Sourland Mountain Associates

A Brief Introduction To

RFID Patents

Roger Stewart President

Sourland Mountain Associates

Quantity, Quality and Ownership

Litigation & Alternative Solutions

A Polarized Industry

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

How Many New RFID Patents?

Number of Patents per year

0

100

200

300

400

500

600

1965 1970 1975 1980 1985 1990 1995 2000 2005

the patent publication rate is accelerating

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

13,532 Patents in RFID Word Search

7,600 Patents in Delphion Search

4,289 Patents in High-Impact RFID Database

550 New RFID per year

15,000 Rough Estimate of RFID Patents in 2013

How Many RFID Patents?

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Where are the RFID Patents Going?

Canada

United States

Europe

United Kingdom

Japan Australia China

Germany

Belgium Greece Israel Lithuania Norway Romania South Africa Hong Kong Netherlands Sweden Singapore Austria New Zealand Mexico Korea Brazil Taiwan China Australia Canada Germany United States Europe United Kingdom Japan

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

RFID Patent Classifications

• Tag Chip – memory – frequency synchronization – power extraction, regulation & management

• Tag Structure – chip packaging – batteries & energy storage – manufacturing

• Antennas – readers & tags – impedance transformation & resonance

• Protocols – anti-collision protocols – wireless data transport – security

• Reader – low-noise transmitters & receivers

• Systems – exotic reader/tag combinations – range & location sensing – testing

• Applications – libraries – retail – security

Data

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Technical Quality Ratings

A The most significant blocking RFID patents. They usually include a breakthrough technical specification and will be extremely difficult or impossible to work around.

B Important patents with key technical innovation that appear to be

difficult to work around when designing certain RFID products. C Useful patents with significant technical innovation but narrower

scope. While they have technical merit, there are alternative solutions that could be implemented if necessary.

D Secondary patents that -- while perhaps useful for some special

products -- appear only marginally useful in mainstream RFID applications.

All quality ratings assume that the patents will withstand invalidity challenges.

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Patent Ownership Summary

Company A-Patents B-Patents C-Patents Total Intermec 7 13 9 23% Checkpoint 1 8 10 10% Motorola 3 5 6 10% Micron 1 5 7 7% Avid 2 2 -- 5% Lucent 1 3 2 5% BTG -- 3 2 3% TI 1 -- 2 2% Sarnoff 1 1 -- 2% 3M 1 -- -- 2% Alien 1 -- -- 2% Marconi -- 2 1 2% Northrup -- 2 1 2% Tadiran 1 -- -- 2% Tek 1 -- -- 2% U of Pittsburgh 1 -- -- 2% Others -- 20 25 19%

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Why We Need A Patent Pool the whirling wheel of death

• RFID Patent Assignment by Company

• 71 Companies or more • Each own 15 or more

RFID Patents • Without as pool,

thousands of individual licenses would have to be negotiated and signed to resolve patent infringement issues

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Standard Individual Licensing Models

Patent Owner

-------- Essential Patent

Licensee

Licensee

Licensee

Licensee

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Patent Licensing & Standards

Patent Owner

Patent Owner

Patent Owner

-------- --------

Essential Patent

-------- --------

Essential Patent

-------- --------

Essential Patent

Standard or technical specification

Licensee

Licensee

Licensee

Licensee

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Licensing Through a Patent Pool

Essential Patent

Essential Patent

License Administrator

Licensee

Pool License

Essential Patent

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Ostrich Society . . . if I don’t look . . . I can’t see it . . . and therefore it must not exist . . .

Denial Primary Premise: There are no infringed patents. Secondary Premise: If there are, then they must all be invalid. Reality Any successful RFID tag will infringe dozens of valid RFID patents. - chip patents - tag structure patents - antenna design patents - protocol patent

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Flat Earth Society . . . this is my patent . . . therefore it must be at the center of the universe . . .

• Patent Owners – Know the value of their own patents,

but very little about other people’s patents

– Overestimate relative value of their patents

– Underestimate value of other patents

• Reality – No one controls more than a tiny fraction

of the 15,000 RFID patents covering tags, readers, software, and applications

– Commercialization requires freedom to practice in all areas – not just yours

– Unlike the IP-dominated drug & art industries,

IP revenues are limited in RFID-related industries like semiconductors and displays

– Based on related industries, the RFID industry cannot sustain IP costs of more than

20% of profits or 10% of sales

– No one patent holder can claim more than a tiny part of that – perhaps 0.02 - 0.5% of sales

MIT Enterprise Forum / RFID/NFC Circle Event, What to do about all the Patent Litigation? Roger Stewart 10/21/13

Sourland Mountain Associates

Summary & Options

• Currently – Patent owners are offered nothing – Owners are left with unreasonable expectations & no money – Result: lawyers get rich

• 270 different vendors, 20 major patent owners, 15,000 patents • Testing these patents in court is costing millions of dollars per patent • Uncertainty is delaying manufacturing & adoption by users

– All RFID manufacturers & users are equally exposed – All litigation and licensing costs will be passed on to users

• Product and interface specifications make little difference – Patent problems mostly unrelated to any particular specification – Specification changes are unlikely to alter the legal outcome

significantly • Out-of-Court settlement via patent pools offer a solution • RFID Databases are available to help access risk & guide

acquisitions