IP licensing in a 3D printed world

At first blush, a world where parts and products are created at home or on the factory floor using 3D printing may seem like a potential IP licensing bonanza. In reality, the technology is likely to create some IP licensing opportunities while destroying others.

The Gartner research firm predicts full consumer adoption of 3D printing by around 2023, though I believe that 2025 is probably more likely. The McKinsey consulting firm seems to agree: “We estimate that consumer use of 3D printing could have potential economic impact of $100 billion to $300 billion per year by 2025.” Gartner also predicts that: “By 2018, 3D printing will result in the loss of at least $100 billion per year in intellectual property globally.” Much of that will be the result of the democratisation of manufacturing and 3D printing away from control.

Democratisation of manufacturing

3D printers eliminate barriers to entry in manufacturing because they have the potential to enable anyone to make almost anything. This means that small companies may be able to compete with big ones in niche markets. 3D printing may also result in widespread copying, especially of consumer products. However, perhaps more importantly, companies that formerly bought replacement or spare parts may start making the parts themselves, or repairing them with 3D printers. According to an IBM 3D printing study: “The competitive advantage from both proprietary design and parts production is expected to erode as basic design blueprints become widely available via open source… And the service parts business will lead the digital transformation, leaving companies unable to generate profits from selling spares.”

As democratised manufacturing increases and the once-clear line between manufacturer and customer blurs, demand for physical products will drop if customers can make such products themselves. Gartner’s prediction of $100 billion per year in worldwide 3D printing-related IP losses seems to be based not only on infringement of IP rights, but also on intellectual property that will never be bought (Gartner seems to be using the term ‘intellectual property’ to mean not just IP rights, but intellectual property in the broad sense, as in the fruit of human creativity.

As demand for physical products drops and customers 3D print what they need, the data needed to make such products will become a licensable commodity. Companies may find that it is more profitable to license digital blueprints of products instead of the products themselves. This could lead to major shifts in business models, as companies morph from making and selling things to selling or licensing data.

Away from control

3D printing away from control means making things without anyone knowing about it or being able to control it. The democratisation of manufacturing naturally leads to the ability to 3D print away from control. 3D printing’s ultimate disruption will happen when people can make things with almost any functionality away from control.

On the industrial side of 3D printing, customers may make and customise their own parts, rather than buying them. Although the supplier may notice the lost sales, it is unlikely to have any way of knowing the extent of the customer’s in-house parts printing and customisation. Absent both knowledge by the supplier and applicable IP rights, the supplier will have no way to stop or control the customer’s in-house parts making. However, the supplier may be able to license its product designs for the customer’s in-house 3D printing.

On the consumer side, away from control means the ability to 3D print at home or in any other way that is not controlled and cannot be controlled, including:

• 3D printing products at home from blueprints obtained via peer-to-peer file sharing on the Internet;
• 3D scanning and printing any product;
• printing or buying 3D printed products or designs on the black market or the deep web;
• obtaining pirated proprietary blueprints from websites such as Pirate Bay; or
• having personal blueprints printed at uncontrolled local shops or by internet-based fabricators.

Some 3D printing away from control may violate IP rights. However, as 3D printing commentator Michael Weinberg of Public Knowledge has said: “Most of the physical world is not protected by any type of intellectual property.” Most 3D printing away from control will be perfectly legal.

The 3D printing of things with almost any functionality away from control is where the real disruption will take place. Anyone will be able to bypass the traditional supply chain and self-manufacture. At present, the things that can be self-manufactured are limited, but this is a time problem: given enough of it, anyone may be able to make almost anything away from control.

Five ‘I’s

Although IP principles apply to 3D printing in the same way as to any other technology, 3D printing has the unique potential to threaten the value of IP rights and their ability to give companies a competitive edge. Combined with democratised manufacturing, 3D printing has the power to make IP rights irrelevant.

