The microtag concept is an anticounterfeiting and security measure. Microtags are computer-generated holograms (CGH's) consisting of 150-nm lines arranged to form 300-nm-period gratings. The microtags that we describe were designed for readout at 442nm . The smallest microtag measures 56micromx80 microm when viewed at normal incidence. The CGH design process uses a modified iterative Fourier-transform algorithm to create either phase-only or phase-and-amplitude microtags. We also report on a simple and compact readout system for recording the diffraction pattern formed by a microtag. The measured diffraction patterns agree very well with predictions.