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Alien Has Landed A growing technology strikes some as a perfect tool, while others think it's a sign of the apocalypse By Stett Holbrook THE ALIEN invasion has begun. Still hidden behind warehouse walls and receiving-dock doors, the technology won't proliferate for several years. The Silicon Valley company with a sci-fi name is at the forefront of an integrated circuit-powered revolution that may someday rival the Internet in its reach, touching virtually all corners of the global marketplace and beyond. Its proponents envision an "Internet of things" that links everything, everywhere. They see dollar signs as well as better-stocked shelves, safer medicine, less lost luggage, fresher produce and an ever-growing list of business and consumer benefits. Others regard the coming revolution as the dawn of an unprecedented era of corporate and government surveillance—and privacy invasion. As devices and life forms merge, locating lost dogs and children will be a snap. Chip-implanted Mexican government officials can now badge their way into secure inner sanctums without even having to flash a card. Loose tongues have already raised macabre South-of-the-border scenarios of kidnappings and severed limbs as chips begin to be used to track, authenticate or grant access and financial privileges. Welcome to the brave new world of Alien Technology and radio-frequency identification. Tag, You're It In the next few years, radio-frequency identification (RFID) may be everywhere: in supermarkets, in your clothes, in your home, even in you. It is imagined that RFID will one day replace the omnipresent bar code. But RFID isn't a new technology. It's only moving into the mainstream now because the price of the technology is dropping and several major corporations are adopting it, creating a get-on-the-bandwagon-or-be-left-behind mentality. "People are getting extremely excited," says Kathleen Schaub, vice president for Sybase Inc.'s information technology solutions group. The Dublin, Calif.-based company is a leading provider of database software and plans to get into the get into the RFID industry itself. "It just absolutely explodes the amount of data coming into a company ... the physical world can now be part of the Internet." For all its potential, RFID is a relatively simple technology. RFID uses radio waves to automatically identify people or objects. In its most common applications, RFID stores a serial number that identifies a person or thing on a microchip. The grain-of-sand-size chip is attached to a tiny antenna. Together, the chip and antenna are called a tag. Most tags are about the size of a small Band-Aid. The antenna allows the chip to transmit information to a reader. The reader then converts the radio waves from the tag into digital information that's read by computers. RFID was first used by the United States in World War II to distinguish friendly and enemy aircraft. The first commercial application dates back to the 1970s, when Los Gatos electronics inventor Charles Walton sold a lock-opening key-card system to Schlage. While he saw widespread uses for the technology, he was too early. Back then, the bar code was the ascendant form of product identification. Now that RFID's time has come, Walton, 82, watches as others run with the technology he was advocating 30 years ago. While he continues working on RFID in his lab, his patent expired in 1997. While consumer applications of RFID are limited now, the technology is widely used. FasTrak toll passes, remote-entry key fobs and ID chip implants in pets are all RFID-based technology. In many ways RFID tags are like bar codes in that they transmit data about a product, but unlike barcodes, which must be held up to a scanner to be read, RFID tags are readable from up to 20 feet away. And where bar codes must be read one at a time, an entire pallet full of products can be read simultaneously, dramatically reducing the time—and workers—required to inventory products. As it's being applied now, RFID is used to strengthen the weak links in commercial and government "supply chains." As merchandise moves from manufacturer to distributor to wholesaler and finally to retailer, things often get lost. Inventory is misidentified. Quantities are improperly calculated. This can mean retailers order too much product or not enough. Products fall out of date or spoil. Customers get mad and shop elsewhere. Prices rise. With RFID, proponents say, these errors will become a thing of the past. Queried with a reader, a pallet of RFID-enabled toothpaste will speak up and say, in essence, "Fifty cases of Crest toothpaste, right here." Perishable items like milk could be programmed to respond, "There are only two cases of us left, and we'll be sour in three days. Better order more." Supply-chain RFID applications are going to be the first roll-out of the technology, but other uses will follow right behind. "Retail supply chain is going," says Tom Pounds, Alien Technology's vice president for corporate affairs and