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What the Round Rock Settlements Mean

Motorola and Smartrac signed settlement agreements with Round Rock Research, which sued several retailers for patent infringement.
By Mark Roberti

More Patent Litigation?
Round Rock Research's decision to sue 11 end-user companies for infringing on passive ultrahigh-frequency RFID patents cast a pall over the RFID industry for nearly two years. Some potential users of the technology put their RFID efforts on hold. Others continued their deployments apace, but refused to talk about them publicly for fear of being sued. That problem is being resolved. The settlements by Motorola and Smartrac free many end user companies from the threat of a suit, and other RFID vendors are also likely to settle. But are there any more non-practicing entities (NPEs), or "patent trolls," lurking in the shadows?

Roger Stewart, former CTO of Alien Technology and president of Sourland Mountain Associates, an intellectual property consulting firm, says the U.S. Patent and Trademark Office has issued more than 15,000 RFID patents and continues to issue roughly 500 RFID patents annually. Given these numbers, it's likely the patent issue will not die with the resolution of the Round Rock lawsuit.

Illustration: iStockphoto
Not all patents are equally important, Stewart points out. But some, he says, are seminal to how RFID works, and there is no easy way to engineer a work-around to avoid infringing on the patent. According to a presentation Stewart did at the Massachusetts Institute of Technology in October, Intermec Technologies has seven of these critical patents and Motorola has three, while Alien Technology, Checkpoint, Texas Instruments and several others each have one.

To date, RFID solution providers have not aggressively asserted their patents. That's because they have a vested interest in seeing the RFID market grow. There might be more suits once the technology achieves widespread adoption.

RFID Journal asked several RFID solution providers whether there are other NPEs that could assert their patents in the next few years. One told us there are many patents, but most are held by technology companies or small RFID companies. "We don't see anyone on the horizon that has the sophistication and resources of Round Rock," he said.

Another vendor agreed, but pointed out that the patent situation can change quickly. "If some struggling RFID company needs to cash in whatever assets it has before closing down, and they sell their patents to an NPE, then you have another Round Rock."

The good news is that the industry is quickly learning how to address patent issues. The bad news is that royalties add to the cost of RFID products. "Based on related industries, such as semiconductors and displays, the RFID industry cannot sustain IP costs of more than 20 percent of profits or 10 percent of sales," Stewart says. "I remain concerned about whether the industry would be able to carry the cumulative burden of 'stacking' 20 or so Round Rock royalty rates, if the Round Rock settlement becomes the template for the other major patent owners."

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