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Analysis of Intermec-Symbol Settlement
Yesterday the RFID industry was abuzz with the announcement that archrivals Intermec and Symbol Technologies had settled their legal dispute related to RFID intellectual property. This article considers the repercussions.
Sep 08, 2005—This article was originally published by RFID Update.
September 8, 2005—Yesterday the RFID industry was abuzz with the announcement that archrivals Intermec and Symbol Technologies had settled their legal dispute related to RFID intellectual property. Since last year, when Intermec sued Matrics, the RFID hardware manufacturer that was subsequently purchased by Symbol for $230 million, the two companies had been engaged in a nasty legal wrangling that saw Symbol sue Intermec in March, Intermec counter-sue Symbol a few weeks later, and Symbol counter-counter-sue Intermec in May. The back-and-forth cast a pall over the industry, with vendors and end-users alike unsure of whom and how much they would have to pay for the use of the key RFID patents disputed between the companies. The question of intellectual property was up there with poor performance, technology cost, and lacking standards as one of the primary hurdles confronting wider RFID adoption.
It seems that that hurdle has now been overcome. According to the announcement, the two companies have settled all RFID-related disputes. Symbol has agreed to join Intermec's Rapid Start Licensing Program and exercise the program's cross-licensing provision, giving each company access to the other's RFID intellectual property portfolio (Intermec's includes about 145 relevant patents; Symbol's about 50). Even more conciliatory, the two data capture leaders have agreed to work toward resolving all other outstanding, non-RFID related legal disputes.
The news is a clear win for Intermec, who also announced yesterday the complete list of Rapid Start participants: Accu-Sort, Avery Dennison, AWID, Datamax, EM Micro, Feig Electronics, Hand Held Products, LXE, Metrologic, Paxar, PSC, Psion Teklogix, SAMSys, Sato, Symbol Technologies, Texas Instruments, ThingMagic, Toppan Printing, and Zebra Technologies. The fact that 19 companies -- including some of the industry's leaders -- have joined the program is another feather in the cap for the company that had raised the industry's ire last year when it announced its intention to charge for the use of patents that affect key RFID technology. Also notable is that a few of the names -- Avery Dennison, AWID, Symbol, ThingMagic, and Symbol -- are part of the recently announced RFID patent consortium initiative. It suggests that the initiative was not launched as a defensive measure against Intermec, as some had speculated, and it means that Intermec's Rapid Start program and the consortium can harmoniously coexist.
John Bruno, Symbol's senior vice president and general manager of the RFID division, said as much in Tuesday's media and analyst teleconference: "[Symbol has] access now to a very broad set of IP in the RFID market, inclusive of the licensing consortium and Intermec's Rapid Start Program, and that brings significant value to our customers and our partners and our ability to deliver very comprehensive RIFD systems to the marketplace without any concern."
The settlement is less positive for Symbol, but it's certainly not bad. At the very least, the company can move its RFID business forward without the nagging uncertainty of the outcome of the many suits with Intermec. When asked during the teleconference if the company could build a profitable RFID business based on the new licensing agreement with Intermec (the financial details of which were not disclosed by the companies), both John Bruno and Symbol's interim president and CEO Sal Iannuzzi answered simultaneously in the affirmative. The company has shipped 10,000 readers to date and is on track to have a production capacity of 400 million tag inlays for next year. Kevin Starke, senior analyst at Weeden & Co., predicts that if Symbol pays a royalty of 5% for the use of Intermec IP (higher than 5% is unlikely), this would only reduce its estimated gross margin for 2005 by ten basis points. And even if Symbol's RFID revenues double next year, the effect for 2006 would only be a reduction of 20 basis points in the gross margin. Not terribly significant.
The fortunes of Intermec and Symbol aside, their settlement is clearly good news for the industry as a whole. With one of the largest concerns now seemingly resolved, both a real and psychological impediment to wider adoption has been overcome, reinvigorating the industry's determined march toward the Internet of Things.
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