Fewer fundamental patents on the most basic 3D printers is unlikely to have an immediate impact on most businesses, IP holders or investors. A few years from now it will be different.
The cost of basic 3D printers is likely to drop dramatically in 2014, enabling hobbyists and individuals greater access to the disruptive technology. The growth of high-end 3D printers, however, will continue at a more deliberate pace, as expensive hardware and innovative scans generate everything from airplane parts to hand guns and human ears. IP disputes are sure to proliferate.
The short-term prognosis for 3D Printing stocks is poor. The prospects for some IP holders and businesses in the not-too-distant future could be much better, depending less upon how the new printers are priced than on how the output from them can be monitored and licensed.
Financials reported last week in the 3D printing space in Seeking Alpha do not support an immediate upside for the industry: ExOne (XONE) warned on Q4 revenues due to delayed orders, and Stratasys (SSYS) announced a slightly light 2014 EPS guidance($2.15-2.25 vs. consensus $2.33) despite a solid revenue outlook (+40%, $670m at midpoint vs. consensus $656m). “The expiration of key patents from 2014 onwards,” wrote the the investor publication, “is likely to spark increased competition and to pressure ASPs (average selling prices) and gross margins of the 3D industry leader, 3D Systems (DDD).”
Just which patents are, in fact, expiring and what do they cover is difficult to tell from my research. But Christopher Mims, Science and Technology reporter for Quartz believes February will be a watermark in the growth of this industry. For the short-term, patent expirations will increase the prospect of much cheaper printers, prices of which have already come down. They also are likely to fuel impending battles between 3D software designers, brands and IP holders.
My next Intangible Investor, “War Between 3D Printing and IP Rights is not Inevitable,” will appear in the March issue of IAM. In it I consider the impact 3D printing will have on IP holders and IP rights, and how patent, trademarks, copyrights and trade secrets will possibly affect the development of this industry.
“While 3DP makes it easier to create new objects and personalize existing ones,” I observe, “it will make counterfeiting a range of products as commonplace as music file sharing. That is unless IP holders choose to liberalize their definition of copying or identify better ways to monitor, enforce and license it.”
Until fairly recently expensive 3D printers were exclusive to high-end design and engineering firms. Now, they are starting to reach the homes of hobbyists and businesses, and have the potential to change how millions of objects and parts are created, distributed and purchased.
All of this raises complex legal issues. The Sony Betamax and Napster cases provide a glimpse of what is likely to occur on a much grander scale. These disputes made clear that in the digital world value is tied to the ability to copy and distribute. There is little jurisprudence to provide guidance for how IP laws will apply when 3D printers become main stream and both businesses and individuals begin manufacturing items for personal use or sale. On another level, 3DP presents an opportunity for printer manufacturers, owners, product distributors, and businesses, including those that hold IP, to get things right.
An important paper to be published this year in the Georgetown Law Review, and currently available here in draft, “Patents Meet Napster: 3D Patents and the Digitization of Things,” by two law professors, argues that 3D printing should not be subject to existing IP regimes and “should be lightly regulated, lest we make the same mistakes as in the past.”
Now, where have we heard this before?
The authors, Deven R. Desai and Gerard N. Magliocca, raise many good points about the coming collusion between IP and 3DP, but also say that Congress should assist the dissemination of 3DP by limiting the infringement liability for personal use in the patent sphere and clarifying the standards that govern digital intermediaries for patents and trade dress. (Prof. Desai served as Academic Research Counsel for Google in 2013 while leave.)
We know today what we did not know some 20 years ago when Napster ruled the Internet and broadband barely existed: regulating digital technologies under IP law is no simple matter, but it can be done without impeding growth or stifling creativity. Less reliance on the letter of the law may help in some cases of personal abuse, but so will more literal interpretation when it comes to large-scale copying and distribution that competes directly with IP holders.
War Between 3DP and IPR is not Inevitable will be available in IAM next week.
Image sources: oabbs.zol.com; gizmodo.com.au; gizmag.com