Now it appears a compromise is imminent.

Wired News reports that IBM has developed a different type of RFID. IBM believes it will address concerns about privacy while providing the benefits of RFID to retailers.

RFID is a very low-energy, low-cost way of making tiny radios that serve as tracking devices. By attaching these to merchandise, retailers realize a number of important benefits.

First, theft becomes much harder because the “beacons” are easily tracked as merchandise leaves the store. (This is especially important in dealing with “shrinkage” — a.k.a. employee theft — which is much harder to monitor than shoplifting.)

Second, the RFID tags allow for easy tracking of inventories. Retailers can monitor changes in real time and also locate merchandise that may have been misplaced (especially important with high-priced or slow-moving items).

IBM’s innovation is called Clipped Tag. It has a special antenna that consumers can easily remove by tearing it off. After the antenna is removed, the RFID’s broadcast range is reduced  from 30 feet to about two inches.

This is important, because the main concern voiced by privacy advocates is that consumers may not remove tags, thereby leaving them open to tracking by intrusive governments or criminals.  For example, if you buy a sweater that’s got an RFID attached, in theory your movements could be tracked. A database linking purchases to RFID codes could enable someone to sweep an area and identify those present without their permission or cooperation.

RFID has many potential uses, and the decision by Wal-Mart to begin using it has resulted in a rush to market. Apart from retail merchandise, it has uses in transportation (imagine never having to take a garage parking ticket again), health care (it could replace ID cards that warn of penicillin sensitivity) and even passports and drivers licenses.

The Clipped Tag concept lets the RFID tag perform all its designated functions so long as the retailer is in control of merchandise. Likewise, a consumer can leave it fully enabled (as in the case of your medical ID card) or disabled (after purchasing that sweater). Because it can still identify the product, merchandise returns are still possible.

The widely advocated alternative approach is a “kill command” that would disable the RFID chip electronically. The problem is that no one but an expert could verify this.

Both industry and privacy advocates seem pleased by IBM’s solution. Privacy advocates appeared to agree, with some reservations. In particular, they like the fact that there is visible proof that the RFID has been “clipped,” something the alternative does not offer.

This is a good example of how innovative technology can offer the advantages of a breakthrough while simultaneously addressing legitimate concerns about misuse.

To your profitable future,
Jonathan Kolber
May 2, 2007

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Investing in RFID Technology was originally featured in the Penny Sleuth.