RFID let off the royalties hook

A cloud hanging over the future of radio frequency identification technology disappeared Thursday with the news that a key technical standard won't entail royalty fees.

Some in the fledgling industry feared that the new standard -- called the Electronic Product Code Generation 2 standard -- would incorporate patented technology from RFID equipment maker Intermec Technologies. The standard, which was finalised on 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 firms 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 bugs for them.

"It reduces the retailers' costs to support RFID," said Mike Meranda, president of EPC Global US, the group that organised 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 designed to be less vulnerable to signal interference, as well as supporting larger-scale projects that involve millions of RFID tags.

It should also 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 recognise 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 labour costs and handle inventory more efficiently.

Intermec, which still maintains an RFID royalty programme, 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 licence 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 still plans to levy 5 percent to 7.5 percent fees on various RFID hardware components that incorporate its patented technology.