As industrial 3D printers become increasingly powerful and the technology trickles down to consumer machines, and as industrial customers and consumers begin to make the things they need, the democratisation of manufacturing will increase away from control. When anyone can 3D print things with almost any functionality away from control, IP rights will suffer the dreaded ‘five Is’:

• Infringement – when anyone can 3D print things with almost any functionality, the risk of IP infringement away from control will increase.
• Identification – infringement away from control will be increasingly difficult to identify.
• Impractical or impossible – it will be increasingly impractical or impossible to enforce IP rights against infringement away from control, or there may be no effective IP protection for the product in question.
• Irrelevant – IP rights will become increasingly irrelevant. They will exist and be enforceable for 3D printing infringement within control, but will be largely impotent for 3D printing infringement away from control.

IP licensing is largely the flipside of litigation – some might even describe it as litigation with a happy ending. Parts and products that are 3D printed away from control will be subject to the five Is, so it may be no more practical or possible to license designs for 3D printing away from control than to enforce IP rights against 3D printing away from control. The licensing of digital blueprints for 3D printing away from control will be entirely voluntary. Machine users will either print unlicensed blueprints – many of which may be non-infringing or even uncontrolled infringing substitutes for IP-protected products – or take traditional IP licences. Such blueprints may be open or closed source designs and may be free or royalty bearing, or a combination of the two. When it becomes possible for anyone to 3D print almost anything away from control, the sheer magnitude of such 3D printing will probably involve little or no control.

In July 2014 Hasbro and 3D printing marketplace Shapeways announced the launch of SuperFanArt, a website that enables fans inspired by Hasbro brands to showcase their artwork and sell their 3D printed designs

Licensing opportunities within control

For products made within control, IP rights and licensing will probably continue to work effectively, much as they do today for traditional manufacturing methods. However, the ability to make things of almost any functionality away from control may radically change the within-control world. You may no longer need most manufacturers’ products because you will be able to make them yourself. Companies may find that demand for their products evaporates because 3D printable substitutes – infringing or not – are readily available. Retail outlets that formerly sold mass-produced products may vanish, just as camera stores vanished when photography went digital.

Widespread 3D printing will also affect licensing opportunities. Manufacturers may realise that it is no longer profitable to continue to mass produce products and may switch to selling or licensing blueprints and customised products instead. The ability of companies to do so profitably will be directly affected by the availability of substitutes that can be 3D printed within or away from control. If reasonable substitutes – infringing or non-infringing – are readily available for 3D printing away from control, companies will be forced to add sufficient value that machine owners will license their products at a premium to the substitute.

Moreover, as digital blueprints become the currency of commerce, rather than physical products, mass customisation may replace mass production. IP rights – particularly patents and copyrights – may be inappropriate or inadequate to protect customisable products. However, companies may be able to maintain the competitive edge formerly provided by such IP rights through a combination of software-driven, customisation-enabling infrastructure and know-how, and value-added services. Although patents and copyrights may have little application to highly customised products, copyright and trade secrets may become the IP rights of choice, protecting the software and infrastructure supporting such customisation and services. Where there are trade secrets, know-how and software, there are licensing opportunities.

Utility patent licences

Compared to traditional manufacturing methods, 3D printing may involve a much larger and more diverse pool of potential infringers, each of which could be a direct, contributory or inducing infringer. Because licensing is the flipside of litigation, wherever there is infringement there may be a licensing opportunity. Table 1 illustrates who may be an infringer and therefore a licensee, and who may not.

The Thingiverse website (www.thingiverse.com), created by Makerbot, is a free library of designs that anyone can 3D print

As the chart illustrates, the only clear infringers – and probably the only potential licensees – are fabricators and distributors of 3D printed parts and products. Under current law, it is unclear whether induced infringement claims are likely to succeed against people who create digital blueprints from scratch, from scans or from existing digital blueprints (or a combination of these sources), people who distribute digital designs or people who commission designs or products. However, as law professors Deven Desai and Gerard Magliocca predict, induced infringement claims may fail to “make a dent in infringement by 3D printers”. Just as there may be no actionable infringement claim against many of the targets identified on the chart, those same targets are also unlikely to be candidates for licensing.

