Selling Prevention : Counterfeits Spell Cash for Veritec

Robert M. Stander likens the situation of his Calabasas Park-based company, Veritec, to that of a snake preparing to devour an elephant.

The potential applications for Veritec’s anti-counterfeiting technologies are so vast, he contends, that they have to be attacked one bite at a time.

“If you take it all in at once, you get sick and die,” said Stander, Veritec’s president.

At this point, Veritec doesn’t need to worry about hurting itself by gorging on too much business. It hasn’t had a dime in sales since it opened three years ago, although it has racked up $350,000 in expenses.

To some extent, however, Stander’s optimism may be warranted. The U. S. Office of Consumer Affairs says that a market does exist for anti-counterfeiting companies such as Veritec because fake goods have become an expensive problem. Last year, according to the department, American industry lost $20 billion in business to counterfeiters.

Getting Complicated

Moreover, counterfeiting is getting more complicated. It’s no longer only a matter of fake Levi’s jeans, Gucci wallets, Rolex watches and Louis Vuitton bags. Now chemicals, computers, pharmaceuticals, pesticides and car and airplane parts are being copied.

And experts say that the anti-counterfeiting field is too varied to be dominated by one firm.

“No single company can make the same device and apply it to records, long underwear, mink coats and fancy sunglasses,” said Anna C. Balatsos, business manager for the International Anticounterfeiting Coalition, a San Francisco-based group.

In fact, Stander’s strategy is to focus on just a few markets. He wants his company to concentrate on ways to spot imitation semiconductor chips for the aerospace industry as well as fake lottery tickets. It also is developing technology to keep track of automobile parts for car makers and the insurance industry.

Tough Competition

The competition may be tough. There were only four companies in the anti-counterfeiting field in 1984, according to the Office of Consumer Affairs. Now there are 20, and that number may double in two years.

Although most of the companies are fledglings like Veritec, Polaroid and 3M are also in the business. So is U. S. Banknote, which has protected and checked documents for more than 100 years.

Veritec, like its competitors, plans to use high-technology to give every item manufactured on a production line a unique “fingerprint” that, as the theory goes, cannot be duplicated even if the product is copied.

Veritec’s most advanced system is called Vericode. It relies on a coded, computer-generated imprint to store information that identifies the origins of, for example, a car transmission.

The stamps resemble the bar codes used to price products at supermarkets. But because the technology that reads the stamp is different from that used for a bar code, a Vericode imprint can store more information in less space. It is tiny enough--as small as a four one-thousandths of a square inch--to fit on a computer chip.

Information on Stamp

The bar code on a loaf of bread, for example, which is several times the size of a Vericode imprint, contains only the manufacturer’s name and product.

A Vericode stamp could be programmed to include the name of a microchip manufacturer, the quality-control inspector, the buyer and other information. The microchips could be checked with a scanner by a computer manufacturer, for example, to make sure it got the circuit boards it ordered.

Competing technology comes from Identification Devices, which is using tiny microchips that emit a signal to identify circuit boards.

Another competitor, Light Signatures, which had sales last year of slightly more than $5 million, is putting its hidden imprints on Chrysalis, Arista and Electra record albums, Levi’s and Lee jeans and Giorgio perfume bottles.

As its name suggests, Light Signatures’ technology is based on an electronic eye that takes a high-intensity picture of a material’s unique fiber pattern. The image is converted to a digitized code, which is stored in the company’s computer.

Losing Money

But the company, based in Century City, is losing money, according to its chairman, Ronald A. Katz. Light Signatures lost $4 million in its fiscal year ended April 30, 1985, and is expected to record a loss again this fiscal year.

In fact, profits may be elusive for the entire industry for the next several years. Stander, 49, a loquacious, chain-smoking Brooklyn native, will not predict when his company will start making money. He optimistically predicts, however, that sales will reach $10 million by 1987 and will exceed $92 million by 1990.

“We have a unique product that is wanted and needed,” Stander said.

Veritec went public on Jan. 3, selling 2.5 million shares of its stock to the public at $1 a share. On Monday, its stock closed at a bid price of $2.

Veritec’s principal shareholders are Stander and the two brothers who founded the company in September, 1982: Robert Anselmo, 48, who is executive vice president, and Carl S. Anselmo, 46, a vice president. The brothers each own 10.5% of the company. Stander owns 10.4%.

Technological Brains

Stander joined the company in 1984. He came to Veritec from Grand Auto in Oakland, a chain of auto parts stores in Northern California, where he was executive vice president.

Robert Anselmo is the technological brains behind the company, according to Stander. A competitor described Robert Anselmo as a “whiz.” Carl Anselmo works for the company part time.

Stander, a graduate of Brooklyn Law School, said the company has no plans to patent its technology because such an application would require Veritec to reveal trade secrets.

A patent application would have to include detailed documents and diagrams explaining Veritec’s technology, information that Stander said he doesn’t want his competitors to obtain. Stander said a new company such as Veritec would find it difficult to pursue a costly patent infringement suit if a competitor tried to use its technology.

Veritec is looking into selling its technology abroad. The company has announced that it is exploring the possibility of licensing its technology to Techtran, a company in India.

Earlier this month, Veritec also announced that it intends to investigate having a Welsh company, G. R. Electronics, make hand-held scanner terminals for Veritec.