The estimates are staggering—$650 billion lost every year worldwide, as much as $250 billion of that in the United States alone.

The culprits? Counterfeiters.

Since the early 1990s, trade in counterfeits has grown at eight times the rate of legitimate trade, according to the U.S. Dept. of Commerce. The Dept. of Homeland Security has initiated more than 31,000 seizures of counterfeit products since 2001, with an estimated retail value of more than $482 million, according to Commerce Dept. figures; counterfeit-related seizures by the U.S. Customs and Border Patrol rose 125 percent from 2000 to 2005. Seizures were up 80 percent from 2005 to 2006 alone, according to the Commerce Dept.

Not surprisingly, given the amount of product American companies import from China, that country was the number one source of counterfeit products seized by customs officials last year, accounting for 81 percent of all seizures, according to the U.S. Patent and Trademark Office.

Given the scale of the problem, what can manufacturers and distributors do to protect the products they make and sell from counterfeiters?

Vaughn Volpi, president of Pica Corp., a loss prevention and risk management consulting firm based in Columbus, Ohio, counsels vigilance and taking a pro-active stance against would-be purveyors of fake goods. The first step is keeping a tight lid on design specifications from the start, Volpi says.

“We did a case for a very large retailer [that makes] clothing exclusively for their store chain. They literally woke up one day and there were over 200 different styles of their products available in every off-price retailer in the country,” he recalls. “The design packs that were being used to make these products were being scattered around like playing cards in China. The keys to the kingdom were already out there.”

To prevent such a nightmare, manufacturers and distributors who private-label products should build in design elements that sourcing vendors aren't privy to, Volpi says, such as a product security device concealed in a label or in product packaging.

“Something that allows you and the consumer to look at it and say, 'Hey this is fake,'” he advises. “How you design your system—that needs to be something you keep tight control of and don't outsource.”

The next line of defense is realizing that if a product has any brand value at all, there will be demand for counterfeit versions of it on the so-called “gray market.” To counter that demand, be willing to invest in what Volpi calls an “intelligence program.”

“There's a secondary market out there for any product with brand value,” he notes. “It's important to monitor the [distribution] channels and brokers of that secondary market. If [counterfeiters] can make a buck, they don't care if it's stolen, counterfeit, diverted, whatever. They don't care, they're going to move it to someone who can sell it retail. When you see someone that's offering significant quantities of your product that doesn't make sense to you, you have to investigate. By leaving it out there, you're creating the notion that your product can be had for the cheap.”

That's where Jack Walsh, director of sales for brand protection solutions at Videojet Technologies Inc., comes in. Videojet manufactures coding, printing and laser marking products for a variety of industries, including the aerospace, pharmaceutical, industrial, automotive and wire and cable sectors.

“We talk to large aerospace companies that have huge machine tools, sometimes worth $30,000 to $40,000,” Walsh says. “It's amazing, but they can lose these things. They try to have some sort of tracking method as to who is using the tool.”

That tracking capability can be used to thwart counterfeiters; Videojet offers a two-pronged approach to protecting goods from forgers.

The first tactic involves marking the product with a trademark or logo using a laser or inks visible only under infrared or ultraviolet light, Walsh says.

“They want a covert mark, something the bad guys don't know about. The problem with inks is they can typically be found and removed. The challenge is to find a place to put a mark [counterfeiters] can't get to without taking the [item] apart and possibly destroying it. Sometimes we hide the code more than make it invisible,” he says. “Laser codes are almost tamper-evident. If you go into a store and see a tool with scratch marks [over the code], you're not going to buy it.”

The second tactic is embedding security features into product packaging. This is useful for items such as bearings, where ink or a laser etching would interfere with the product's performance.

“The problem I see with bearings is they need to be smooth. The function they serve is to be fluid, so you wouldn't want to add a marking that would disturb that,” Walsh notes.

“The package is, a lot of times, the brand to the customer. A lot of manufacturers start with the package. They try to design a package that's hard to duplicate and they try to build in features that show tampering. … You're hiding a mark or code on a package that helps authenticate the package. The other technique we offer is a serialization/track and trace, where through software you track the custody of the product and the authorized distribution of it by a couple of unique identifiers.”

Volpi says the final line of defense is an educated customer base.

“Part of this is educating the consumer. There are people out there that will willingly buy counterfeits.

“They need to understand that these people are criminals,” he says, citing estimates that up to $100 million a year is laundered to terrorist organizations through counterfeiting operations in New York City alone.

“People just really need to peel back the curtain and see who they're supporting in buying counterfeit,” he says.