Intermec has withdrawn a commitment to license its RFID-related intellectual property on a "reasonable and non-discriminatory" (RAND) basis. The action followed an EPCglobal announcement that the class 1 version 2 standard (commonly called Gen 2) does not require using patented technology.

The EPCglobal (www.epcglobalus.org) statement in mid-December followed "successful testing of prototypes from several technology providers, which illustrated that the ratified standard can meet the EPCglobal community end user requirements, as well as final determination that all intellectual property presented on a licensed basis during the standards development process was not necessary to the standard."

EPCglobal is right: there is no royalty or licensing required to use the standard. However, that does not necessarily mean royalty-free products can be manufactured. Intermec (www.intermec.com) pointed this out in its own announcement congratulating EPCglobal on its standard ratification, which included the following statement from Intermec President Tom Miller: "It is important to remember that the claim of a royalty-free air interface protocol specification does not mean royalty-free UHF RFID products. We believe companies that offer UHF RFID products and solutions will still require a license to use Intermec intellectual property."

The EPCglobal UHF Gen 2 standard is intended to ensure interoperability and minimum operational expectations for components in the EPCglobal Network, including hardware.

Intermec formally notified EPCglobal of its withdrawal in mid-January.

With the RAND offer rescinded, Intermec can establish license terms on any basis, or reserve its IP for its own use. The company has indicated its intention to enter into licensing agreements. "Every firm that wants to succeed in the RFID space will require IP licenses from Intermec," the company said in a February 1 statement.

Intermec says that beyond the Gen 2 tags, its IP applies to any RFID system, including class 0 version 1, class 1 version 1, and "the derivative non-standard technology known as class 0+"— irrespective of whether a 1 or 0 appears at the start of the AFI header.

Intermec believes that an RFID system limited to the Gen 2 standard "will be a bare-bones affair without the features, functionality, reliability or cost profile customers are demanding. It is unlikely anyone would buy these…they do not meet applications requirements."

The company insisted that future RFID systems must "go well beyond the basics. We believe there is high value to products which incorporate the inventions Intermec has patented. These products cannot be commercialized without a license from Intermec."

A typical licensing fee is set as a percentage of the product price and requires a pre-paid minimum that can exceed hundreds of thousands of dollars.

Intermec holds more than 140 patents and patent applications in RFID. While EPCglobal was setting its Gen 2 standards, Intermec declared 18 of its patents, patent applications and foreign counterparts as potentially necessary.

Last year, Intermec built RFID reader products according to ETSI (European Telecommunications Standards Institute) specifications, and then, "loaded Gen 2 into it and demo'd it in dense-reader mode to the (EPCglobal) Board of Governors. They were happy," says Scott Medford, Intermec vice president. Based on the demonstration, the EPCglobal Hardware Action Group approved the specifications for Gen 2, and Intermec agreed to a 60-day period for proof-of-concept. "As a favor to EPC, Intermec waived five patents to Texas Instruments, Philips, and Impinj for chips, and for AWID readers," Medford says.

"A patent portfolio is about making the stuff in the first place—to think of it before it existed," Medford notes. "Somebody had to do the first ones to get the industry going. Intellectual property and licensing is meant to be between two consenting companies."

Q.E.D. Systems (www.qed.org) provides standards development and educational, advisory, and systems design services for electronic commerce and related business technologies. Craig Harmon, president and CEO of Q.E.D. Systems, says, "If a public company wants to give away their IP, they are violating their fiduciary responsibility to stockholders. By enforcing your IP, you pay for R&D."

"EPC made a strategic mistake," Harmon believes. "They started out by wanting everything to be royalty free. That's not going to happen. The patents that Intermec or others hold don't have to do with the protocol, but how you implement RFID. The ISO bar is 'reasonable and non discriminatory' and that should have been how EPC came into the game."