EU project to fight counterfeits succeeds by being open, says founder

Eonpass is the latest startup trying to find commercial applications for Web3 technology that can grow to real-world scale.

Galvanized by official support from the European Union, its founder believes the company can succeed where others have failed, thanks to open-source technology that allows everyone to come together to stop the influx of counterfeit products.

Distributed ledgers, which in principle offer an immutable and unalterable provenance record, should be a good way to verify supply chains. But Eonpass management is well aware of the issues that have previously plagued the industry known as enterprise blockchain.

Eonpass has an advantage. In March, he won a competition organized by the European Union Intellectual Property Office, EUIPO. Along with partners such as consulting firm EY and freight forwarder Jet Air Service, Eonpass had the best model of using blockchain technology to detect fraudulent goods arriving at the border, according to EUIPO, a branch of the EU Trademark and Similar Matters Authority.

This put a spring in the approach of the founder of Eonpass, Thomas Rossi.

“As a startup, I have to be optimistic,” Rossi told CoinDesk in an online interview. “I took a long time to study why previous enterprise blockchains – I don’t mean they failed, but they didn’t evolve.”

EUIPO’s interest is clear: the costs of counterfeiting.

A 2019 study by consultants from the Boston Consulting Group (BCG) estimated the global price of fake pharmaceuticals at $75 billion to $200 billion, with fake electronic parts costing another $100 billion. The EUIPO itself claims that 6.8% of EU imports from the rest of the world are counterfeit, which amounts to around $134 billion a year. In addition, there is the non-monetary cost of bringing dangerous drugs or children’s toys to market.

Fighting this is not easy. Customs officers around the world have a choice between trusting easily forged documents or forcing individual pallets open for verification. Banks are betting large volumes of trade finance on the bottom line.

The trade in conventional goods – like prescription drugs or electronics – “is a very opaque industry and there is no way to tie a shipment to the original brand owner who approves the contents of the shipment. and this destination,” Rossi said.

More innovative assets like non-fungible tokens, blockchain-powered assets that are supposed to be used to prove ownership and authenticity of an item, can still be faked: he cites the appearance of fake Hermès NFTs on OpenSea , and compares NFT platforms to a Wild West free of intellectual property rights.

Rossi – like BCG – thinks the blockchain can help, by providing customs officers with an irrefutable certificate. While IBM’s product runs on the company’s blockchain and cloud, Rossi’s will be adaptable enough to work with brands that may have already chosen to use Ethereum over an alternative blockchain such as Polygon. , did he declare.

“The most important function of blockchains is that they create a shared clock,” Rossi said. “So you can’t cheat on the chronological order of events.”

Existing blockchain products — he cites TradeLens, an initiative of IT giant IBM and shipping company Maersk — might have worked well for a small handful of large, well-resourced companies, but not for what he calls the “long tail” of many smaller contractors. .

IBM’s initiative is “not really open source, so there’s no way to spin up a node and connect to a network,” Rossi said. “Maybe inside their closed system everything works fine…but leaving the system or letting in someone else from another system – that part is extremely difficult.”

Contacted by CoinDesk, an IBM spokesperson said TradeLens is “built on open standards” and “enables supply chain participants to securely and transparently share data with one another.”

The initiative has more than 1,000 participating organizations and has already been used to process more than 5,500 electronic bills of lading, the legal documents used as receipts in international shipping, IBM said. The spokesperson cited the involvement of ports, authorities from six continents and customs authorities from 16 countries, adding that TradeLens is “a neutral solution” and that its platform can accept data from shipping carriers, whether they are members or not.

Read more: IBM and Maersk struggle to sign partners to ship blockchain

Closed and proprietary systems have their advantages, including allowing greater control over revenue to recoup investment. Yet capturing even a fraction of the $10 trillion spent on global trade would be worth it. Rossi has a plan for that too.

Very early on, Rossi believed that he could make money by consulting large companies; later, by offering efficient data services for trade financiers. He wants to go from the three companies already tested to 10 by the end of next year and 100 within a few years.

“I have already spoken with a few banks here in Italy. They’re really looking forward to a more efficient way to manage the decisions they make about financing valuable shipments,” he said. “Monetization comes after the network is as big as possible.”

EUIPO’s support is helpful, Rossi says, not least in getting potential customers of luxury brands to sit up and take notice. And the EU agency remains an evangelist for a system it says could help overworked border guards.

“Given the limited resources of law enforcement officers, technologies such as blockchain could prove to be game-changing tools in combating the trade in counterfeit goods,” a spokesperson for the agency said. EUIPO to CoinDesk in a written interview. “Globally, stakeholders use diverse systems that, when working, are often disjointed, and this isolation is used by criminal networks to their advantage.”

The results of the proof of concept of the Eonpass model will be presented early next year, with a basic product available to the public by the end of 2023, according to EUIPO. The EU agency itself is creating a database to match marks to public keys, so that customs officers can verify that declarations signed on the blockchain are valid. He is also working with his American counterparts and presented a document to the World Intellectual Property Organization earlier in September.

The vision is an infrastructure “where any interested party (producers, consumers, transport services, etc.) can easily verify the authenticity of a product and alert rights holders when a counterfeit product is detected”, said a leaked version of the document, the authenticity of which EUIPO has since confirmed.

All will be watching to see if, with EU support, business-focused blockchain ideas can actually thrive in the wild.

Read more: Money reinvented: the enterprise blockchain is not dead

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