Ronald Stein's shiny silver discs don't look revolutionary, but if he and his crew are successful, the technology embedded in them will become a powerful weapon in China's battle against piracy.

Stein's family-owned media company, Crest Digital, partnered with Phillips, the European electronics giant, to develop traceable authentic content technology, which they call TRAC.

And Crest Digital has teamed with the leading film company in China to bring the system to that country, the world's largest producer of both legitimate and pirated CDs and DVDs.

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Is TRAC foolproof?

Hardly, Stein said, given bootleggers' commitment and cunning.

"Not to say they won't try" to break the code, he said. "But we've made it difficult for them."

China's pirates are a headache for Hollywood studios and American technology companies, which say they lose hundreds of millions of dollars to copied goods sold inside China and exported to other countries. Earlier this year, the United States filed a World Trade Organization complaint accusing China of failing to protect intellectual property from theft.

Beijing would like to crack down, Stein said, because it recognizes it can't build a world-class entertainment industry unless it can protect content creators. Chinese filmmakers, who are starting to receive world acclaim for their movies, have the same interest.

Enter TRAC discs, which Crest Digital and its joint venture partner, China Film Group, will make at a plant that will have an initial annual manufacturing capacity of 100 million DVDs and CDs.

The plant, slated to open later this year, will be in China Film's digital production complex, a 325-hectare entertainment center being built about 45 kilometers from downtown Beijing. Eric Loong, Crest Digital's chief operating officer, said China Film was investing US$500 million (HK$3.9 billion) into the "Hollywood-style" complex, which will house film and animation studios, a school, theaters and hotels.

Executives declined to say how much privately held Crest Digital was investing in the China venture or to reveal other financial information.

With TRAC, a visible stamp, or "watermark," is put on the information side of a CD or DVD and invisible "data channels" are embedded into it. Law-enforcement officials can access the data to determine whether the disc is legitimate. And decryption keys or other anti-piracy utensils can be applied during the process, so filmmakers, music companies or computer firms can produce secure "gold masters" that can be unlocked only by someone with a decryption key. The masters can be controlled with "smart cards" and will contain information that tracks the product through the supply chain.

Mike McGuire, an analyst with Gartner Dataquest Research, said that nobody in the anti-piracy arena "believes technology is the ultimate solution." But, he said, "certainly, the pre-production or pre-release cycle is the most vulnerable place where a lot of movie content does make it onto the Web."

Stein said China Film was eager to work with Crest Digital.

"They're very excited about opening up opportunities in China and making themselves more of a player," he said.

In fact, China Film is already doing deals: it's a partner in Walt Disney's first Chinese co-production, an animated movie called The Magic Gourd that will be released this summer.

Crest Digital's first contact with China's film industry was in the 1970s, when a group of executives visited the company's Hollywood facility to learn more about the Western filmmaking business. Back then, the company's main business was processing film for Hollywood.

Over the next few decades, Crest expanded to the in-flight and cable television markets, moving from film to video and eventually digital. Crest provided the first DVD replication services in Hollywood in 1998 and opened a DVD and CD manufacturing facility in Anaheim in 2004.

One of the company's goals was finding ways to stay in front of the rapidly evolving entertainment industry, Stein said. "We were always a technology chaser."

In 2004, Stein began looking for a way to get into China, where many customers had moved their production. That was when he reconnected with executives from China Film Group.

"It was like meeting old friends," he said.

Crest and its Chinese partner have signed letters of intent with 50 Chinese companies interested in the TRAC system, said John Walker, Crest's spokesman.

China Film is anxious to get Crest's help in upgrading its technology and marketing the Chinese film industry to western companies, he said. China Film is seeking distribution opportunities for 3,000 to 4,000 films contained in its library.

LOS ANGELES TIMES