Friday, 4 October 2013

3D Printing: A Couple of IP Aspects You Probably Have Not Thought About

As of late, few hi-tech topics have captured as much interest as has 3D printing (aka 3D manufacturing or additive manufacturing). It is not surprising, therefore, that the IP aspects of 3D printing have attracted increased attention as well. In the main, the focus has been on copyright, design and trade mark issues with respect to the potential use of production files by end-users, and on patent rights in the 3D printing machines. However, it seems to me that there are two IP issues that have enjoyed far less coverage, despite their potential commercial importance, namely the branding of 3D printing manufacturers and IP protection of the manufacturing materials.

As for the branding issue, it is connected with the current structure of the industry. Two US-based major companies appear to dominate—3D Systems, here and Stratasys, here. Both have parlayed internal development with aggressive acquisition activity which is intended to achieve industry consolidation. Indeed, Stratasys has been particularly active of this in late, having merged with the Israeli company Objet in 2012 and in June 2013 having purchased the Brooklyn-based company MakerBot, here. There is no single technology for 3D printing, which in part explains the interest by both companies in acquiring various technologies in the field, when available and where appropriate.

But even more than that, as has been explained to me by someone close to the industry, the goal of both companies is to bring a variety of such technologies under its house brand, thereby enabling a potential customer to come to rely on the brand as indicating a one-stop shop for all of his 3D hardware manufacturing needs. As Landes and Posner argued in their oft-cited article, "Trademark Law: An Economic Perspective",Journal of Law and Economics (vol. 30, no. 2 (Oct., 1987), pp. 265-309), the major economic function of a trade mark is to reduce consumer search costs. If each of these two companies can develop a strong house brand for 3D printing products across a wide range of uses, price points, and manufacturing capabilities, customers will be more likely to eschew a detailed investigation of smaller purveyors of 3D printers in favour of simply turning to one these two companies, secure in the belief that one is likely to find whatever he is looking for.

However, it seems to be only a matter of time before one or more multinational companies (such as GE or maybe even Kodak(?)) will make concerted efforts to enter the field in a commercially meaningful way. When this happens, a particularly interesting branding struggle may well then ensue: in this corner, the entrenched market leaders in the 3D printing industry, each identified by its house brand and, in the other corner, one or more or multinationals, each of whose powerful brands covers a swathe of technology and industrial companies, but which currently have a only a limited presence in the 3D printing industry (unless, of course, a multi-national simply acquires one of the 3D printing leaders, but then allows the acquiree to continue to trade under its house mark and brands.)

The issue of IP and 3D printing materials derives from the economics of the industry. At present, the current business model of the dominant 3D manufacturers appears to be a version of the model that has characterized the 2D printing industry. Thus a 3D manufacturer can sell any given device only once but, in order for the customer to make use of the machine, he must also purchase the material that enables additive manufacture to take place. The sale of the material portion of the 3D printing process is therefore a critical source of recurring income.

As summarized in a 7 September 2013 article in The Economist ("3D printing scales up"), one of the current drags on widespread reliance on 3D printing is that the cost of the materials needed may reach a price of $80 a kilo, as compared to $2 a kilo for materials used in mass manufacturing. However, the reason for this wide disparity of price is not only the high requirements for purity and composition needed for 3D printing; it also is explained by the current way that the industry is organized. Thus, as the article explains:
"But mostly it is because 3D-printer manufacturers require users to buy materials from them and mark up the price, as with the inks for 2D inkjet manufacturers. Mr Vicari [Anthony Vicari of Lux Research] thinks this strategy is not sustainable long term as third-party suppliers enter the business. Moreover, some big manufacturers, like GE, are developing bespoke 3D-printing systems which are not dependent on a single supplier of equipment or material."
Against this backdrop, it would seem that being able to continue to reap substantial profits from 3D manufacturing materials is essential to the industry as it is currently structured. Can IP play a role here? It is my understanding that, at the moment, manufacturing materials are currently protected primarily by trade secrets. As we all know, this kind of protection is intended to prevent unauthorized disclosure, but it does nothing to prevent competitors from coming up independently with equivalent materials. If 3D printing manufacturers face waning control over sale of the materials, might not patents come to their rescue? I frankly do not know the extent to which patent protection is appropriate for 3D printing materials. But if it is, then perhaps the manufacturers might be able to prevent the possible erosion of their profit margins in the materials by being able to assert patent rights (even if merely to sign up third-party licensees). It will be interesting in this context to see if there will be enhanced acquisition of companies specializing in developing 3D printing materials and an increase in patent filings in this area.

1 comment:

Anonymous said...

I think your link to Stratasys should be