product development. "2005 is the year of implementation. It's deploying." Other uses, while they may sound far-fetched, are only a few years off. In the home, it's imagined that clothes will tell a smart washing machine that they should be washed in cold water or an RFID-wired turkey will tell the oven how long it needs to be cooked. In the supermarket, an entire shopping cart of groceries could be scanned at once without unloading your cart. If you've got an RFID-enabled credit card or customer-loyalty card, the RFID reader will scan your purse and debit your account. But it's talk of RFID tags appearing on individual products like cosmetics, automobile tires and clothes, and potentially linking them to the people who purchased them, that gets privacy advocates nervous. RFID critics fear the technology will offer corporations and the government irresistible access to not only our shopping habits, but a peephole on our movements outside the supermarket. RFID tags could potentially be read through your car or your clothes or as you move about, identifying not only what you buy, but who you are, critics say. It's expected that the distance at which the tags can be read will increase over time, but in the near future critics fear the placement of readers at strategic points such as store and parking lot entrances, freeway on/offramps, public buildings, etc. "You could put these things anywhere," says Katherine Albrecht, a privacy advocate and leading critic of RFID. The Patriot Act already allows federal agents to seize personal and business records if the records can be shown to relate to terrorism or spying. Government agents can also conduct "sneak and peak" searches, entering a home or business secretly without immediately notifying the target. In the post-Sept. 11 world, will Constitution-stretching officials like Attorney General John Ashcroft be able to resist using RFID to accomplish their goals? Organizations like the American Civil Liberties Union and the Electronic Privacy Center as well as elected officials are also concerned about the privacy implications of RFID technology. Prime Mover Directive While the public is generally unaware of the potential perils and promise of RFID, Alien Technology has been at the center of the coming revolution. Alien Technology occupies a sprawling modern building in Morgan Hill's growing high-tech area off Cochrane Road. A company that calls itself Alien offers plenty of fodder for opponents who fear the technology's intrusion into private life, but Alien seems to have a bit of fun with its name. Inside the company's dark tinted glass front doors, two robots stand sentry in the lobby: Robby the Robot, who made his debut in the 1956 sci-fi classic Forbidden Planet as an iconic image of advanced but friendly technology ("Danger, Will Robinson!"), guards the right flank of the lobby. On the left stands Gort, the silver-helmeted giant who turned his death ray on a paranoid Washington, D.C., in 1951's epic The Day the Earth Stood Still, trying to convince earthlings to live in peace or face destruction. Pretty good corporate messengers to have around. Alien's front hallway comes straight out of another sci-fi standby: the U.S.S. Enterprise. The brushed steel and rivet-studded walls are as Star Trek as Spock's ears. A key card-activated metal door opens by sliding into the wall. All that's missing is the whoosh of the Enterprise's portals. Alien isn't out to control the world. The company just wants to supply the world's largest corporations and most powerful government with tiny tags that will identify virtually everything in them. Today, RFID is a roughly $1 billion a year industry. But in the next few years, the business is projected to jump to about $5 billion a year. With the new applications being unveiled all the time, it's anyone's guess how big RFID will become. "I think it's going to be a very major industry," says vice president Pounds, a thin man whose casual dress style and restrained demeanor peg him for a tech executive. "If you go out 10 years it has the potential to be a ubiquitous technology." Alien is a privately held company and one of a half-dozen radio-frequency identification (RFID) manufacturers in the United States (Matrics is another RFID leader; the companies seem to have a thing for unsettling names). Alien has approximately 130 employees and is supported by venture capital, about $140 million to date. The company is expected to break even next year. While still relatively small, Alien's been busy cranking out millions of RFID tags to feed a growing market, positioning it to become the Ford Motor Co. of the RFID industry. One of Alien's market advantages is a patented technology called fluidic self-assembly that allows the company to make large volumes of RFID tags quickly and cheaply. Instead of using a robotic arm to put tiny microchips in place, a process that is not well suited to speed and large quantities, Alien uses a technique in which the chips are placed in liquid and then allowed to settle into place. The process is