RFID Consortium Releases Patent-Licensing Portfolio

The process took many years—in part, because the group needed to work not only with existing patent holders, but also with anti-trust lawyers, to ensure the portfolio would not inhibit market competition.

"It's a very complex process," O'Hagan says. "It did take longer than we expected." But over the course of that time, he notes, the group not only drew in more participating companies, but also gained approval from the U.S. Department of Justice, indicating that the portfolio would not violate laws or restrain trade (see Justice Department Gives Nod to EPC Gen 2 Patent Pool).

Sean Corey

With the portfolio, O'Hagan says, RFID hardware vendors that previously had to negotiate each patent license individually can now avoid the need to develop terms of such an agreement with each company—including price, the frequency at which payments would be made, and the type of auditing to be performed—while also reducing the risk of litigation over patents. According to O'Hagan, the consortium's program will not affect existing license agreements that RFID hardware manufacturers already have struck with consortium members. "Many licensors and licensees will have other agreements regarding technology that is valuable, but not essential, to building licensed tags or readers," he says. "That may require agreements beyond the consortium. When people look at their own business plans, a licensing program removes a lot of the uncertainty around the technology and the legal implication of [acquiring an individual license]."

Zebra Technologies, O'Hagan says, is both a licensor (providing its licenses as part of the portfolio) and a licensee (paying a fee to access licenses in that portfolio). In other words, the firm hopes to benefit from access to existing patents from other consortium members. The portfolio will help not only RFID technology vendors, but ultimately technology users as well. For example, he says, a large retailer or manufacturer hoping to adopt an RFID solution to track items or individuals could be assured that the technology used would not be delayed by a future patent dispute.

The consortium license portfolio is unlikely to significantly affect the cost of RFID hardware, Corey notes, since the licensing fee is not a significant portion of the total expense of manufacturing the hardware. However, he says, "the consortium's portfolio license will add more transparency and predictability in the cost of licensing essential UHF RFID patents." This, he explains, should provide developers and manufacturers with greater confidence in their business plans, and make more companies more likely to introduce such products sooner. "Also, it should be cheaper to evaluate and execute a single standard license from the RFID Consortium... than it would be to negotiate custom agreements with each patent holder."

Similar patent-licensing portfolios have been developed for other technologies, Corey notes, such as MP3 players and DVDs. Since the portfolios in those industries were developed, O'Hagan says, numerous manufacturers of DVD- or MP3-related products have been "coming out with new products, and building technology into their existing products."