RFID's promise of low-cost tags for asset tracking seems set to sour thanks to a patent lawsuit that is casting a cloud over standards work in the previously harmonious RFID world. Barcode supremo Intermec Technologies has sued RFID tag and reader maker Matrics, basing its claim on four patents.

"This could open up a world where who has what IP is what counts," said Erik Miehielsen, director of ABI Research. "It is not a disaster, but it could put up the cost of RFID systems, and delay the standards."

Intermec has four U.S. patents, which Intermec VP Mike Wills VP sums up to Line56: "They address the basic RFID system: chip, tag, and reader, and how they interface with each other." The four patents, two of which it acquired from IBM's RFID lab, which it bought in 1997 are:

• Patent No. 5,528,222, issued in June 1996, which covers the idea of a radio-frequency circuit and memory in a thin flexible package.
• Patent No. 5,912,632, issued in June 1999, which covers how a passive RF tag that can synchronize and lock onto a signal from a base station
• Patent No. 5,995,019, issued November 1999, which handles the way the tags communicate with RF transponders
• Patent No. 6,371,375, issued in April 2002, which covers the idea of an RF tag which stores information to be retrieved

Intermec's lawsuit is strange because the company has showed little sign of litigation before, despite a lot of high profile activity and plenty of products in the field, and a solid set of patents, which include one for the basic idea of a thin, cheap, flexible radio beacon. Also, the patents could equally apply to virtually all the other vendors in the emerging RFID market, including giants such as Texas Instruments and Royal Philips Electronics, and new startups such as Alien Technology, yet the company is suing just one competitor, Matrics.

In fact, Matrics is part of one group proposing technologies to the next generation RFID standard, the UHF Generation 2, being put together by RFID standards maker, EPCglobal, while Intermec is in a different camp. "This definitely clouds the UHF Generation 2 standards discussions and is fueling considerable animosity in the industry," said Michielsen in a statement to online publication Line56.

"The standards are a cooperative effort, where people have to sign off on intellectual property sharing," said Michielsen. However, this lawsuit could show a crack in that agreement. At present the intellectual property tends to reside with the more established companies such as Intermec, while newer venture funded companies such as Matrics and Alien tend to own less intellectual property, and also be under pressure from their funders to get a return quickly.

It is possible that older, well-funded companies could decide that a legal delay is worth suffering, in order to gain more control, and a better eventual return on their intellectual property. "Intermec has been slow in embracing newer technologies," said Michielsen. "They have not been the ones to progress and innovate on tags in this UHF space. This is no different from Texas Instruments and Philips."

Unfortunately, it could open up a Pandora's box, as companies like Texas Instruments and Philips have all kinds of patents that could affect specific parts of the RFID market. If everyone decides to play it tough, sorting through them could spell a big delay to the standards.

"This does not spell disaster by any means," said an optimistic Michielsen. "It will be resolved." He pointed out that Intermec's royalty on barcode systems has not held up the universal deployment of barcodes. The potential returns from RFID patents are huge, although the actual addition to end-user costs will be small.

There is a danger that companies, including big retailers like US-based Wal-Mart Stores and UK-based Tesco, may go lukewarm and put off or reduce their RFID deployments. Already United Parcel Service has decided to stick with barcodes for a major high-tech revamp of its parcel tracking systems.