Round Rock Completes Licensing Deals With Majority of RFID Vendors

The licensing firm says it now has agreements with at least 90 percent of all EPC tag suppliers to the U.S. market, and will focus its future efforts on educating RFID suppliers and end users, to ensure the patents are honored.
Published: December 19, 2013

With the recent announcement of licensing agreements with SML Group and Nordic ID, and with deals with two additional companies expected to be announced within the coming days, patent-licensing company Round Rock Research reports that it now has settled with at least 90 percent of all EPC RFID tag suppliers that sell their products within the United States, as well as with between 75 and 80 percent of all reader suppliers. “We think this is a positive development and a win-win for the industry,” says K. McNeill Taylor Jr., Round Rock’s VP of law and its general counsel.

The latest RFID companies to sign agreements with Round Rock are woven and printed label manufacturer SML Group and mobile and fixed RFID reader company Nordic ID. Two other RFID firms have signed agreements as well, according to James Burris, Round Rock’s VP of licensing, and will be announcing those deals soon, bringing the total number of licensing agreements to 16.

In December 2011, the patent licensing firm filed lawsuits against Wal-Mart, Macy’s, Fruit of the Loom and eight other retailers or consumer product suppliers that it believed were major users of EPC ultrahigh-frequency (UHF) RFID tags and readers. Round Rock owns approximately 4,000 patents that it obtained from Micron Technologies, dating from the 1990s to the early 2000s. Of those patents, it says, 290 are related to RFID chips, tags and readers, or to techniques for using EPC tags. Micron developed the technology behind those patents, but ultimately chose to sell the patents to Round Rock when it opted not to pursue the manufacturing of the products. “Micron’s expertise is in products, not in recouping its [patent-based] investment,” Taylor states. Taylor argues that the cost of making maintenance payments (fees charged by the U.S. Patent Office to maintain a patent) then fell on Round Rock, and the licensing company went about seeking licensing agreements. Round Rock identified companies that it felt were infringing on some of the 290 patents, through reverse engineering and viewing companies’ literature (the lawsuits involved only 10 of those patents). He says the firm filed its claims in 2012 when it found evidence of such infringement, in order to ensure that those claims were made before any patents expired. Round Rock targeted the customers rather than the vendors themselves, since the customers were the technology’s users, and believed that those customers would, in turn, approach the vendors to urge a resolution of any patent-infringement claims.

While the company owns 290 U.S. patents based on RFID technology, it does not own patents in Europe. That is not due to the stringent rules about patent ownership on that continent, Taylor notes, but because Micron never pursued European patents due to the cost involved. Each patent can cost approximately $25,000, he says, and Micron considered it too cost-prohibitive to file for patents in multiple countries outside of the United States.

In March 2012, Motorola Solutions filed a countersuit against Round Rock. According to Motorola’s complaint, the company had been asked to defend the retailers being sued because it had indemnified them in contracts signed when the retailers purchased its RFID technology. In April of this year, a U.S. district judge suspended the proceeding pending a reexamination of Rock Rock’s patents (see Update on the Round Rock Patent-Infringement Lawsuit). To date, Taylor says, approximately half of the patents have been reviewed.

In the meantime, Taylor says, Round Rock met with several RFID technology vendors. “We got together and worked out a minimum we could [accept] that would allow us to recoup our investment,” he explains, while at the same time, the RFID companies determined what the market could sustain, in terms of any additional cost to cover licensing fees. He did not indicate the amount of the fees, but indicates that once the first licensing agreement was struck, the same rate has since been applied to each subsequent deal.

In November, Motorola Solutions and Smartrac announced that they had reached settlements with Round Rock (see Motorola Solutions, Smartrac Settle Patent Litigation by Round Rock and What the Round Rock Settlements Mean). And earlier this month, Avery Dennison, Alien Technology and Invengo did the same (see Avery Dennison, Alien Technology and Invengo Sign Licensing Deals With Round Rock). Prior to those settlements, Round Rock had reached agreements independently with Intelleflex and UniLabel ID Service. On May 7, 2013, Checkpoint Systems announced that it, too, had cut a deal.

With each of these agreements, an RFID vendor secures an understanding with Round Rock that customers using its licensed products will not be sued. What’s more, Round Rock agrees not to pursue companies if a small percentage of the tags or readers they use come from vendors that lack licensing agreements. “We’re taking a risk,” Taylor says, by accepting that an end user is making every effort to use only licensed products. “We feel that’s the right way to stimulate the industry.”

Round Rock objects to being referred to as “patent troll,” a term that it says is derogatory and does not take into account the development work that led to the creation of those patents and their legitimate acquisition, as well as the need to pay for those acquisitions and their ongoing patent-maintenance costs.

From this point forward, Taylor says, “Our approach is to monitor who the big players are in the U.S.,” and when they may be infringing on Round Rock’s patents. “We’re not trying to over-charge or collect payments based on threat of lawsuits. Ninety-five percent of the time, we want a license agreement.”

Taylor says his company has decided not to pursue licensing agreements from UHF RFID chip manufacturers, such as Impinj, NXP Semiconductors and Alien Technology—though it does hold patents on such chips—because it considers the chips to be already covered by Round Rock’s agreement with the companies that use them in manufacturing their tags. “You want to seek a license closest to the end customer,” he says, which would be the tag rather than the chip.

In the future, Taylor says, Round Rock’s strategy will be to focus on large players rather than small end users. “We’re not going to send out letters to get every small retailer” that might be using RFID products that Round Rock believes infringes on a patent, he says. In fact, he adds, the firm is focused not on end users, but rather on companies supplying them with tags. However, Taylor notes, if a major U.S. retailer were to purchase large quantity of merchandise with goods tagged in China, bearing RFID tags from an unlicensed company, the patent firm would expect to reach out to that retailer, to indicate they should make their purchases from a licensed RFID supplier. “That will be an educational process,” he says.