RFID Vendors, Analysts Upbeat on Proposed Licensing Plan

News Analysis: Consortium would have mission to help holders of essential RFID patents receive fair compensation at a reasonable cost to the end-user.

Analysts and RFID industry executives sounded an upbeat note over a proposed patent licensing consortium announced on Tuesday. The plan seeks to bring some order to the rollouts of RFID (radio-frequency identification) implementations heading to market.

Called the RFID Consortium, the patent licensing group is modeled on the non-profit association that helped market MPEG video decoding technology. The consortium is intended to provide a structured approach for holders of essential RFID patents to receive fair compensation for those patents, at a reasonable cost to the end-user. The group said it will present its proposal to the U.S. Department of Justice for regulatory approval.

"Generally, its a good and overdue step," said Dr. Paul Kedrosky, of the William J. von Liebig Center at the University of California, San Diego, in an interview with Ziff Davis Internet.

"While patent pools dont have the authority of international standards, it increasingly was looking like the sun would cool before RFID vendors converged around a specific standard. Setting up a patent pool is a reasonable compromise that allows the tag market to develop, not to mention a step that has worked reasonably well in other similar markets, like DVD and MPEG-2," Kedrosky said.

"The key reason were joining this is that we are a supplier—and a user—of RFID technology," said Carl McGrath, vice president and chief technology officer of Tyco Fire and Security, a Boca Raton, Fla.-based firm. "Our number one interest is in getting as broad a market as possible for RFID."

Close to 20 companies are part of the group, which is planning to license intellectual property and create a more efficient way to manage RFID-related patents. The group is calling for others to join in the coming weeks and months.

/zimages/6/28571.gifClick here to read more about the structure of the RFID Consortium.

At first glance the consortium may remind some of Sematech, the famed consortium for the computer chip industry. There is a crucial distinction, however, analysts observed.

"This is different than Sematech in that Sematech had a big research component," said Jon Michaelson, a partner in the Palo Alto office of Kirkpatrick & Lockhart, Nicholson, Graham, in an interview with eWEEK.com. "This is focused on licensing. Rather than having to negotiate with hundreds of patent holders, technology developers can more easily order their affairs and deal with one licensing authority for many patents crucial to RFID."

To be sure, the consortium does not have all the RFID patents locked up right now. There are potentially other RFID patents that may be relevant to supply chain applications scattered across a large number of companies and institutions, according to a statement by Intermec Technologies Corp., one of the leading players in the RFID industry today.

In addition, Intermec also said there could be anti-trust concerns over the consortium, which would shape its eventual structure and goals. The company in June announced its own licensing program, called Rapid Start RFID.

The RFID Consortium said it will base its work on the standards and specifications put out by EPCglobal, which develops standards for Electronic Product codes and RFID technology. It will also take into account those standards put out by the ISO (International Standards Organization), a counterpart to EPCglobal.

There may be some tough going for the vendors involved in the RFID Consortium process, analysts advised. But hashing out IP matters in committee may be preferable to the legal alternatives.

"Granted, patent pools are no fun to work with, with a new bureaucracy involved, but in markets where vendors wont play nice it beats bashing each others brains out," Kedrosky said.

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