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RFID dodges royalties bullet

Fears that radio tag patents could saddle companies with big royalty fees dissipate with release of key standard.

Alorie Gilbert Staff Writer, CNET News.com
Alorie Gilbert
writes about software, spy chips and the high-tech workplace.
Alorie Gilbert
2 min read
A cloud hanging over the future of radio frequency identification technology disappeared Thursday with the news that a key technical standard won't result in royalty fees.

Some in the fledgling industry feared that the new standard--called Electronic Product Code Generation 2--would incorporate patented technology from RFID equipment maker Intermec Technologies. The standard, which was made final Thursday, is designed to improve the reliability of RFID equipment, a wireless tracking technology that may someday replace bar codes.

The release of the standard and the question of royalties have a direct impact on a number of major technology firms, including Philips Semiconductor and Texas Instruments. They and a number of other companies should be breathing a sigh of relief at being let off the hook in terms of royalties. The companies have been ramping up RFID hardware production as major retailers--including Wal-Mart Stores, Target and Albertsons--launch big RFID projects and place more orders.

The new standard is also good news for the retail giants and their merchandise suppliers because it means less testing and fewer bugs for them.

"It reduces the retailers' costs to support RFID," said Mike Meranda, president of EPC Global US, the group that organized the standards push. "It also reduces cost for all their suppliers. They know the equipment will be interoperable and high performance."

The standard is supposed to work better across international borders, addressing the fact that the ultra-high-frequency spectrum on which RFID operates varies in range from country to country. It's also meant to be less vulnerable to signal interference and is designed to support larger-scale projects that involve millions of RFID tags.

The new standard should replace several previous standards that have made hardware interoperability a problem. A hodgepodge of competing protocols currently governs wireless communication between RFID tags and readers. Adhering to a common protocol will enable any compliant RFID reader to recognize any compliant tag, regardless of who makes them.

Albertsons, Procter & Gamble, Wal-Mart Stores and other major retail and consumer goods companies have already begun to set up RFID systems with the expectation that it will help to reduce theft, shave labor costs and handle inventory more efficiently.

Intermec, which still maintains an RFID royalty program, said that many companies may still seek to license its technology even though it's not mandated.

"It is important to remember the claim of a royalty-free protocol does not mean ultra high-frequency RFID products will be royalty-free," the company said in a statement.

"We believe companies who offer UHF RFID products will still require a license to use Intermec intellectual property," the statement continued. "In addition to the intellectual property claims included in the Generation 2 standard, Intermec holds more than 125 additional UHF RFID patents."

The company, based in Everett, Wash., still plans to levy 5 percent to 7.5 percent fees on various RFID hardware components that incorporate its patented technology.