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RFID Patent Pool Approved by US Government

The US Department of Justice last week issued a letter to the RFID Consortium, indicating its approval for the organization's intent to manage an industry patent pool that it hopes will facilitate licensing of intellectual property related to Gen2 RFID. The approval process clears the way for the Consortium to "open for business."
Oct 27, 2008This article was originally published by RFID Update.

October 27, 2008—The US Department of Justice last week issued a letter to the RFID Consortium, indicating its approval for the organization's intent to manage an industry patent pool that it hopes will facilitate licensing of intellectual property related to Gen2 RFID. The approval process was required to ensure that the consortium's collective licensing did not constitute anti-competitive activity.

"[The RFID Consortium] includes safeguards reasonably tailored to minimize the risk of harm to competition by producers of products compliant with the Gen-2 standard or by technology holders and to minimize the risk of dampening innovation incentives," reads the letter, which is available on the DOJ's website. "Therefore, the Department has no present intention to take antitrust enforcement action against the conduct you have described."

The approval is an important last step in bringing the RFID patent pool to fruition and beginning its activity. Dave Poole, RFID Consortium spokesperson and former VP of patents and technology for Zebra, told RFID Update in an interview late last year that upon DOJ approval "the Consortium will be open for business." At the time the RFID Consortium had just established an LLC to serve as the official managing legal entity, but it had been two years since the patent pool concept was actually announced. "The fact that it's taken two years is a testament to the complexity of putting a pool together," explained Poole. "We've brought together holders of patents essential for UHF RFID products; we've agreed on the definitive terms of the licensing arrangement; and we've established an LLC to manage the arrangement."

The patent pool concept is not a new one in the high technology sector. In fact, proponents of the RFID patent pool point to similar pools for DVD and MPEG-2. Corporations that had developed patents related to those technologies conferred the licensing management to an industry-wide, third-party entity. Doing so freed them from having to negotiate licensing terms with multiple licensees, and also offered licensees streamlined access and standardized pricing for the intellectual property. According to proponents, this win-win accelerated adoption of the technology. That same eventuality is the motivation for the RFID patent pool.

The DOJ appears convinced. "The [RFID] Consortium's pool appears reasonably likely to yield some tangible cost savings by limiting the threat of hold up and royalty stacking and by lowering transaction costs... Its efforts to identify patents essential to the practice of the Gen-2 standard and to disseminate this information offers savings in search costs to licensees. Moreover, licensees could shop at a single stop for the patents of Consortium members, rather than negotiating individually with seven separate parties for licenses.

"Similarly, the pool likely will reduce costs for licensors," the letter continues. "Members would no longer face the expensive and time-consuming tasks of searching out manufacturers who are using those members' intellectual property, or negotiating individual licenses. Instead, they would reap the cost savings of centralized licensing and would realize an immediate return on their intellectual property. In addition, if UHF RFID patent licensing increases as a result of the pool license, infringement litigation (and the potential for infringement litigation) will decrease."

The RFID Consortium currently includes seven members that have contributed intellectual property: 3M, France Telecom, HP, LG Electronics, Motorola, ThingMagic, and Zebra. An important caveat noted by the DOJ is that the current patent pool does not include all "essential" IP, that is, patents which are necessary "to manufacture products in compliance with certain ultra high frequency radio frequency identification standards." The absence of such essential IP could "limit the efficiency gains" of the patent pool since would-be licensees will have to negotiate and license that IP separately.

For past coverage on the RFID patent pool, see:
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