Motorola Solutions, Smartrac Settle Patent Litigation by Round Rock

By Claire Swedberg

The two RFID hardware vendors have entered into a licensing agreement with the patent holder, allowing them to sell products using Round Rock's patents, effectively releasing the vendors' customers from Round Rock lawsuits.

Motorola Solutions and Smartrac have signed settlements with patent-licensing company Round Rock Research, thereby ending a lawsuit between Motorola and Round Rock, as well as halting Round Rock's suits against multiple companies that employ Motorola's RFID readers and Smartrac's tags. Motorola Solutions and Smartrac now have a license for Round Rock's patents, though the companies have declined to disclose the terms of the agreement.

Round Rock Research is a patent-licensing firm with several thousand patents and pending applications. The company does not manufacture, sell or market any products or services. Instead, it operates as a non-practicing entity (NPE), or what is sometimes referred to as a "patent-assertion entity" (PAE) or "patent troll," earning revenue solely by licensing and enforcing its patents. On Dec. 14, 2011, the Mount Kisco, N.Y., firm filed lawsuits against nine companies using products provided by Motorola, Smartrac and other RFID vendors, charging that the solutions infringed on five of Round Rock's radio frequency identification patents granted by the U.S. Patent and Trademark Office. Those companies consisted of American Apparel, Dole Food, Fruit of the Loom, Gap, HanesBrands, JC Penney, Macy's Retail Holdings, PepsiCo and V.F. Corp (see RFID Lawsuit Not a Major Issue for RFID and Courting Confusion). A week later, Round Rock filed a similar lawsuit against Amazon.com, claiming the online merchant infringed on nine Round Rock U.S. RFID patents. In March, 2012, the company added Wal-mart Stores Inc. to the list of defendants, claiming the retailer violated 10 of Round Rock's U.S. RFID patents. In all 11 lawsuits, Round Rock asked that it be awarded damages adequate to compensate for the alleged infringement, that such damages be determined by a jury and be trebled, with interest, and that it also be reimbursed for its legal expenses.

Round Rock acquired patents related to the use of ultrahigh-frequency (UHF) RFID tags and readers from semiconductor company Micron Technology.

In response to being sued by Round Rock, some of those firms then demanded defense and indemnification against Round Rock's claims of patent infringement from Motorola Solutions, under the indemnification clauses in their contracts with Motorola. In March 2012, Motorola filed a countersuit against Round Rock, challenging its claims. This ongoing litigation created some uncertainty—not only for the end users named in the lawsuits, but also for others who were potential customers and were concerned about becoming pulled into the patent dispute.

With the settlement announced today, Motorola reports, all pending litigation between it and Round Rock has now been terminated. Meanwhile, end users are being instructed to contact Motorola or Smartrac to begin the process of having the Round Rock patent lawsuit dismissed.

"This is good news for Motorola and for its customers," says Tama McWhinney, Motorola Solutions' corporate communications director. "We're now free from the distraction of the litigation." The vendor's customers, she adds, "can feel free to use our readers with licensed RFID tags." What's more, she says, since the agreement with Round Rock is not exclusive, "We would anticipate that other RFID suppliers will contact Round Rock to discuss their own licensing deals."

The agreements promise to spur greater interest in RFID.

"These settlements may pave the way to further innovation and adoption of UHF RFID technology," says Randy Hargrove, a Wal-Mart spokesperson.

Smartrac expressed similar sentiments.

"The Round Rock litigation threatened to slow the adoption of RFID solutions in growing markets—for example, in retail," says Karin Fabri, Smartrac's head of corporate communications and marketing. The agreements and dual participation of Smartrac and Motorola, she adds, ensure that the market offers both tag and reader vendor options that, when used in tandem, are free from Round Rock RFID patent assertions. "In short term and long terms, it means a business resolution outside of the litigation process, and protection for our customers and supply chain partners to use our products as a safe investment."

For Motorola, the value of its settlement with Round Rock in concurrence with Smartrac's is the assurance that both tags and readers would be licensed for customer use. "We wanted to ensure that we have license-free tags to work with our readers," McWhinney states.

Prior to its licensing deals with Motorola and Smartrac, Round Rock had reached agreements independently with Intelleflex and UniLabel ID Service. On May 7, 2013, Checkpoint Systems also announced that it had signed an agreement with Round Rock to license its patents. Shortly thereafter, RFID Journal reported that RFID tag and label manufacturer Avery Dennison, RFID chip and reader provider Impinj, Motorola and several other RFID companies had teamed up to fight the Round Rock lawsuit (see Update on the Round Rock Patent-Infringement).

"Impinj has very closely followed intellectual property developments in the RFID industry, particularly the litigation and licensing activities related to Round Rock," says William T. Colleran, the company's president and CEO. "Although many of the licensing details remain unknown, we think today's announcements probably represent a positive step forward for the industry. With Smartrac and Motorola joining Checkpoint as nonexclusive licensees to the Round Rock RFID patent portfolio, we believe that end users can continue RFID deployments with confidence, knowing that the community of solution providers, including Impinj, will protect their customers from future patent litigation."

Other RFID technology vendors say they expect to make public statements regarding the settlement later this week.

Round Rock did not respond to a request for comments. The legislative climate for companies like Round Rock has turned gloomy lately. This past summer, a number of major U.S. companies signed a letter addressed to lawmakers in Washington, urging them to pass bills that would protect products against "extortive demands" from patent holders (see Companies Back U.S. Bills to Fight 'Patent Trolls').