[DMCA-Activists] SW Patent Static over RFID

[Seth Johnson]

-------- Original Message --------
Subject: [IP] Static over RFID
Date: Mon, 13 Sep 2004 19:37:41 -0400
From: David Farber <address@hidden>
To: Ip <address@hidden>



Begin forwarded message:

From: Dewayne Hendricks <address@hidden>
Date: September 13, 2004 8:48:36 AM EDT
To: Dewayne-Net Technology List <address@hidden>
Subject: [Dewayne-Net] Static over RFID
Reply-To: address@hidden

Static over RFID

  By  Alorie Gilbert
  Staff Writer, CNET News.com
  <http://news.com.com/2100-1008-5357189.html>

  Story last modified September 13, 2004, 4:00 AM PDT

  A key patent holder's demand for royalties has triggered
concerns that promising RFID technology could become embroiled in
an intellectual property battle.

What's new:
  Intermec, which holds significant RFID patents, has demanded
royalties from companies using a new interoperability protocol,
raising fears that other firms could follow suit.

  Bottom line:
RFID supporters fear that the technology could become embroiled
in an  intellectual property battle, driving up prices and
slowing  implementations, if other patent holders come forward to
demand  royalties.


  The royalty flap stems from a new protocol, the Electronic
Product  Code Generation 2 standard, designed to improve the
compatibility of  radio-frequency identification (RFID) equipment
from different  suppliers and iron out a number of other
technical kinks.

The protocol is likely to contain certain patented technology
from RFID  equipment maker Intermec Technologies. The Everett,
Wash., company  recently demanded royalties for the use of the
patents, and is suing  Matrics, a rival, for allegedly infringing
on some of them. The patent  infringement suit, filed in June, is
pending. No schedule has been set  for the trial.

  The patent claim comes on the eve of a new protocol's debut.
EPC  Global, the organization that helped create the protocol,
expects to  finalize it at an Oct. 5 meeting. Now, some RFID
backers fear other  patent holders could come forward and demand
royalties, slowing RFID's  progress.

Major companies, including Albertsons, Procter & Gamble,
Wal-Mart  Stores and German retailer Metro, have already begun to
set up RFID  systems and are eagerly awaiting the release of the
new protocol to  advance their projects. They expect RFID, a
wireless tracking  technology that may someday replace bar codes,
to help them reduce  theft, shave labor costs and handle
inventory more efficiently.

  Observers say Intermec’s move was an abrupt departure from an 
ultra-cooperative standards building effort, in which many
participants  had agreed to donate key intellectual property. The
company holds the  bulk of the most significant RFID patents.

  “Suing Matrics in the heat of setting the Generation 2 standard
was  not conducive to bringing all sides together,” said Daniel
Engels, a  researcher at Massachusetts Institute of Technology.
“It was a major  concern and a major distraction to the process.”

  Engels is research director of MIT’s Auto-ID Lab, an RFID
research  center that led early development of the technology and
envisioned a  royalty-free standard. The university handed off
the standards baton  last year to EPC Global, an arm of the
Uniform Code Council, keeper of  the bar code.

  EPC Global is now leading the effort to devise standards and 
commercialize the technology, which works by placing special 
microchips--RFID tags--on merchandise. The tags signal their
location  across a network of RFID readers placed on shipping
docks, in  warehouses and stores, allowing retailers and
manufacturers to monitor  products on their paths from factory to
store shelf, and possibly  beyond.

  Lingua non franca   The Generation 2 standard should resolve
some lingering glitches in  the system and is critical to
advancing the technology beyond the trial  stage, experts say.
The main problem is hardware interoperability.  Today, a
hodgepodge of competing protocols governs wireless  communication
between RFID tags and readers. Adhering to a common  protocol
will enable any compliant RFID reader to recognize any  compliant
tag, regardless of who makes them.

  Some makers of RFID readers, such as ThingMagic in Cambridge,
Mass.,  have tackled the compatibility problem by designing
readers that can be  programmed to work with all kinds of tags.
The only drawback is that  users need to upgrade their readers'
software whenever a new type of  tag is introduced.