Copyright licences

Copyrights have three main potential applications for 3D printing: software, objects and the compilation of data in digital blueprints.

The big copyright winner in 3D printing could be software, including software for design, scanning, manufacturing and machine control, streaming of digital blueprints, file authentication and security, digital rights management (DRM) and file management. Thus, 3D printing-related software is a fertile ground for licensing. For example, a manufacturer of consumer-grade 3D printers may not want its machines to be used to 3D print guns. DRM to prevent the machines from printing guns is probably unworkable, so what can the manufacturer do? Because all 3D printers run on software, a clickwrap software licence agreement accompanying the machine could include a restriction forbidding use of the software to 3D print a gun. The restriction may not prevent some users from 3D printing guns on the machine, but the manufacturer will be able to point to the agreement as an effort to prevent its machines from being used for such purposes.

3D printed objects are copyrightable to the same extent as their counterparts made by traditional methods. Only the non-functional and original aspects of an object can be copyrighted. If the object has at least a small amount of artistic authorship original to the creator, that authorship is copyrightable. The originality requirement is low, but not non-existent and must probably come from a human creator, not a machine. This means that creative objects (eg, action figures, sculptures and some toys) are copyrightable. This in turn probably means that for digital blueprints to be copyrightable, they must either be created by a person from scratch or be modified by a person from a pre-existing digital blueprint. It also means that digital blueprints created by 3D scanners are probably not copyrightable. While this is probably true for scans of functional objects, it is less certain for scans of copyrighted objects. In my view, just as a photo of a copyrighted object may be copyrightable, a digital blueprint could be too. However, no one will really be certain until the issue is addressed by the courts.

Table 2 illustrates what may and may not be copyrightable in a 3D printed world. Wherever there is copyright, there is a licensing opportunity.

As the chart illustrates, the US Supreme Court’s landmark decision in Feist may substantially limit the copyrightability of 3D printed objects. The only objects and digital blueprints that are clearly copyrightable are the same types of object and blueprint that have always been copyrightable: non-functional objects and their digital files. Thus, opportunities in the copyright licensing of 3D printable objects are probably limited.

One area with abundant licensing opportunities is the toy market. Companies with a corpus of licensable copyrightable toy designs are starting to make them available for 3D printing. Hasbro and 3D Systems have partnered to bring Hasbro’s library of toy designs – which include designs for Mr Potato Head, Playskool, Star Wars, Tonka and Transformers – to a 3D printer near you. Hasbro also partnered with Shapeways, so that children of all ages can create customised versions of Hasbro products, which Shapeways 3D prints and either sells to customers directly or sends to them, starting with My Little Pony. Selected fans of Hasbro’s My Little Pony brand design and sell personalised figurines through the Shapeways platform. This may be the first step in shifting the company from making and selling products to designing and selling or licensing digital blueprints, whether it knows it or not. Hasbro and Shapeways are expected to do the same with other Hasbro brands, such as Transformers, Dungeons and Dragons, Scrabble, Monopoly and GI Joe.

In the long term – meaning about five years – the copyright owners will probably lose control of this intellectual property, regardless of DRM, either because the digital blueprints are hacked or because the toys are 3D scanned and the resulting scans are freely disseminated. More significantly, demand for these toy icons could well be usurped by generics or remixes. Do you and your child really need to 3D print Mr Potato Head or will Johnny Applehead do? Thus, licensing 3D printable content for 3D printing within or away from control is likely to face stiff competition from 3D scanning and printing of knock-offs or substitutes away from control.

When is a licence not a licence?

