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Right in the Race for ePassports

Smart card maker On Track competes for a first-of-its kind federal contractWith a legal victory fresh under its belt, smart card maker On Track Innovations America hopes to win a major contract to produce electronic passports for the U.S. government. The Department of State wants the new passports to help improve identification and security at entry points to the country. “If we are one of the winning parties, this could be a multi-million dollar, multi-year contract which will be significant,” says Ohad Bashan, 34, CEO of the Fort Lee-based company.

Last month a federal court in Washington, D.C., overturned the termination of On Track’s right to bid on the program. The Government Printing Office, which manufactures the test passports, had dropped the company from consideration because of a technical flaw.

“We were eliminated due to a fault of one of the components that were provided by one of our suppliers,” says Bashan. On Track successfully argued that the fault lay with the supplier.

Now the company is back in the competition to create so-called epassports with microchips that carry personal identification data. The contract is to be awarded to one or more companies early this year, with the first passports to be used by U.S. diplomats and other government officials. Also in the race to provide the passports are Infineon Technologies, which is based in Munich, Germany, and has operations in Princeton; Axalto in Austin, Texas; and SuperCom and BearingPoint, both in McLean, Virginia.

The electronic passports will enter circulation when new passports are issued and older ones are renewed. The difference will not be noticeable to the naked eye. A chip embedded in the back cover will carry biometric data and a digital photo of the passport holder.

“It began with the Enhanced Border Security and Visa Reform Act, which required countries in our visa waiver program to issue biometric passports by October 2006,” says Laura Tischler, a spokesperson for the State Department. Citizens of the 27 countries in the waiver program can travel in the U.S. without obtaining visas.

According to the American Civil Liberties Union (ACLU), such chips raise privacy issues. It argues that a clever ID thief could use a handheld reader to scan the data on a passport without coming in direct contact with the passport holder.

“These chips compromise Americans’ privacy, expose them to danger from terrorists and criminals and provide a limited security benefit,” says an ACLU statement. “Instead, U.S. passport standards should employ a contact chip-one that can only be read through contact between a reader and chip.” The Department of State says it will incorporate technology in the front cover of the electronic passports to prevent the data from being compromised.

Ohad Bashan’s father, Oded Bashan, cofounded On Track Innovations, the parent company of On Track Innovations America, in 1990 in Rosha Pina, Israel. It provides identification cards for Palestinian workers crossing from the Gaza strip into Israel. The parent company launched On Track Innovations America in 1998 in Silicon Valley and relocated it to Fort Lee in 2004.

The passport contract could help the Israeli company recoup widening losses that reached $2.1 million on revenue of $12.1 million in the third quarter, compared with red ink of $1.2 million on revenue of $5.5 million for the year-ago period. On Track Innovations stock traded around $13.50 a share on Nasdaq last week, down from a 52-week high of $16.14 last summer.

“We are in the business of contactless, microprocessor-based smart cards,” says Ohad Bashan. The cards have embedded computer chips that carry data that can be read by passing the card by a magnetic reader. The same technology is used with pay-at-the-pump gasoline cards.

“What we’ve done is develop a significant portfolio of intellectual property and content to provide solutions for three markets: payment, identification and petroleum,” says Bashan.

Oil companies use tags with microchips on their tank trucks. Much like radio frequency identification (RFID) systems, the chips allow companies to keep track of the trucks. The chips carry more detailed data than RFID tags, which are identified by code numbers.

The payment market includes credit cards like MasterCard’s PayPass and Visa’s Contactless. On Track supplies technology for such cards.

On Track-equipped cards carry data for three different types of biometric identifiers—hand geometry, face recognition and fingerprints. “That is all stored on the card,” says Bashan. “The microprocessor allows us to meet the strict regulations of financial and government institutions. It also allows us to store information in a protected way where we are encrypting it.”

E-mail to jpruth@njbiz.com

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