(FORTUNE Magazine) – Stopping counterfeiters is a relentless battle for brand manufacturers, whose detection systems are foiled by ever clever copiers. The International Anticounterfeiting Coalition Inc. in Washington, D.C., says counterfeiters cheat U.S. companies alone of $200 billion annually, up from $60 billion five years ago. Organized crime syndicates are using counterfeiting operations to launder drug money, while creating hefty profits and legit-looking paper trails.

The latest anticounterfeit weapon borrows from biotech: It uses monoclonal antibodies to help manufacturers mark and identify the genuine article. The process, created by a Cambridge, Massachusetts, company called Biocode, tags products by adding tiny amounts of chemicals--cheap, inert, nontoxic substances that can even be added to food.

The company, a spinoff from Royal Dutch/Shell Group and backed by biotech impresario Henry Blair (a Genzyme co-founder), is mum on the identities of the markers, but Biocode says different marker mixes show where and when products were made. The bad guys can't detect them, but good guys can, with kits resembling home pregnancy tests.

That's where the monoclonal antibodies come in. These are cell extracts that are used for diagnostic testing and pursued as anticancer drugs. In this role, the antibodies glom onto the markers' molecules and trigger color-change reactions. Dribble a few drops of suspect champagne (see photo) into a matchbook-size box containing litmus paper-like strips, and the paper turns red if the telltale markers are present.

The process will also help manufacturers enforce selective distribution. For instance, a U.S. maker of hair products sold exclusively through salons will soon use Biocode's markers to trace products back to distributors who divert goods to unauthorized retailers, such as discounters.

Manufacturers are sometimes reluctant to return Biocode's calls--they don't want to admit there's a problem. The company has challenged some to try to break the codes in samples it sends. None have. The head of a shampoo maker eventually gave in; gloats Biocode CEO David Phillips: "Now he's working with us." Not giving in: explosives makers. Despite the horrific Oklahoma bombing, the explosives industry is opposed to marking its products, citing privacy and liability issues.

- David Stipp