Wednesday, April 05, 2006

Bar(code) Brawl

Lawyers have their knives drawn in a patent dispute over the public domain 2D datamatrix technology. Originally invented by RVSI (now part of Siemens), the venerable datamatrix has been promoted as an open standard, is covered by ISO/IEC16022, and has been widely adopted as the symbology of choice by manufacturers due to its high data density, ease of marking, excellent error correction characteristics, and widely available scanners. Datamatrix is widely used on e-stamps (, electricity bills, mailings, pharmaceuticals, UID, medical devices, auto parts, etc. etc.

Therefore it was disturbing to the industry to hear that a little-heard of legal firm was out demanding licensing fees for use of the datamatrix. A number of companies -- including Adidas, AMD, Nokia, and Boston Scientific -- have signed license agreements rather than litigate. But why, surely it’s public domain? The legal firm is allegedly seeking licensing fees in the vicinity of $400,000 -- a sum considerably less than what it would cost those companies to defend themselves in court. Therefore it’s easier to settle than to fight. This is familiar to anyone who knows the Lemelson case - in which a firm was able to extract over $1bn in license fees from companies using barcodes.

Not so fast!, says Cognex - an industry leader in machine vision - who would have a lot to lose from its customers shying away from the 2D datamatrix. “We strongly object when questionable patents are used to extort payments from companies that do not have the expertise to challenge the patents, or who, for business reasons, decide to submit to licensing demands rather than to undertake costly legal challenges," said Dr. Robert J. Shillman, Cognex's Chairman and CEO.
Cognex is well positioned – they beat the Lemelson case, and believe the patents being used by Acacia are far weaker.

If Acacia is successful in “extracting” a tithe on the datamatrix, then it would be a boon to makers of proprietary code symbologies, such as VideoJet’s “Snowflake”, ORBID’s 2DMI, or Code Corp’s “GoCode”. Given the installed base and strength of the datamatrix case, however, … it looks like Acacia will be on the defensive.