  The standard is supposed to work better across international
borders,  addressing the fact that the ultra-high-frequency
spectrum on which  RFID operates varies in range from country to
country. It's also  designed to be less vulnerable to signal
interference and to support  larger-scale projects that involve
tagging millions of everyday  objects, such as razors and
sweaters.

  But Engles and others fear that a standard that calls for the 
collection of royalties by one player will invite other RFID
patent  holders to demand fees, which could drive up prices and
sap budding  demand. In such a scenario, soaring license fees
could cause RFID  equipment makers, including Alien Technologies,
Matrics, Texas  Instruments and Philips Semiconductor, to pass
the extra costs along to  customers.

  Executives at Intermec defend the royalty program, saying most
popular  technology--including cell phones, laptops and bar
codes--were brought  to market through the licensing of
intellectual property among  suppliers. "You can't pick up a
product today that doesn't have some  sort of cross-licensing
that takes place," Intermec President Tom  Miller said. "It's how
you make innovation happen."

  Additionally, Intermec has donated technology covered by five
of its  RFID patents on a royalty-free basis--more than any other
participant  in the standards-building effort, Miller said.

  So far, few RFID equipment suppliers or buyers are panicking
over the  prospect of royalties. A spokesman for razor maker
Gillette said his  company expects the cost of royalties to be
negligible--unlikely to  drive up prices of RFID tags and
readers. Gillette, a supplier to  Wal-Mart that's participating
in the retailer's RFID implementation,  has "no concerns" about
other patent holders making royalty claims,  spokesman Paul Fox
said.

  Likewise, an EPC Global executive cast Intermec's patent
declaration  as a normal part of any standards building process
and nothing that  should hinder the technology's development. The
group is also exploring  a workaround as an alternative to the
patented technology, which would  let suppliers dodge royalties,
said Sue Hutchinson, EPC Global product  manager.

  Even an executive at Texas Instruments, whose bottom line is at
stake,  said the prospect of paying royalties is not a big
concern at the  moment. However, the electronics giant has much
deeper pockets and more  change to spare than smaller players,
such as venture-backed Alien  Technology, which declined to
comment for this story.

  "I don't think it's unusual, and I don't think it's going to
be  catastrophic," Texas Instruments spokesman Bill Allen said of
the  patent claims. "This is just a process that industries go
through."

  Sticker shock   Nevertheless, Intermec's royalty program, which
levies 5 percent to  7.5 percent fees on various RFID hardware
components, highlights a  difficult balancing act for RFID patent
holders--something Intermec's  own Miller calls a "conundrum."
One the one hand, patent holders want  to profit from their
development work. On the other, they don't want to  sap the
demand for the technology with excessive fees.

  A pile-on by other patent holders could double the costs of
RFID tags  and related equipment, according to MIT's Engels.
About 30 other  companies and individuals, including Lucent
Technologies and Micron  Technology, hold important RFID patents,
though some expire soon, he  said.

  Although it's a worst-case scenario, a doubling of price would
be a  major blow to the industry, which has been marching toward
a 5 cent tag  as a prerequisite for introducing more advanced
RFID features, such as  those to combat shoplifting and
counterfeiting. Those features require  the tagging of millions
of individual items rather today's more common  practice of
placing tags on shipping cases, which requires far fewer  tags.
Today, tags sell for 20 cents to 45 cents each, depending on the 
volume of the order.

  "We're seeing a downward trend in prices, and that's one of
things  driving adoption," said Jeff Richards, president and
chief executive of  R4 Global Solutions, an RFID consulting firm
in San Francisco.  "Anything that adds cost into the equation
could impact that progress."

  Yet even the royalty-wary say Intermec and others are unlikely
to do  anything to compromise the growth of a budding industry
that's set to  line their own coffers. To be sure, a lot of cash
is at stake. U.S.  retailers will ratchet up spending on RFID
equipment from $91.5 million  last year to nearly $1.3 billion in
2008, according to market research  firm IDC. Outlays on RFID
hardware alone are projected to total $875  million in 2007.

  "Everyone wants to see this technology move forward," Richards
said.  "I don't think you're going to see a major revolt in which
everyone  takes their toys home."

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