Swimming in the Patent Pools

By Kenneth A. Adler, Esq.

Number of RFID Patents Per Year

Source: Centredoc RFID IP Database
(click for large image)

The overall uncertainty surrounding RFID intellectual property (IP) clouds the future of the industry. As with any new technology, the wrangling over ownership and licensing of critical IP rights is likely to continue. Over time, as the industry matures, patent ownership rights will become better defined, as will requires patent licensing. However, there have been some recent developments of interest which may help to shape the future of IP ownership and licensing in the RFID arena.

Disputes regarding patent ownership rights in a new technology are fairly common, and RFID is no exception. Early lawsuits often help to establish the foothold of key IP owners in the technology space. To that end, many in the RFID industry were watching to see the results of the well-publicized lawsuit between Intermec Technologies Corporation and Symbol Technologies, which was recently settled, for the most part.

It appears as if the main RFID dispute between these two companies is over, pending the settlement of other minor disputes. Symbol has agreed to join the Intermec Rapid Start Licensing Program, which provides Symbol with access to a number of RFID patent portfolios. Conversely, both parties can exercise the cross-licensing provisions of the Rapid Start program, under which Intermec will have access to certain of Symbol's RFID IP. While it is hard to draw any conclusions based upon the reported settlement, it may signify an early beginning of defining the patent landscape for the larger holders of RFID patents.

Another important development is the formation of a RFID patent-pooling consortium. Approximately 20 providers of RFID technology have created the RFID consortium to establish a means for end-users to reduce risks such as IP infringement while also endeavoring to create a mechanism by which owners of RFID IP can manage their RFID patent portfolios. Several large players in the RFID field have joined the consortium, including Alien Technologies, Applied Wireless Identifications Group (AWID), Avery Dennison, Symbol Technologies, and Zebra Technologies.

Conspicuously absent from the consortium is Intermec, which has implemented a licensing program of its own. Under Intermec's Rapid Start Licensing Program, licensees are provided access to Intermec's RFID patent portfolio. Interestingly, according to Intermec, certain RFID consortium members have also signed up for its Rapid Start program, including Avery Dennison, AWID, and Zebra Technologies (in addition to Symbol Technologies, as noted above).

The RFID consortium creates certain potential benefits for end-users of RFID technology. The consortium intends to license RFID patents on a reasonable and non-discriminatory (RAND) basis, making it more cost effective for end-users to license RFID technology. Additionally, the consortium has the potential to create a single source for end-users to license RFID-related patents from participating entities, thereby streamlining the process of licensing the required patents needed to implement an RFID solution. As a company's RFID technology solution changes over time, the patent licenses required for the solution may change as well. The consortium "umbrella" approach also has the potential to reduce the need to negotiate additional patent licenses from participating patent holders for new solution components.

RFID IP holders may also find the consortium beneficial to their interests. As represented by the consortium, patent holders will be paid royalties based on the importance of their patents, to be independently determined by a team of experts reported to be led initially by MPEG LA, a patent management firm which was formed to manage the patent portfolio license of video technology based on the MPEG-2 standard. This independent assessment will provide a system by which RFID patent holders can gauge the value of their RFID patents. Another potential benefit of the consortium to RFID patent holders is the anticipated reduction in the cost of administration of their patent portfolios as, according to the consortium, royalties will be collected and distributed centrally by MPEG LA.

Obtaining a license from the consortium can also assist RFID technology vendors in providing assurances and contractual indemnities to customers that their products do not infringe patent rights of third parties. However, manufacturers should not assume that all necessary patent rights will be covered by the consortium license, since other licenses may be required depending on whether all patent owners for the technology involved participate in the consortium.

The success of the consortium will likely depend on the degree of participation of various patent owners, particularly those owning important or large RFID patent portfolios. It appears that some of the larger RFID players are waiting to see which entities join the consortium before they decide whether to participate; however, industry developments, such as the settlement of the Symbol/Intermec RFID IP dispute, may influence whether and when others join the consortium.

Although these developments illustrate how the RFID IP landscape is changing, uncertainty still looms as to how these patent issues will ultimately be resolved. As RFID technology evolves, other IP disputes and challenges which will likely develop as the industry matures. The best advice is to take a well-considered approach to RFID patent issues, and to revisit these issues periodically to mitigate potential risks.

Ken Adler is a partner in the New York office of Brown Raysman Millstein Felder & Steiner, where he concentrates on complex transactions, intellectual property, and outsourcing issues relating to emerging technologies, e-commerce, telecommunications, and computer law. Ken writes and speaks regularly on RFID and technology related issues, and can be reached at 212-895-2410 or kadler@brownraysman.com.