Cooperation, Compromise, and RFID IP: Intermec and Symbol Aim to Move the Market Forward

Natick, Massachusetts - October 12, 2005 - The recent compromise and cooperation between Symbol Technologies and Intermec Technologies is welcome news in today's RFID market, especially for the open-loop supply chain. The two AIDC giants have agreed to work together to settle all outstanding litigation, with RFID taking center stage. While the September announcement helps to quell some of the RFID industry's intellectual property concerns, the near- and long-term impact on their respective RFID businesses remains to be seen.

Under the agreement, RFID patent infringement claims between the two companies have been dismissed. In addition, Symbol joined Intermec's Rapid-Start Licensing Program, under which it is expected to pay royalties to Intermec to utilize Intermec's RFID patents. Three other suits brought by Symbol against Intermec related to a broader set of core AIDC and wireless technologies are to be stayed for 90 days.

The legal wrangling between Symbol Technologies and Intermec Technologies Corporation has a long history, with both companies filing multiple suits against one another in AIDC, RFID, and wireless technology markets over the years. However, the spirit of cooperation and collaboration between the two rivals over the last few months is refreshing. The following provides a short recap of recent events:

- First came Intermec filing a patent infringement suit that alleges Symbol infringed on its RFID patents;
- Symbol countered in March by filing a suit that claims Intermec violated its Wi-Fi technology-related patents. The company also ceased supplying Intermec with its bar code laser scan engines (this has since been lifted);
- On the heels of the Symbol filing, Intermec filed another suit, claiming Symbol was in violation of six of its patents which cover an integrated wireless data capture system; portable, battery-powered data processing devices; handheld portable data capture devices; and the ability to accept and process handwritten information; and
- Symbol then sued Intermec again in late April claiming Intermec has infringed on Symbol's patents related to the decoding of Reduced Space Symbology (RSS)-14 stacked bar codes and PDF-417 2D bar codes.

The settlement that was announced in September called for Intermec to file for the dismissal of its RFID lawsuit. The SEC filing pertaining to the settlement states that Intermec has dropped its claim that Symbol engaged in unfair trade practices by importing handheld devices infringing on Intermec's patents. Further, the two companies agreed to not start any actions in the US International Trade Commission (USITC) for the next two years.

According to the same SEC filing, Symbol can license Intermec's RFID-related patents to "make, have made, or sell RFID readers and RFID tags in all markets other than a defined number of transportation-related markets where the RFID tag is associated with a vehicle or mode of transportation." Similarly, Intermec can license Symbol's RFID-related patents "to make, have made, or sell RFID readers and RFID tags" in all markets other than the transportation market. During a conference call Symbol noted that this clause in the negotiations does not refer to the entire transportation market, but rather to a subset Symbol does not believe it will be selling into in the near future.

All RFID-related disputes are therefore now considered resolved. As for the remainder of contested IP, the companies have agreed to put their other legal battles on hold for 90 days while they try to reach compromises on each. There are a lot of patents that need to be discussed and reviewed to determine a fair compromise. Without question, both entities have large, comprehensive, and complex IP portfolios in AIDC, RFID, wireless, and beyond. The key message is that both are committed to a process that focuses on resolving all IP issues.

So, why is the settlement of the RFID IP issue so critical to the industry? According to VDC research, the question of IP ranks high among the other factors restraining adoption of RFID - others include poor performance, high costs, and lack of globally harmonized standards. The potential for litigation has fostered uncertainty among vendors and users over to whom and how much they would have to pay for the use of key RFID patents.

Whether positioned as an excuse or legitimate reason, it has been suggested that the industry's IP tug-of-war has prevented many users from investing in and adopting RFID technology.

In addition to the settlement of RFID lawsuits, the companies announced that Symbol has joined Intermec's Rapid-Start Licensing Program and has elected to exercise the program's cross-licensing provision, giving each company access to the other's RFID IP portfolio. Intermec holds roughly 145 patents to Symbol's 50 patents. However, it is important to note that both companies have IP not directly related to RFID but that may broadly apply to fixed and handheld scanners/interrogators that may be used to read RFID tags.

On the whole, the industry should be cautiously optimistic about the eventual outcome. Neither company seems willing to provide any indication of how the settlement will affect revenue royalty streams or margins.

The settlement clearly bolsters Intermec's position in the RFID market and further supports its long-term IP licensing strategy goals. Intermec's licensing program enables the company to secure a share of the revenue streams from businesses they would not otherwise have the resources to secure on its own. The settlement with Symbol, coupled with the announcement of its roughly 20 Rapid-Start Program participants, are two feathers in the cap of the company that may have raised a few eyebrows last year when it originally announced its RFID IP licensing program.

The settlement is also positive for Symbol in that the company can move its RFID business forward without the uncertainty of the outcome of RFID suits with Intermec. And, despite Symbol's past successful track record in IP protection, it may have been a solid business decision to settle sooner rather than later. Litigation is costly, as is the potential of paying punitive damages on top of royalty fees. In the end, cooperation has and will continue to be the most effective means to grow a market and best serve the customer. The overarching question, however, becomes how the agreement will impact Symbol's long-term RFID revenues and margins.

The potential future RFID revenues of Intermec and Symbol aside, the settlement is clearly good news for the industry as a whole. Both companies desire to sell products that customers can feel comfortable are backed by the strongest IP portfolio and licensing available. And, with some of the IP litigation concerns now seemingly resolved, both a real and psychological impediment to wider RFID adoption has been overcome.

For further information about VDC's "RFID Business Planning Service - 2005-2006 Global Asset and Transaction Management Systems Market Analysis," go to:

About VDC

Venture Development Corporation (VDC) is an independent technology market research and strategy consulting firm that specializes in a number of retail automation, RFID, AIDC, embedded, component, industrial, and defense markets. VDC has been operating since 1971, when the firm was founded by graduates of the Harvard Business School and Massachusetts Institute of Technology. Today, we employ a talented collection of analysts and consultants who offer a rare combination of expertise in the market research process; experience in technology product and program management; and formal training in engineering and marketing. VDC's clients include thousands of the largest and fastest-growing tech suppliers in the world and the most successful investors participating in the markets we cover.

For further information, contact:

Michael J. Liard, RFID Program Director, 508-653-9000 ext. 130,

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