3D printing is driving the availability of many 3D printable designs. For example, the Thingiverse website (www.thingiverse.com) created by Makerbot, a manufacturer of consumer and prosumer 3D printers now owned by industry powerhouse Stratasys, is a free library of designs that anyone can 3D print. The industry is crowded with many other design libraries, some of which use traditional IP licences. Others use Creative Commons licences or are entirely open. Many of the traditional licences are essentially unrestricted non-exclusive licences in which the blueprint designer grants unlimited rights in blueprints uploaded to the library, which in turn grants unlimited rights to anyone who downloads and 3D prints the design.

Many 3D printers are also based on open source designs. In 2004 Adrian Bowyer invented the RepRap 3D printer, which is designed to reproduce itself, although it cannot yet print all of its own parts. All of its design specifications are freely available on the Internet. As Bowyer said: “Just as the clover does not charge the bee for its pollen, I gave all the RepRap designs and software away for free.” Tens of thousands of Rep Rap printers are believed to have been made.

Many products are likely to become available as open source designs, such as household handyman’s tools, common kitchen tools, toys and dolls, decorative items, sports equipment and garden tools and equipment. According to IBM: “Where just a few years ago consumers were sharing just 20 to 50 new open source product designs every month, today we count more than 30,000 new designs every month.” This is also happening in industry. IBM says that: “Just 20 percent of products were open source five years ago and in 2013 that percentage had climbed to 33 percent.” Think about how this could affect companies that make and sell such products today, or that license – or are interested in licensing – digital blueprints on a royalty-bearing basis.

Design remix

Another phenomenon driven by 3D printing is design remix, in which product and part designs are tweaked, combined and transformed. A design that goes into one end of a remix process may look nothing like the original when it emerges from the other end. For example, Argentine designer Agustin Flowalistick remixes Pokemon Bulbasurs and posts them on the Internet under a Creative Commons licence for others to download and 3D print. Other designers then remix Flowalistick’s designs. Some of the remixes resemble Flowalistick’s designs and some have been remixed to the point that they are unrecognisable as derivatives of the original designs, which were themselves remixes. The ability to license designs may therefore be limited – either legally or practically – by the practice of remixing. Even if every step of a remix were governed by a licence (which is highly unlikely), is it practical for the original designer to have any rights in an unrecognisable remix? We are accustomed to thinking of products as homogeneous, the result of mass production. In the not too distant future, design remix and mass personalised products may be the norm. It will be interesting to see how – or whether – licensing adapts to such a world.

Undermining licensing

A fundamental underpinning of IP licensing is that licensed products are genuine. Such products practise licensed patent claims, incorporate licensed software or are identified by a licensed brand. However, widespread 3D printing – within and away from control – may undermine the authenticity of products and affect the viability of licensing and brands.

Counterfeiting is expected to be a $1.7 trillion threat to world economies in 2015. From 2002 to 2012, 325% more counterfeit goods were confiscated than in the previous decade. 3D printing is a perfect tool for counterfeiters. The democratisation of manufacturing driven by 3D printing may lead to ‘counterfeiting on steroids’ because copies of genuine products can be made by professional counterfeiters or by well-meaning people who 3D print things away from control. As 3D printers get better, faster and more and more consumer friendly, anyone will be able to make copies of genuine products. And counterfeiters will always invent ingenious ways to make products that appear to be genuine.

In a world where companies sell 3D printed products or license blueprints, or both; where such products are bought and resold; where blueprints can be obtained from many sources, and modified and remixed; where such blueprints are printed within and away from control; and where such products are sold and resold, how will you know whether a product is genuine? How will you know whether a blueprint is the real deal? In a 3D printed world, what does ‘genuine’ even mean?

Rights holders worry that their copyrights will not stop people from making their own Star Wars action figures; that their trademarks will not block homemade Tonka trucks or Caterpillar toy tractors. Design patent and utility patent owners worry that their patents will not stop their customers or consumers from making products that they would rather sell to them. If IP rights lose their potency and licences do not guarantee authenticity, then who will take a licence?

