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The IP Cloud on the Horizon

Intellectual property remains a concern among end users, but some vendors are formulating strategies for dealing with it.
By Ari Juels
Aug 01, 2005—Since Intermec Technologies announced in January that it would not license its RFID patents on a reasonable and nondiscriminatory (RAND) basis, a lot has been written about the potential effect of this on the RFID market. Behind the scenes, vendors have been exploring different strategies to deal with the IP issue.

Vendors that determine that their products require the use of patented technology have a few options. They can:
• Enter negotiations to license the patents
• Redesign their products to avoid infringing on relevant patents
• Find potential markets where the IP holder hasn't filed patents
• Forge ahead regardless of the outcome of any due diligence investigations.

A group of hardware providers has been meeting secretly to explore the possibility of somehow blocking or fighting Intermec's patents.

At least two companies—SAMSys Technologies, a maker of RFID readers, and Zebra Technologies, a manufacturer of RFID printers—have chosen the first option. Both have signed on to Intermec's Rapid Start IP program, which allows them to gain unlimited access to certain patents. (Intermec has grouped its patents into four portfolios covering four product categories—RFID chips and dies, RFID tags and labels, fixed RFID readers and printers, and mobile or handheld RFID readers and printers.)

Under the program, companies licensing Intermec's patents pay an initial fee, which Intermec has not disclosed, and a royalty of 2.5 percent to 7.5 percent on sales of their products. Both SAMSys and Zebra have cross-licensed their own patents with Intermec, which lowers their royalty fees.

While the decisions by SAMSys and Zebra to join the licensing program seem to validate Intermec's patent claims, not all vendors are jumping on board. Only these two companies had done so when we went to press. And rfid journal has learned that a group of hardware providers has been meeting secretly to explore the possibility of somehow blocking or fighting Intermec's patents. Several people who attended one or more of the meetings declined to say how many companies, or which ones, are involved.

It's not clear exactly what strategy the group will adopt—early meetings have focused primarily on how to avoid contravening antitrust laws—but two possible approaches have been discussed. The first would combine resources to try to fight Intermec's claims in court. The second would try to create some kind of patent pool, an idea that was originally floated by the MIT Auto-ID Center, the research group that developed the original EPC protocols, but rejected by EPCglobal.

A patent pool would seem to be a nonstarter unless Intermec were willing to join. Obviously, Intermec has little incentive to do so. If it can take the lion's share of the licensing fees, why should it share them with others in a patent pool? The only way such an arrangement might work is if Intermec needed the IP in the pool to build its own products. Then, the members of the pool could require Intermec to cross-license its patents with the group that contributed to the pool. And it's not clear what chance, if any, there is of negating Intermec's patents. That would have to be decided in court, something that could take years.
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