reading of hundreds of labels at a time • Enables more frequent authentication checks • RFID chip with a factury programmed and permalocked (unchangeable) unique serial number (TID) • unique watermark per chip Tamper resistant • SGTIN-96 uniquely identifies an instance of a product • TID and SGTIN-96 form unique watermark per instance of a product This combination can be verified in the backend • Existing standards could be used to provide strong brand protection RFID step-up Tamper Resistance Back-end security Secure printing Barcode

9. Summary • Counterfeiting statistics • The model of counterfeiting business • Technologies for item tagging • Backend assisted counterfeit protection • Authentication use cases • RFID and anti-counterfeiting • Cost-benefit analysis for RFID based authentication solution • RFID authentication schemes • A threat model for RFID systems • Attack scenarios for RFID tags with cryptographic capabilities • Future proven RFID solutions • Conclusions

10. Contact Details Henk Dannenberg NXP Semiconductors Henk.Dannenberg@nxp.com Jens Kungl METRO MGI Jens.Kungl@mgi.de