„Know Your Customer“ for Logistics Providers – Public talk at the World Intellectual Property Forum WIPF 2019 in Taiwan on 07 November 2019
This is a talk that I have given @ the World Intellectual Property Forum WIPF 2019 on 07 November 2019, at the Grand Hyatt hotel in Taipei in Taiwan.
This is where I come from: trademark litigation has gone too far.
In „Burberry vs. Megastar“, five owners of famous trademarks have tried to sue an innocent freight forwarder in Singapore for the transshipment of counterfeit handbags through Singapore.
The freight forwarder never took possession of that container, he only agreed to ship the container from arrival in Singapore to Indonesia.
He never could open the container because he is not allowed to break its seal.
The Bill of Lading said „household goods“.
But the container had counterfeit handbags.
Sueing the freight forwarder in court did not work. No trademark infringement was found. I have earlier written about this case here https://ip-lawyer-tools.com/the-megastar-case-enforcing-ip-rights-against-innocent-freight-forwarders-in-singapore-does-not-work/
Now, everybody in anti-counterfeiting is calling for a solution.
These are the available solutions:
- “Know your customer“: logistics providers are required to provide a due diligence on each and every inquiry before they accept shipment of the respective goods
- Shift responsibility over to the consumers, by enabling the consumers to check the authenticity of the goods that they are going to purchase
- Provide logistics provider with a means for checking the authenticity of the goods that they are going to transport
- Provide a global repository for tracking and tracing the shipment of individual goods
As I explain in my talk, the “Know your customer“ approach is not realistic in logistics. Too slow and too expensive.
I did not mention the “blacklist” option, as it is applied within the US for air transport services. What happens when a logistics provider gets blacklisted by mistake? This could destroy a company.
The QR Code plus Blockchain Technology Solution
This is what I am seeing developing right under our noses: each single product gets a unique QR code applied to it, plus its packagings that are used while transporting that product from the manufacturer to the retailer or the customer. I have earlier given a talk about this, here https://ip-lawyer-tools.com/talk-at-wipf-2018-new-delhi-technologies-impact-on-patents/
What is new this year is a distributed database in the form of a blockchain ledger. The ledger serves to store the locations where the product or its packaging has been scanned by the parties that are involved in shipping the product. These updates of the shipment locations are protected against tampering by using hash encryption technology.
This results in a Distributed Global Shipping Repository (DGSR) that is accessible by anyone who is interested. Certain data of the DGSR, for example, prices or brand names of the goods, are only accessible for parties that have been authorized by the owner of the goods, for example with a PIN code or with 2-step-verification. That makes it possible to provide information that is only accessible for customs purposes and it protects the products from becoming prey for criminals while being shipped.
In a sideline only, the concept of having a DGSR that is accessible by anyone who is interested combines well with a recent development by the Singapore International Chamber of Commerce (SICC), which introduces an Electronic Certificate of Origin (eCO) based on Blockchain technology, see here and here.
Many Advantages come with this technology, and manufacturers probably benefit the most from it:
- Product traceability improves the handling of customer complaints
- Product liability issues are more transparent
- Detection of grey imports (product diversion)
- Enforcement is easier at a local level as compared with border seizure
Customs Control Becomes Easier for Parties
Although this Science Fiction today, I can see it becoming reality soon: there will „green lanes“ for ISO containers that comply with the new standard. Comparing the bills of lading with then customs declarations and the actual content of the ISO containers in the „green line“ will be automated.
As a consequence, Customs can focus on the „red lane“ ISO containers. That is similar to what already happens at the arrival gates of airports.
This system is incentivizing the shipping of containers according to the „green lane“ standard, and logistics providers have a good reason to charge more for accepting a shipping order for a “red lane” ISO container introduces some liability for them. I would expect a more thorough due diligence from a logistics provider before accepting a shipping order for a “red lane” ISO container.
As a side effect, erroneous border seizures also don‘t happen anymore. It is a very embarrassing situation if this happens, I can tell you from my own experience.
Counterfeit, Ethics and Responsibility
By applying this new method, the responsibility for counterfeit products is shifted from the logistics provider to the retailers and consumers. Only they can tell whether the product that they are displaying or using is a genuine product or not. The manufacturers of the genuine products have enabled them to do so, by using modern technology. This is how it should be.
I don`t think that the new method of tracking the shipment locations of products will ultimately stop counterfeiting. I do anti-counterfeiting since 1996 and it is my personal experience that the majority of counterfeit products exist because consumers want them.
And here comes evidence, you see these fake watch shops all over the world:
The above-described new technology is a real breakthrough.
It is now also time to re-think whether governments are still using tax money for subsidizing anti-counterfeiting in transshipments. This service should come with a fee that covers the costs of intervening in transshipments.
And here is my recorded talk
And here come my slides, for download Know your customer – How QR and blockchain technology makes our lives safer and easier