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The March of Folly
It foolish to continue selling proprietary systems when the broad market has embraced open standards.
Nov 04, 2002—Nov. 4, 2002 - I received a number of e-mails about the Auto-ID Center's interest in creating a patent pool. They expressed a broad range of views. Some patent holders wanted to know how they might join the pool. Others thought I must have brain damage from sitting in front of my computer for 12 hours a day. There were a couple of messages from potential consumers of RFID products, which I'll get to later.
First, I want to clarify that my editorial of Oct. 21 (see Patently Obvious), was not an endorsement of the Auto-ID Center's patent pool. As I mentioned in that piece, I haven't seen the proposal. I support open standards and believe a pool could smooth the way to an open system. When the details of the proposal are released, we will report on them fair and accurately and solicit a range of viewpoints, as we did in our feature (see Auto-ID Center Ponders Patent Pool).
RFID Journal is committed to educating potential users of RFID technology about all related issues that may have an effect on their business. I express my point of view in this column as part of that process, but we welcome other points of view. I've asked Dan Mullen, CEO of AIM, to contribute when he can, and he has agreed. I encourage anyone else with experience and views on this issue to submit them for publication.
Dan wrote to me after my last column to say that I was simplifying the issue by saying patent holders should not let their emotions get in the way of any decision about joining a patent pool. He pointed out that many companies have invested millions in developing their intellectual property. Perhaps the word "emotion" was a poor choice. I didn't mean to imply that companies were acting irrationally if they didn't dive into the Auto-ID Center's patent pool. So let me take another crack at it.
It is natural for companies that have invested not just money, but also time, energy and personal prestige in developing a product line to have a hard time changing when market conditions change. This is true of all companies. Many great businesses have bitten the dust because they failed to change with the times.
When Lou Gerstner was appointed CEO of IBM in 1993, many commentators were shocked. Gerstner had worked at RJR Nabisco, American Express and McKinsey & Co. What did he know about technology? In hindsight, choosing an outsider clearly saved IBM. The market was shifting away from its core mainframe products, and companies were no longer interested in buying all their technology from a single vendor. Sales were declining, and Big Blue was in big trouble.
Gerstner was an outsider, so he could look at the company's products dispassionately and decide which lines to keep and which to jettison. He also changed IBM's culture of pushing customers to buy everything from IBM. Gerstner embraced open systems, formed alliances, and changed IBM from a company focused on technology to a company focused on its customers. If IBM had promoted an insider instead of hiring Gerstner, I seriously doubt that that person would have agreed to sell hardware with the Linux operating system. That was antithetical to the pre-Gerstner culture at IBM. But Gerstner did it because he that was what some customers wanted.
It's natural for RFID vendors to resist not just the concept of a patent pool, but the entire direction the Auto-ID Center has taken. But in my view, no matter how much you've invested in IP, it is the march of folly to continue selling proprietary systems when the broad market has embraced open standards.
That's not to say that there won't be many niche applications where proprietary technology works well, or that vendors should toss their IP out the window because everyone will use the Auto-ID Center's system. No one knows if the center's technology will be widely adopted, but smart vendors will look at the patent issue dispassionately, or hire a business consultant to do it for them.
Don't take my advice. Listen to potential customers like Ralph Smith, business development manager at Consignia, the government-owned company that has taken over postal delivery in the U.K. "I get very twitchy when anyone suggests to me that I should pay for patented products because of the potential of being held to ransom in terms of any future developments of technology or systems," he wrote after my last opinion on patents.
Mr. Smith went on to say that "whilst there is a lot of interest in what is going on at Auto-ID Center, more important by far is the prospect of being able to enter a marketplace where the customer is offered some comfort and stability from standards and open systems." He said that these would give companies the opportunity to buy from whichever vendor was able to meet their changing needs. He closed by staying: "I doubt that I -- or anyone else -- would be willingly put up pots of money if it were seen that free access to a regulated environment was not possible."
I couldn't have said it better myself.
Mark Roberti is the Editor of RFID Journal. If you would like to comment on this article or submit your own, send e-mail to email@example.com.
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