For those of you who may believe fake goods are confined merely to cheap knockoffs of handbags and sunglasses, "law enforcement officials say that your perception of the problem is perhaps a generation out of date," reads a recent report from the National Chamber Federation (www.uschamber.com/ncf), an independent, nonprofit, public-policy think tank affiliated with the U.S. Chamber of Commerce. According to the NCF, the Federal Bureau of Investigation, Interpol and the World Customs Organization, approximately 5 percent to 7 percent of the world's annual trade is in counterfeit goods. This translates to nearly $512 billion in global sales lost each year.

In the last decade, counterfeiters have gained increased accessibility to technology and other resources, so that virtually anything that can be manufactured, traded, imported or sold is now a potential target for intellectual property (IP) theft. Those items most under siege include high-value products such as pharmaceuticals ($22 billion globally), software ($12 billion) and apparel and footwear ($12 billion), as well as cosmetics, cigarettes, alcohol and more.

But the cost of IP theft goes far beyond the dollars and cents: Counterfeiting quashes investment and innovation, threatens public health and safety, results in lost jobs (more than 750,000 in the U.S. alone) and has links to terrorism and organized crime.

Now, more than ever, it is vital for brand owners to implement brand-protection strategies that secure their IP investments and maintain the integrity of their products. One of the major tools in the brand owner's arsenal is security packaging, which involves the use of various materials and technologies to authenticate their brand. These technologies can be overt (easily identified by the human senses), covert (detectable with simple technical tools) or forensic (only revealed through sophisticated forensic tools), or a combination of all three.

In the case of two luxury-brand owners, vintner Domecq Bodegas of Spain and cigarette-maker Hongta Group of China, complex, optically variable devices (OVDs), also known as holograms in their simpler forms, from Kurz Transfer Products, L.P. (www.kurzusa.com), are providing brand authentication to thwart would-be counterfeiters.

Holography is an advanced form of photography that allows an image to be recorded in three dimensions. Invented in 1948, the science of holography did not advance much until the 1960s, when the laser was introduced. In packaging, holograms are used for two purposes: promotion and security, with brand enhancement making up an estimated 90 percent of the market, according to Brad Long, business development manager, Brand Protection, for Kurz.

Long adds that the most widely used type of hologram for package decoration is the dot matrix, which consists of computer-generated arrangements of dots in a screen that give off different light effects from different viewing positions. "Dot-matrix technology is the one you see on the toothpaste boxes, on videos and on gift-wrapping paper," he says. "This is very prevalent. There are thousands and thousands of manufacturers of this type of imagery."

Standard holograms, which include dot-matrix, two-dimensional, three-dimensional and 2-D/3-D styles, are made up of a collection of microscopic peaks and valleys, called interference patterns, on a plate surface. Two-dimensional holograms are based on a 2-D graphic image, where all elements of the design appear in a single image plane. Three-dimensional styles are produced by capturing a 3-D model in a 1:1 size ratio. Three-dimensional holograms show a realistic, in-depth image that requires a strong, direct light for optimal viewing. Two-dimensional/3-D holograms show two or more 2D images in parallel image planes, producing a "perspective effect" and creating the illusion of depth.

Hologram creation involves simultaneously exposing a selected piece of artwork, either a 2-D graphic or a 3-D model, and a photosensitive recording material with laser light in a certain way. Through this process, the desired image is recorded as a complex, microscopic pattern called a holographic interference pattern, or a master hologram. The master hologram can then be replicated via nickel electroforming to create a working shim, or what Kurz calls an approval shim. From this, a production shim is generated through recombination and a galvanic-forming process. The production shim is then used to emboss the hologram onto a specialty coated plastic film.

Although a number of proprietary techniques may be employed to emboss a hologram, in generic terms, the process is similar to a web-printing operation in that a continuous web of film passes between nip rollers, on which the embossing plate is mounted. The holographic information—submicron in size—is imparted into the film or a coating on the film with heat pressure and/or radiation, either UV or electron-beam.

Unlike printing, hologram embossing does not use any ink. The colors seen in a hologram are derived from diffraction of the light from the surface.

Kurz can produce holograms, including 2-D, 3-D, 2-D/3-D and dot-matrix, in the form of hot-stamping foil, laminating foil, self-adhesive labels, tearstrips or other, project-specific formats. But for the purposes of brand protection, standard holograms do not provide enough complexity, relates Long. "With typical holography, some counterfeiters have become sophisticated enough to replicate the designs," he says.

During a recent visit by PD to Kurz's U.S. headquarters in Charlotte, NC, technical project coordinator Max S. Astor explained that the more complex holograms used for security, such as the proprietary designs manufactured by Kurz, are referred to as OVDs. Kurz's high-end brand-protection solution, the Trustseal®, differs from a standard hologram in that it is a fully exposed image, without the peaks and valleys evident in dot-matrix, 2D, 3D and 2D/3D holograms. The Trustseal, proprietary to OVD Kinegram Corp. (www.trustseal.biz), a member of the Kurz Group, is a synthetic, computer-controlled, diffraction-graphic element that is created by using special, proprietary equipment, materials and knowledge.

Because of the way it is produced, Long relates, the Trustseal exhibits a greater brilliance and color control, and can incorporate many different optical techniques (see sidebar at right). "For brand protection, you need to have overt, covert and forensic features within your package or product to have the most robust program," says Long.