unlike any other chip-assembly technique on the market, and it allows Alien to make large quantities of tags at a very low cost, Ponds says. For orders over 1 million, tags go for 20 cents each. But the industry is watching Alien to see when and if it makes good on its pledge to manufacture tags for 5 cents each. When that happens, expect the RFID floodgates to open as the technology becomes affordable for medium- and small-sized companies. Alien's growing chip assembly prowess has meant steady growth since it was founded a decade ago. The company has landed several key contracts, including the U.S. Department of Defense, Gillette, San Francisco International Airport and other clients. It has opened a second assembly plant in Fargo, N.D. But now Alien is about to hit the big time. There's nothing like a dictate from the world's largest retailer that its top 100 suppliers adopt RFID technology by 2005 to put a little wind in your sails. Wal-Mart has given the industry and Alien in particular a monumental shot in the arm. The Arkansas-based superstore chain mandated that its top suppliers use RFID tags on cases and pallets going through its three Dallas area distribution centers by January 2005. The rest of the store's suppliers must adopt RFID for Dallas area warehouse operations by the end of 2006. "They are clearly a prime mover," says Pounds. Wal-Mart is generally regarded as one of the most efficient retailers in the business, but even the behemoth faces shortages attributable to hang-ups in its supply chain management. It's estimated that the stores are out of stock about 7 percent of the time. RFID can help solve that problem, says Pounds. According to published reports, thanks to Wal-Mart's mandate Alien is expected to expand its customer base tenfold and quadruple its annual revenue this year. Asked how many of Wal-Mart's top 10 suppliers are coming to Alien, Pounds says "a majority," the hint of a smile forming on his lips. "We have a significant majority market share among those Wal-Mart top 100," he says. For now, Wal-Mart and other companies like Target and Albertson's in the United States and Tesco and Metro in Europe are focusing on supply chain RFID applications. Other uses include tagging pharmaceuticals to prevent counterfeiting, store checkout scanners and tracking systems on container ships and trucks. All this back-of-the-house, supply-chain stuff is well and good. Better inventory control. Fewer out-of-stock items. Safer meds. Lower prices. What's not to like? Although the adoption of RFID technology will probably favor big retailers and manufacturers that deal in large volumes at the expense of mom-and-pop operations that won't qualify for large-volume RFID-tag price breaks, the benefits of the technology are plain to see. But there's a potentially dark side to this bright new technology. Market of the Beast A small but growing chorus of critics says RFID must be held in check before already pervasive cracks in consumer privacy break wide open. If the anti-RFID movement has a spokesperson, it's Katherine Albrecht. Albrecht, an attractive, clear-eyed woman with long, straight hair, founded a group called Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), and is the self-appointed David against the RFID Goliath. Albrecht is Ph.D. student at Harvard University where's she's earning a degree in education. (Her dissertation is on consumer psychology.) Before moving to Massachusetts, she lived in San Jose, where she began her career as a consumer-privacy activist. Her initial focus was supermarket loyalty cards (another name for discount cards). In her research, she found that not only do loyalty or so-called "club cards" fail to offer savings, they prey upon elderly, low-income and immigrants shoppers who don't use the cards, and they allow supermarkets to target big-spending consumers at the expense of everyone else. Her opposition to supermarket-loyalty cards led her to RFID, a technology that is far more disturbing, she says. But her discomfiture with these technologies dates back to her childhood. When she was an 8-year-old girl, Albrecht's grandmother took her aside one day and issued her a grave warning. Be on the lookout for the number of the beast, she told the young and slightly freaked-out Albrecht. The warning comes from the Bible, Revelations 13:16-18: "And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is six hundred threescore and six." "People have struggled to understand that scripture since it was written," she says. She says she understands it now. Albrecht never forgot what her grandmother told her, and she promised herself she would remain vigilant. To her, the passage "No man might buy sell, save he had the mark" means "If you don't take the mark, you starve." Years later as she began investigating supermarket cards and later RFID, chills began to run down her spine. "Here we are," she says. "I saw that nightmarish vision of the future. ...I made a vow that I was going to tell the world." While Albrecht is a Christian and is motivated by what