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Leading Providers of RFID Technology Settle with Patent Troll, Impacting Fashion and Apparel Companies

Over the past several years, many fashion and apparel retail companies have implemented RFID technology in their stores, as it provides a fast, cost-efficient, automated, and accurate method for tracking inventory both through the supply chain and within the retail environment. However, as previously discussed by Arent Fox, many of these companies have been contacted by a patent-licensing company called Round Rock Research LLC (Round Rock) regarding their use of RFID readers and tags in their stores. Round Rock, which operates as a non-practicing entity (NPE) and earns revenue solely by licensing and enforcing its patents, alleged that the retailers’ use of RFID products provided by vendors such as Motorola Solutions, Inc. and SMARTRAC N.V. infringed several of its patents encompassing RFID technology. After licensing negotiations stalled in late 2011, Round Rock filed patent infringement lawsuits against many of these companies, including Macy’s Inc., Gap Inc., Wal-mart Store Inc., American Apparel, and J.C. Penney Co.
 
In a development that bodes well for the fashion industry, Motorola and SMARTRAC—which offer RFID readers and RFID tags, respectively—recently announced that they have reached settlements with Round Rock. As part of the settlements, a related infringement lawsuit between Motorola and Round Rock will be terminated, Motorola and SMARTRAC will license Round Rock’s patents, and customers of these RFID vendors reportedly will not be sued by Round Rock for patent infringement or will have their existing lawsuits dismissed. Given Round Rock’s settlements with Motorola and SMARTRAC, as well as its ongoing negotiations of licensing agreements with several other RFID vendors, resolutions of its disputes with fashion and apparel retail companies are likely forthcoming.
 
Round Rock’s licensing of its patents to RFID vendors is expected to spur greater interest in RFID, as it will allow retailers to employ RFID solutions with confidence, knowing that certain vendors will be able to protect them from future patent litigation. Nevertheless, given the rapid expansion of RFID in the fashion industry and the lingering uncertainty relating to Round Rock’s enforcement of its patents, both manufacturers and retailers should be aware of the legal risks involved in utilizing this technology.
 
Arent Fox is continuing to monitor these cases. For more information, please contact Anthony V. LupoSarah L. Bruno, or Anthony D. Peluso.