Perhaps more significantly, the ability to 3D print things with virtually any functionality may substantially reduce the need and demand for genuine products or their blueprints. Why print a genuine product when you can print a generic substitute, especially if the blueprint for the generic is free? Will people buy genuine products, or even mass-produced generic products, if they can make (and customise) them themselves, or obtain their blueprints – or blueprints for substitutes – more cheaply than the genuine product, or for free? If demand for genuine products is replaced by demand for customisable generic blueprints or knock-off copies of genuine blueprints, who will take a licence for the branded product?

Companies may find their products competing not only with their traditional competition, but with copies of their own products, customised versions of their own products, generic substitutes or customised generic substitutes. Such products could be made by professional counterfeiters, 3D print shops, customers or consumers. In such a marketplace, rights holders would need to make a powerful case for why machine users should license their designs.

A powerful case?

Some commentators, such as Melba Kurman and law professors Desai and Magliocca, view brands as saviours in a 3D printed world. They believe that the added value that brand owners will be forced to provide (to survive) will lead consumers to continue to want and even demand authentic branded products. Kurman believes that: “As manufacturing becomes more decentralized, ironically, consumers will demand more reassurance that the 3D-printed goods they are buying are safe to use and will perform as advertised. The power of a brand name will increase in importance.” She also believes that consumers may pay a premium for verified safety and performance.

In my view, some will and some will not. On the industrial side, some customers will pay a premium for genuine standard or customised parts, or for genuine blueprints. Some will print the blueprints according to company specs to get the company’s customer service and warranty, or simply because they have greater confidence in the genuine part. This is a licensing opportunity and is not limited to brand licensing. These licences are likely to be for data sets and know-how, and may have a patent licence and brand component.

Others will buy second-hand parts, parts printed by independent fabricators, parts made by pirates and parts of uncertain provenance and performance. Still others will print the parts themselves – some according to specs, some not. As always, price and other factors will affect each customer’s decision. For example, a customer may 3D print sacrificial parts from lower-quality material than genuine parts if they are not mission-critical. Profitable licensing opportunities will probably be limited here.

On the consumer side, all of the same things will happen; but price and intelligence may play a bigger role in whether some consumers buy name-brand products or blueprints, and whether they print blueprints according to company specs. Some will want verified safety and performance and others will not care. For example, although most cyclists may want a genuine bicycle helmet printed by a respected manufacturer or from blueprints according to company specs, some will buy knock-offs or print them at home with unsafe materials and ignore the specs.

For machine owners seeking genuine standard or customised parts, or genuine blueprints, a digital blueprint licence may be a vehicle for providing such added value. A rights holder can provide value that generics probably do not, such as licensing proven designs; specifying authorised fabricators, approved machines and materials, adequate process and quality controls, and post-production steps; sharing product-specific 3D printing know-how; and providing customer service and a warranty it stands behind. There may also be a patent licence and brand component. Such value may be enough to entice machine owners to take a licence and pay a premium for its designs, rather than using a generic, infringing or inferior design.

What will really happen?

Experts, industry observers and analysts disagree about the extent to which 3D printing will be adopted and change the world. Some believe that almost every home will have a 3D printer. Others find this highly unlikely. Some believe that independent fabricators will 3D print most of what we want or need, while others believe that large companies will use 3D printers to do this. Some believe that 3D printers and mass-customised products will replace mass production, while others believe that 3D printers will simply be one more machine on the factory floor. Some believe that companies will start selling or licensing designs rather than products, while others believe that companies will make mass-customised products or send their designs to their own local factories for 3D printing. Some believe that 3D printers will create jobs, while others believe they will destroy them.

My view is that everything will happen. A world full of 3D printers that can make almost anything, within control and away from control, will be an almost inconceivably complex place, where products and blueprints are designed, scanned, customised, made, sold and licensed by an uncountable number of companies and home printers offering a dizzying array of products and services. It is impossible to predict exactly what this will mean for IP licensing, but it will probably play a very different role in such a world than it does today.