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Can a New Patent Alleviate Amazon’s Counterfeit Concerns?

Amazon is diving deeper into the world of blockchain.

The e-commerce juggernaut has been awarded a patent for a blockchain-based system that can track items as they move through the supply chain using a “distributed electronic ledger,” potentially giving the Seattle-based firm the product authentication feature it sorely needs. On May 26, the U.S. Patent and Trademark Office approved Amazon’s nearly three-year-old filing, which describes using a distributed electronic ledger to infuse “digital trust from the first mile of an item’s supply chain.”

The system compiles data from distributors, manufacturers, couriers and end users on an open framework designed to reveal product origins across information silos. Using this mapping can enable and expose real-time visibility into supply chains from the point of production to the final purchase.

“Trust is earned. Once trust is lost, it can often be difficult to regain,” Amazon said in the patent filing. “As society moves more activities across borders and into the virtual world, the ability to discern the trustworthiness of an item or party can become a difficult if not impossible task. Technologies for recording information continue to proliferate, but this proliferation presents a patchwork of systems and databases that can often lack transparency, coherency, referential integrity or security, which can be factors impacting trust.”

A certification authority may be included to verify that items received correspond to the item included in the catalog based on one or more certification rules. If a certification rule is satisfied, a record may be added to indicate transfer of the item from a provider to the catalog system.

The distributed ledger history can be used to prove if a product actually originated on the secondhand market instead of at a manufacturer once that item is transferred through the chain. Secondhand transactions for the item can also be registered on the distributed ledger. Thus, every time the item changes ownership, a transaction reflecting that change can be recorded on the ledger and associated with the item. Interfaces, alerts and notifications may be generated based on the item history, and, along with ownership history, can be presented to the new owner.

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In the filing, Amazon says this system would be different from previous track-and-trace solutions, which only mapped a limited portion of a supply chain, usually the part within the purview of the solution’s developer. This open framework is designed to be more of a fit for a supply chain that is increasingly modularized, in which each entity works with multiple customer-facing channels.

Amazon has been taken to task in the past by consumers and government officials alike for not doing enough to counterfeit products sold on its marketplace. Both Birkenstock and Nike have pulled products from the marketplace altogether, citing, among other issues, the company’s subpar efforts to keep counterfeiters in check.

Last year, the company launched Project Zero as its first major stand against counterfeit items, which included the use of machine learning technology to scan 5 billion product listings daily and even allowed brands to remove counterfeit listings themselves.

In January, Reuters reported that Amazon agreed to work more closely with law enforcement to root out bad actors and specifically hand over more data on the fake goods listed on its marketplace. And in March, a bipartisan group of house lawmakers urged both Amazon and eBay executives to take stronger actions against third-party vendors who sell fake, stolen or unsafe goods on their websites.

In April, Amazon began testing a program in select markets that verified new sellers through a video call. Amazon is also currently advertising multiple positions for a ‘seller onboarding associate’ whose primary duties include “collecting the required information and documentation and conducting the relevant verification” before the merchant can start selling on Amazon. The verification and onboarding tasks the associate is required to do could take place on Amazon’s premises, or at the seller’s place of business.

In total, Amazon says it has invested $400 million in hiring 5,000-plus employees to police fraudulent and abusive behaviors, including counterfeiting.

The decision to turn to a blockchain-based system to gain transparency and traceability into the supply chain would be valuable in ensuring the quality of Amazon’s ever-growing apparel assortment. Similarly, H&M reportedly sought to bring blockchain-based traceability from VeChain to its upscale fashion brand Cos.

A report by blockchain and cryptocurrency investment firm Cream suggested that with the partnership, Cos could enhance its upcoming secondhand “Resell” marketplace with the technology. For example, clothing items can have a non-fungible token pairing generated at the point of sale, providing the new owner with a token proving authenticity and an indisputable record of ownership.