CNet new.com reports that a key patent holder's demand for royalties has triggered concerns that promising RFID technology could become embroiled in an intellectual property battle.

The royalty flap stems from a new protocol, the Electronic Product Code Generation 2 standard, designed to improve the compatibility of radio-frequency identification (RFID) equipment from different suppliers and iron out a number of other technical kinks.

The patent claim comes on the eve of a new protocol's debut. EPC Global, the organization that helped create the protocol, expects to finalize it at an Oct. 5 meeting. Now, some RFID backers fear other patent holders could come forward and demand royalties, slowing RFID's progress.

Major companies, including Albertsons, Procter & Gamble, Wal-Mart Stores and German retailer Metro, have already begun to set up RFID systems and are eagerly awaiting the release of the new protocol to advance their projects. They expect RFID, a wireless tracking technology that may someday replace bar codes, to help them reduce theft, shave labor costs and handle inventory more efficiently.