[IP] Static over RFID
Begin forwarded message:
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: September 13, 2004 8:48:36 AM EDT
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] Static over RFID
Reply-To: dewayne@xxxxxxxxxxxxx
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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