she sees as biblical prophesy, she bases her privacy concerns and critique of RFID on her philosophy as a "free-market libertarian." But she also sees a role for government and is pushing for the adoption of an "RFID right-to-know act," proposed legislation that can be found on her website stoprfid.com. Entrusting big corporations to police themselves and to ignore the potential mother lode of data that could mined from RFID databases is not something she's willing to do. "I don't trust them one iota," she says. "I want a law." Although the industry says it will label RFID-tagged items and allow consumers to deactivate them before leaving the store, Albrecht says it's too easy to hide them in cardboard packaging, in clothes labels, between layers of rubber in shoes or in tires. Instead of having corporate goons driving around in unmarked vans and pointing RFID readers at people's front doors, Albrecht says it's not hard to imagine the installation of readers at traffic onramps, shopping-center entrances and other key locations. Because RFID-tagged products could be linked to the people who purchased them, the potential for privacy invasions is legion. In an article she wrote for the Denver University Law Review, Albrecht cites statements in Consumer Insight Magazine made by John Stermer, senior vice president of E-business market development at ACNielsen, a market research firm: "In an industry first, RFID enables the linking of all this product information with a specific consumer identified by key demographic and psychographic markers. ...Where once we collected purchase information, now we can correlate multiple points of consumer product purchase with consumption specifics such as the how, when and who of product use." While the industry has pledged to protect consumer privacy, there have been several examples of less-than-forthcoming corporate behavior. In January, German supermarket Metro AG, the country's largest retailer and fifth-largest in the world, unveiled its "future store" to the public in Rheinberg—a showcase of RFID technology. In introducing the technology, the store assured the public that whenever RFID technology was used it would make it visible and that the chips would never be used to store customer data. Those claims, as uncovered by Albrecht during her tour of the store, turned out to be false. Without notifying customers, the store hid RFID tags in customer-loyalty cards, linking purchases with customer identity. What's more, Metro AG embedded RFID in shopping carts to track customer movement in the store without notifying them. And then there was the RFID-tag deactivation station that didn't work. Last year, Albrecht organized an international boycott of Gillette after she discovered the company was testing a so-called "smart shelf" in a Massachusetts Wal-Mart store. When a shopper picked up a package of Mach3 razors, a product notoriously popular with shoplifters, an RFID tag on the packaging activated a camera that photographed the shopper. The photo was then compared with another taken when the customer took the razors to the checkout counter. Days after Albrecht launched her boycott of Gillette, the company said it dropped plans to monitor individual products for 10 years. In a similar case uncovered by the Chicago Sun-Times last year, Wal-Mart and Procter & Gamble tested an RFID-activated smart shelf in an Oklahoma Wal-Mart. When a customer picked up a tube of Max Factor Lipfinity lipstick, it triggered a webcam monitored by cosmetic-company employees. Procter & Gamble defended the test, saying it posted a sign near the shelf alerting customers to the electronic monitoring system. No mention, however, was made of the RFID tag. Procter & Gamble said the monitoring system helped it maintain inventory on the shelf. But after the Sun-Times uncovered the trial, the companies discontinued it. "This trial is a perfect illustration of how easy it is to set up a secret RFID infrastructure and use it to spy on people," said Albrecht after the trial was uncovered. "The RFID industry has been paying lip service to privacy concerns, calling for notice, choice and control. But companies like P&G, Wal-Mart and Gillette have already violated all three tenets when they thought nobody was looking. This is exactly why we oppose item-level RFID tagging and have called for mandatory labeling legislation." The I.D. and the Ego Jack Grosso, spokesman for EPC Global, the RFID industry's trade group that includes Wal-Mart, Procter & Gamble, Gillette and Alien Technology, says those incidents are "old news" and don't reflect the practices in the industry today. Privacy is in the interest of the industry because if consumers are hesitant, it will hamper adoption of the technology, he says. "Privacy is as important to us as anything else we are doing," he says. EPC Global has adopted a number of guidelines he says will protect the public. They include labeling all products that carry RFID tags and allowing retailers to deactivate or "kill" the tags before they leave the store. While the