SCDigest editorial staff

With controversy and lawsuits over intellectual property embroiling the RIFD industry, there are questions as to how much if at all these events should impact company buying decisions.

“There is a lot on play right now, and I think it is prudent for companies purchasing RFID equipment to ask questions regarding where their vendors stand,” said Mark Fralick, SupplyChainDigest technology editor.

The questions have several roots. First, in 2004 EPC Global claimed that its specification for the so called “Gen 2” standard was free of intellectual property issues. This claim was termed “ambiguous” by several industry observers, and was followed shortly by RFID equipment and systems supplier Intermec contesting that claim.

Intermec also sued EPC tag and reader manufacturer Matrics over patent infringement. Matrics was subsequently purchased by Symbol Technologies, a long-time Intermec rival in other business areas, such as wireless systems, adding to the conflict. Some believed Intermec sued Matrics in part to deter Symbol from making the acquisition.

While protecting what it believes is a broad array of patent protection, Intermec was also appeared sensitive to criticism that its actions were contrary to the spirit of EPC, and perhaps a barrier to EPC adoption across the industry. Intermec subsequently announced a temporary program, the RFID Rapid Licensing Program, under which other manufacturing companies could license its technology, organized into three groups, at what Intermec has described as “attractive” rates. The program began June 1, and is set to expire on Aug. 31, 2005.

For example, Zebra Technologies, an RFID tag printer manufacturer and a competitor to Intermec in this area, announced June 23 that it has joined the Rapid Start licensing program.

Other companies, such as Phillips Electronics, also have intellectual property claims.

While Intermec has announced it will not take legal action against any user companies over its technology disputes, focusing claims only on other manufacturers, should end users be concerned?

“I think end users have little to worry about from a lawsuit or damages perspective,” said Fralick. “The bigger risk is that the vendor they choose may find themselves in an unfavorable IP situation, and/or have to pay hefty royalties, which could add to equipment costs for their customers. “

Gary Morgan, Director of Technical Services for supply chain execution and RFID provider RedPrairie, notes that a number of companies appear to be joining the Intermec licensing program.

“More and more companies appear to be jumping on the bandwagon,” Morgan said. “That’s good news, as it should bring some stability to the market, and ease a barrier to adoption that has existed over the last few months.”

Experts contacted by SCDigest generally agree that users should inquire to prospective providers of tags, readers and other RFID gear as to their intellectual property position, and their stance vis-a-vis Intermec’s claims and its Rapid Start program. The field should be somewhat clearer after the Aug. 31 program deadline, as it will then be known who has settled with Intermec, and who hasn’t.

“We do have some clients asking us about these issues,” said Dean Frew, president of Xterprise, a RFID-focused consultant and systems integrator. Frew noted his company is currently working with a large retailer which has asked some questions, but believes its size and market clout will mitigate any real effects from the disputes. Still, Frew notes it has caused some market confusion.

“There certainly have been some questions to how Intermec can be part of EPC Global and that process, and raise these IP issues around EPC at the same time,” he said. “I really think this thing will shake itself out over time. Your best bet know is to ask people who are really deep in this to help you sort it out, as there are a lot of dimensions to these questions.”

There are some rumors in the industry – as yet unconfirmed – that Intermec, Texas Instruments, and Phillips have privately agreed to share IP and drop any competing claims.

How should users respond to the current IP environment? Are these issues a barrier to adoption? How do you think it will get sorted out? Let us know your thoughts.