Arcade manufacturers employ a multi-layered strategy to combat counterfeit software, beginning with hardware-based security measures. Modern arcade PCBs (Printed Circuit Boards) often incorporate custom security chips or encrypted ROMs that require specific handshake protocols with genuine software. Companies like Namco and Sega developed proprietary encryption systems (e.g., C-Chip, Kabusa) that make duplication extremely difficult without specialized hardware.

Many manufacturers implement digital rights management (DRM) through online verification systems, where arcade cabinets periodically authenticate software with central servers. This approach allows developers to remotely disable pirated copies while collecting usage data. Physical security measures include tamper-evident seals, unique serial numbers, and epoxy-coated components that prevent chip dumping.

Licensing agreements with arcade operators create legal accountability, while regular audits ensure compliance. Manufacturers also pursue legal actions against counterfeit distributors through international intellectual property laws. Some companies incorporate regional coding, preventing software from one territory from operating on hardware from another.

The industry increasingly adopts modular systems like Capcom's CP System III or Taito's Type X, where games are distributed on encrypted solid-state drives rather than traditional ROMs. These systems often require online activation, making unauthorized copies unusable. Additionally, manufacturers implement unique per-unit keys and cryptographic signatures that are verified during boot-up sequences.

Through continuous firmware updates and security patches, arcade manufacturers maintain an ongoing battle against software piracy, ensuring that their intellectual property remains protected while maintaining the integrity of the gaming experience.