"If you could create the perfect authentication device, it would be an overt technology that would allow you to just pick up a package and know immediately that it was the real thing. But there is no such product. That's why brand owners need to use something that's very complex optically on their packaging.

"We're doing our job if somebody tries to knock off our OVD because we're going to be able to tell if it's fake. Nobody is going to be able to duplicate it exactly."

In the case of Spanish winemaker and exporter Domecq Bodegas, a part of Domecq PLC, a pressure-sensitive Kurz Trustseal label verifies that its Campo Viejo Rioja wine is from the prestigious Rioja region of Spain, which is said to produce some of the best red wines in the world from the tempranillo grape. This distinction is important, as Rioja was the first of Spain's wine-producing regions to obtain the government's official appellation designation, or "denominacion de origen," in 1926. Nine years ago, the Rioja region became the first and only in the country so far to be granted the "denominacion de origen calificada" or "qualified appellation."

But Domecq Bodegas is not the only vintner to employ this label. For the past three years, Kurz has supplied all 400-plus manufacturers of Rioja with this p-s label, which includes an overt Trustseal OVD, as well as sequential numbering and other Rioja certification graphics.

Relates Long, "Several years ago, companies not from the Rioja region were marketing Rioja wines. It is similar to someone saying that a wine is a Cabernet when they are not using Cabernet grapes." In the case of Rioja wines, the Rioja Appellation Regulatory Council (www.riojawine.com) came up with the idea of the certified seal. Although Long says that he can't comment on the whether the Rioja Trustseal label has eliminated knockoffs, he does relate, "a few years later, the label is still being used."

For Chinese tobacco company Hongta Group, the need for brand authentication is just as vital, especially considering the environment in which the company operates. It is generally acknowledged that China is the single-largest source of counterfeit and pirated products worldwide. According to the Quality Brands Protection Committee (www.qbpc.org.cn), a group of more than 100 multinational companies with investments in China, approximately 100 billion counterfeit brand-name cigarettes are produced in China each year.

Hongta Group was established in 1956 as a small-scale tobacco recuring factory. Today the company is not only the largest tobacco company in China, but it is also a multinational enterprise. Last November, five of the company's brands—Gonghexinxi, the Great Hall of the People, Ashima, Mount Hongtashan and Yuxi—were named among the top 10 Chinese cigarette brands in terms of quality by China's State Tobacco Monopoly Administration.

To protect and decorate its cigarette cartons, Hongta Group employs several overt features from Kurz, including a demetallized laser tear-tape around the carton opening, a laser hot-stamp foil decoration on the carton's panels, a red, metallized hot-stamp-foil logo and a Trustseal OVD.

At Kurz's Charlotte facility, the process of creating a customized OVD begins when Kurz meets with the brand owner to discuss the scope of the brand's counterfeit problem and to identify what types of overt and covert elements can be used to provide the most effective solution. From this discussion, Long explains, Kurz creates a hard-copy design proposal. "The design proposal just shows the brand owner on paper what we're going to do," he says. "Obviously it doesn't have the optical components of a hologram or an OVD, but it outlines what the image will include."

Another tool used by Kurz to illustrate a proposed design is computer animation of the hologram, which Long says is used about 75 percent of the time. Designed in-house, the program is "a pretty useful tool for holographers because it allows them to look a lot closer at what the image is going to look like," he adds.

Once the design proposal is approved, an approval shim is made. At this point, because the design involves Kurz's proprietary exposure technology as well as the brand owner's security solution, it must be manually delivered to the brand owner for approvals. When the approval shim is given a green light, it is then used to step and repeat to fabricate the production shim, according to the brand owner's specifications.

During embossing, the production shim is mounted as a sleeve, and the original master hologram's diffractive grating is repeatedly stamped into a fast-moving web of material—usually hot-stamping foil or laminating film. To maximize yields, it is common to gang more than one image on a shim, so each transfer creates multiple holograms that can be die-cut into separate units during the final converting and finishing steps. Rolls of embossed holograms can be further processed and/or fed into hot-stamping machines, labelers or laminators, depending on the end use.

From the initial analysis of the brand owner's requirements to the shipment of the OVD, the process takes approximately eight weeks, Long says, with standard Trustseal originations built to fit any budget. "If there are custom covert features in the OVD, the cost will go up," he adds.

An optimal solution is one that can be used for 12 to 18 months before being changed, Long says. "A lot of times, brand owners keep the overt technology pretty static because it's part of their brand identity, but typically it is changed about every eighteen months," he says.

Of the industries presently using Kurz's OVDs, pharmaceuticals has been the slowest to implement this technology, Long relates. "We're putting a lot of effort into that industry because we think it is the one that needs it the most," he says, adding that sales of counterfeit pharmaceuticals are projected to grow at 10 percent this year—far outstripping the 2-percent increase in sales expected for legitimate pharmaceutical drugs.

"I think that more pharmaceutical companies will use OVDs once the ROI is figured out—what you're going to get for putting five cents into your label rather than one cent, and how much it money it saves when you are selling your real product, rather than counterfeiters selling your product. But that hasn't been done yet," he says. "I'd love to have the formula."