A new patent licensing consortium for radio frequency identification (RFID) technology, designed to pool RFID patents and simplify the licensing process, may expedite the availability of less expensive RFID equipment for food retailers and CPG manufacturers.
The consortium plans to serve as a one-stop shop for companies that wish to license patents for the RFID readers, tags and other tools that enable retailers and CPG manufacturers to locate and track products throughout the supply chain.
"The consortium is a win-win for patent holders [and technology vendors], but maybe even more so for consumers and organizations adopting RFID," said Stan Drobeck, vice president of RFID strategy and planning, Avery Dennison, Pasadena, Calif., and spokesman for the consortium. The consortium could start offering licenses by early next year.
While Wal-Mart Stores has put RFID on the retail landscape with its Dallas-area program involving shipments from its top suppliers, the technology has seen relatively slow adoption by other retailers. Moreover, CPG manufacturers have been vocal in complaining about the cost, poor return on investment and technological limitations of the technology.
Some of those issues may be addressed by the new "Generation 2" RFID standard for tags and readers released by EPCglobal, the organization responsible for commercializing RFID technology based on the electronic product code (EPC).
But the consortium hopes to take that further by improving the availability of the technology essential for creating RFID equipment based on the Gen 2 standard as well as International Standards Organization (ISO) standards.
"[The patent pool] will facilitate more rapid and easier adoption [of patents by technology vendors], greater competition and a larger [RFID technology] market," Drobeck said. These benefits are expected to trickle down to the technology's end users in the form of earlier availability of lower-cost RFID tags, readers and software.
"Anything that makes it easier for [technology vendors] to produce lower-cost RFID equipment is a good thing for grocery manufacturers," said Pam Stegeman, vice president, supply chain and technology, Grocery Manufacturers Association, Washington. "I think this consortium really does that, and we applaud it. The more [patent holders] that take part in it, the better."
The consortium is trying to eliminate confusion surrounding the more than 3,000 RFID patents that have been issued. "[RFID] technology has been around since World War II, and it's been used in lots of applications in the course of history," Drobeck said. "The number of patents issued over those years has made for a very complex situation. Interlocking patents can block vendors from making products that are useful for consumers."
Similar consortiums have been effective in managing patents for other technologies, including those for DVDs and the MPEG-2 video decoding.
Nearly 20 patent holders have thus far dedicated resources toward the RFID patent pool. Among those companies, Alien Technology, Applied Wireless Identification Group, Avery Dennison, Symbol Technologies, ThingMagic, Tyco Fire & Security and Zebra Technologies have opted to join the consortium.
The participating companies intend to submit their plan for the consortium to the Department of Justice to ensure that it does not violate antitrust laws.
Meanwhile, Intermec Technologies, Everett, Wash., which has one of the largest RFID patent portfolios, has not joined the consortium. "It is too early to draw a conclusion about the pros and cons of the consortium until the details of its purpose, ownership, control, processes, participation by patent holders and legal compliance -- particularly with strict antitrust regulations -- becomes available," Intermec said in a statement.
Intermec has invested in establishing a Rapid Start licensing program for its own patented RFID intellectual property. The company is also embroiled in litigation with Symbol, one of the consortium members, over Intermec's RFID patents, among other issues.
Only patents deemed "essential" to RFID systems by an independent third party can be part of the consortium, according to Kevin Ashton, vice president of marketing for ThingMagic, Cambridge, Mass., and a spokesman for the consortium. Ashton was a co-founder and executive director of Massachusetts Institute of Technology's Auto-ID Center.
EPCglobal will not play any role in determining whether a patent is essential, according to Jack Grasso, spokesperson, EPCglobal, whose U.S. division is based in Lawrenceville, N.J. "Our job stops at developing the standard," he explained. "If the consortium accelerates the pace of [EPC and RFID] adoption and makes [equipment] less expensive, then of course it's a good thing."
It has not yet been determined whether licensing fees will be royalty-based or a flat fee. It will most likely be a flat fee, according to Ashton. Although patent licensing fees are not regulated, it will be in the best interest of consortium members to keep them low, he added. "Patent pools recognize that the more they do to grow the market, the better," Ashton said. "They keep prices low to spur adoption." Meanwhile, the Gen 2 standard specifications remain royalty free.
The consortium must also determine whether to offer a single license for all essential patents or multiple licenses for groups of patents, Ashton said.