guidelines are voluntary, Grosso says companies that don't abide by them "will find themselves on the wrong side of the issue." Alien's Pounds agrees. "The retailers have no interest in making a problem or making it a reason not to shop at a store," he says. "I don't think there's any misalignment of incentives between the retailers and consumers." Privacy controversies have taught the industry that item level tagging "has to be done very thoughtfully," he says. But he thinks privacy concerns may be overblown. "You hate to say the cow's out of the barn, but it you carry a cell phone now, it's easy to track your location," he says. "If you wanted to do something nefarious, I'd argue you could do that now." True enough, but RFID may make that much easier. And more global. In July, the U.S. House of Representatives' Committee on Energy and Commerce held a hearing on RFID and its implications for commerce and privacy. In testimony before the committee, Barry Steinhardt, director of the technology and liberty program of the American Civil Liberties Union, outlined potential RFID abuses. "Most troubling of all are proposals to incorporate RFID tags into government identity documents," Steinhardt told the committee. "RFID would allow for convenient, at-a-distance verification of ID. RFID-tagged IDs could be secretly read right through a wallet, pocket, backpack or purse by anyone with the appropriate reader device, including marketers, identity thieves, pickpockets, oppressive governments and others. Retailers might add RFID readers to find out exactly who is browsing their aisles, gawking at their window displays from the sidewalk—or passing by without looking. Pocket ID readers could be used by government agents to sweep up the identities of everyone at a political meeting, protest march or Islamic prayer service. A network of automated RFID listening posts on the sidewalks and roads could even reveal the location of all people in the United States at all times." According to Steinhardt, a plan for RFID-tagged passports is already in the works. In the wake of Sept. 11, a U.N.-affiliated group called the International Civil Aviation Organization (ICAO) has been developing global standards for passports and other travel documents, an effort that stems from the U.S. Enhanced Border Security and Visa Entry Reform Act, which mandated machine-readable, tamper-resistant passports that incorporate biometric and document authentication. The act mandates that the ICAO create the standards for these passports. Under the ICAO's current proposal, passports around the world would incorporate not only biometrics like fingerprints or face recognition but also remotely readable RFID tags, he says. For now, the RFID industry is a kind of high-tech Wild West. There are no government regulations, and the industry has pledged to be its own watchdog. State Sen. Deborah Bowen (D-Redondo Beach) was one of the first lawmakers to carry legislation to try to regulate RFID. She carried a bill last year (S.B. 834) that would have permitted stores and libraries to collect the same information they do now using bar codes but banning the use of RFID to track people as they shop or after they leave the store or library. Specifically, the legislation would have prohibited any person or business from using RFID tags on store products and from using RFID readers to collect personal information about people unless a customer provides the information. The reasonably written bill never made it out of committee and died. Lining up to oppose were the American Electronics Association, California Chamber of Commerce, California Grocers Association, California Retailers Association, Consumer Specialty Products Association, General Motors Corporation, Grocery Manufacturers of America and Hewlett-Packard Company. Grosso, spokesman for EPC Global, and other RFID industry proponents say the legislation would have stifled a new technology before it was fully formed. Bowen sees many benefits to RFID but says the time to address its potential abuse is now, not later. Now that we realize the threats posed by Internet spam and spyware, privacy problems that in retrospect should have been confronted earlier, it makes sense to nip potential RFID abuses in the bud, she says. "There's plenty of room to be innovative and creative and still protect people's privacy," she says. "It's better to lay out the ground rules now." She's vowed to introduce legislation again. Meanwhile U.S. Sen. Bill Nelson (D-Fla.) has taken up the RFID issue at the federal level. Nelson, a member of the Senate Commerce Committee, has gone to the Federal Trade Commission with a list of questions and concerns about the privacy and security issues raised by RFID. In the debate over RFID and privacy concerns, Alien Technology and companies like it argue that they are really just messengers. "We make these tags," says Pounds when asked about the potential for abuse of RFID technology. "We cannot control what people do with them." 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