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Trolling for Dollars

RFID technology and application patents have been a topic of industry debate for many years, particularly those tied to passive UHF EPC Gen 2 technology. Historically, RFID patent activity has centered on patent pooling efforts, consortium building and the occasional patent infringement suit between or among vendors. However, the industry is facing a new threat: NPEs (non-practicing entities), more commonly known as patent trolls. And, one in particular, Round Rock Research LLC (Round Rock), is capturing headlines by filing suit against major RFID users including Macy’s, GAP Inc, J.C. Penny, Hanes, Dole, Pepsi as well as passive UHF end users in a variety of industries.

Unlike what we have seen in the past, the intended targets this time around are not vendors and solutions providers. Round Rock is pursuing enterprise end users, including many with deep pockets, currently citing five patents which cover communication methods or passive UHF EPC Gen2 RFID. The specific patent numbers are: 5,500,650; 5,627,544; 5,974,078; 6,459,726 and RE 41,531 (with others under consideration).  Micron Technology Inc. sold these patents along with some 4,200 others to Round Rock founder John Desmarais.

Although the complaints filed by Round Rock differ in some ways, each claims that a specific defendant has infringed Round Rock’s patents by making, using, selling or importing products or systems that consist of or include passive UHF RFID EPC Gen2 tags and readers. The actions are the result of Round Rock allegedly having grown frustrated with the slow pace of licensing discussions and possible royalty collections in the passive UHF EPC Gen2 RFID arena. Therefore, Round Rock elected to bring these suits in order to provide a catalyst for what it dubs “stalled negotiations.” Round Rock has consistently asked the court to declare that a defendant’s infringement is “willful” and to award unspecified damages, attorneys’ fees and expenses incurred in litigation.

Where’s the RFID Troll Patrol?

To better understand the RFID industry’s response or plan of action to address this significant issue, VDC Research reached out to several leading passive UHF EPC Gen2 component, hardware and solutions providers as well as industry associations. Responses were relatively uniform: we are doing our homework; however, there is little the RFID vendor community can do to defend or protect customers and users other than recommending they seek legal counsel and use the procedures of the courts to extend the process, including forcing Round Rock to produce documentation. The hands of most industry associations are also tied as they operate as non-partisan entities.  They, too, are suggesting end users seek independent counsel.

The harsh reality is that those being sued are apparently left to fend for themselves with no direct assistance or defense support from vendors and industry associations at this time. VDC Research believes a collaborative response is required; however, uncertainties around the best approach remain.

VDC Research supports the right of organizations to derive value from the intellectual property that they own. But, when done in this fashion, questions about blackmail and the inadequacies of our patent protection system arise.  In this particular case, passive UHF EPC Gen2 RFID end users had no knowledge, no advance warning and were essentially blindsided.  The fear is that the issue will balloon if not controlled or addressed soon, and that largest accounts – which are the most attractive to both RFID technology vendors and Round Rock – will delay further investment in RFID.

VDC Research continues to monitor the situation and will provide additional commentary and analysis as more information is gathered.

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