The recent International RFID IP Conference demonstrated just how troublesome the whole patent issue is surrounding RFID. The issues are apparently more complex than most people realized.

It seems that the EPCglobal standard would provide incomplete protection against infringement claims.

Up to now only one concern has been reported on: whether all RFID patent holders would agree to "donate" their intellectual property to the EPCglobal Gen 2 standard without requiring royalties from anyone using it in their hardware.

However, that's not the extent of the issue. It turns out that royalties might have to be paid even if the patent holder signs the EPCglobal policy. The RFID Journal has an excellent article on the subject, which lays out the complex nature of the issue:

But vendors may have to pay royalties even to vendors that have opted in to EPCglobal IP policy. The policy says that all vendors that sign on to the licensing program grant a royalty-free license "in its necessary claims" to all other reciprocating participants. The term "necessary claims" refers to claims that would necessarily be infringed by implementing the standard. The policy goes on to say that "a claim is necessarily infringed only when it is not possible to avoid such infringement because there is no non-infringing alternative for implementing the spec."

"If there's an alternative way of doing something, even if it costs $5 per tag, then you have to use that option," said Stewart. "Otherwise you may be infringing someone else's patent and may have to pay royalties" to the patent holders.

Stewart also said that the free license to other HAG committee members covers only the air-interface protocol (the means by which tags and readers communicate), commands and methods of data exchange. It doesn't include chip design, the way the tag is packaged, antenna manufacturing and so on. That excludes many RFID patents from the free license agreement. If you add in patents where alternative technology is available and patents that are owned by those who have not signed EPCglobal's IP policy, many of the RFID patents are not covered, he said.

More than 4,000 RFID patents have been issued worldwide. Any vendor developing and selling RFID technology today needs to have a good handle on the patents situation, to avoid ending up on the wrong side of patent disputes and unexpectedly having to pay large royalties. And any company adopting RFID should know what they could be getting into.

Not to mention the fact that the patents issue could affect the cost structure of the entire industry.