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Open standards create opportunity by dramatically increasing the size of the potential market.
Nov 11, 2002—Nov. 11, 2002 - After my last Op-Ed, The March of Folly, Wayne Shanks of Matrics, a startup in Columbia, Md., wrote to ask whether big companies would benefit the most if everyone contributes their IP to a patent pool for the sake of creating an open standard.
"Do we expect start-up companies to compete on an equal footing with large established companies?" he writes. "If the standard is open, why would a large semiconductor manufacturer not spend a few million dollars to develop their own chip that conforms to the open standard, and thus undercut all the small players? And why should a small company go to the trouble of developing RFID technology?"
These are all good questions that are pertinent to the discussion of a patent pool, and they relate directly to this week's feature, RFID: The Coming Investment Opportunity. So I'm going to take on the question of whether big companies get all the benefits, and then I'm going to give the patent issue a rest until we see the Auto-ID Center's proposal.
First, let me begin my answer with a question: What's to stop a big company from investing millions of dollars to blow a small company with proprietary technology out of the water? Silicon Valley is littered with the remnants of companies that developed some clever technology that worked on Windows PCs. Microsoft simple took the concept, found a legal way to offer the same thing, and put those companies out of business. The value of patents is often greatly overrated.
If a company develops proprietary technology that can do something no one else's products can do, that company may be to make some money before a larger competitor comes out with a similar product. But I haven't heard of any RFID technology that is so much better than everything else out there that the developer would stand to lose millions by joining a pool. And it's unlikely that anyone will come up with something that a richer company can't match using its own proprietary system.
Alien Technology has received a lot of press coverage for its patented fluidic self-assembly technology. But there are large semiconductor companies that are working on their own means of mass assembling large numbers of very tiny chips (we'll be writing about one this week). Alien has a head start, but it will need to continue to innovate if it is going to thrive.
Whether there are open standards or not, the companies that do well are the ones that see a market opportunity and exploit it with strong execution. Startups usually see the opportunity first because they are looking for new markets, while establish players focus on established markets, where they can sell a lot of product and make big profits. And startups tend to be able to adapt and innovate better than larger companies.
Just look at the Internet. Microsoft was able to push Netscape out of the market because the Netscape browser runs on a platform Microsoft controls -- the PC operating system. But Microsoft can never dominate the Internet. It can't force Amazon.com or eBay out of business the same way, because it can't control the Internet. In fact, over the long term, the Internet will spell the end Microsoft's dominance in computing because what's important now is being connected to the Internet. Whether you connect with a Palm Pilot, a cell phone, a Mac, or a Windows PC is irrelevant.
This week's feature looks at vast opportunities that will be created as RFID equipment prices come down and open standards are adopted. We see enormous opportunities, not just in producing tags and readers, but in using RFID technology to create value for end users. Yes, large, hyper-efficient manufacturers will likely dominate a few areas. But most other areas are wide open. I firmly believe that open standards benefit everyone -- end users, small vendors, big vendors, even startup publishers.
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 firstname.lastname@example.org.
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