3D printing: a blessing or a threat to company value?
The world has progressively digitised in recent decades and the pace of change is increasing, changing products and industries beyond recognition. The ready and rapid adoption of digital technology in all parts of society is testament to the benefits digital technology provides. At the heart of these new technologies is the management of data flows, be that for the purpose of optimising manufacturing processes or assisting people in the performance of everyday tasks or even automating them altogether.
The automotive industry is no stranger to digitisation, and the particular intellectual property (IP) challenges it brings. Originally, IP conflicts were between rival automotive innovators, and solutions such as cross-licensing IP were relatively easy to agree and cost effective. More recently however, Non-Practicing Entities – entities that have no intention to make or sell the invention covered by IP – have bought up IP rights with the sole purpose of extracting royalty payments from automotive companies. The frequency of such cases has been exacerbated by the digitisation of the automotive industry and the surge in innovation, and need for IP, in the automotive data communication field.
The next IP challenge facing the automotive industry is likely to come from a technology that the sector has been instrumental in advancing—additive manufacturing. The technological advantages of additive manufacturing are no secret to the automotive industry—an industry which is one of the leaders in terms of developing and realising the opportunities provided by this technology. Not only does additive manufacturing allow for the creation of automotive components that have hitherto simply not been manufacturable, but it also allows for the creation of components that vastly outperform their traditionally manufactured counterparts. Aside from the technological advances provided by 3D printing, the distributed nature of manufacturing enabled by 3D printing is also beneficial in improving the supply chain. This is not least so in the spare parts market where the relevant spare parts can be manufactured at a time and location of need, obviating the need to stockpile spare parts and eliminating the delays associated with delivery.
The coming decades are likely to be characterised by legal cases where innovators who did not prepare their IP strategy accordingly find that their portfolio is not fit for purpose in a 3D printed world
Despite this, the threats posed by additive manufacturing to IP portfolios are much less well appreciated and the coming decades are likely to be characterised by legal cases where innovators who did not prepare their IP strategy accordingly find that their portfolio is not fit for purpose in a 3D printed world. Ironically, it is the very opportunities provided by additive manufacturing that make the technology susceptible to future intellectual property risks.
The ease with which additive manufacturing facilitates a distributed manufacturing model has significant potential to disrupt traditional IP strategies. Traditionally crafted IP portfolios tend to focus protection on manufacturing countries and major markets, and seek protection for physical products. There has previously been little rationale for seeking IP protection in markets and territories beyond this. In an age of 3D printing however, this potentially leaves many countries without protection.
Once a (3D printable) digital twin of the product has become available in countries not covered by IP protection there is little recourse against competitors that locally 3D print and sell the product in question. In addition to loss of market share through 3D printing infringement, the production of 3D printed counterfeits may moreover damage the reputation of the original innovator. Take, for example, a situation in which a car spare part for a particular brand is manufactured using 3D printing. Original manufacturers will be intent on ensuring that the product performs to tight specification. A copyist that uses a digital twin of the product, however, may not have the expertise to use the digital twin to provide consistent performance parameters for the product. If underperforming products presented as original parts enter the marketplace, the innovator’s reputation may be compromised.
IP laws were created long before the opportunities and risks associated with digitisation were appreciated. In 2021 however, IP protection that focuses solely on the physical manifestation of a product will, in many countries, be unsuitable for preventing the dissemination of a digital version of the product.
The question of whether existing IP law can rise to this challenge is being asked with increasing frequency at the European Patent Office and elsewhere.
Whilst there is recognition that some changes to current legislation are required, the law is, by and large, considered to serve its intended purpose if used in a way that reflects new threats posed by 3D printing infringement. So, while the law is mostly fit for purpose when it comes to anticipating the challenge of 3D printing, changes to best practice will be required if automotive manufacturers are to stay ahead of the curve. IP practitioners who do not familiarise themselves with the risks posed by 3D printing, and adapt their practice accordingly, might find that their IP portfolios are not fit for purpose in the near future.
As more companies explore the benefits of manufacturing using 3D printing, patent holders may find that traditionally-drafted patents are unsuitable for protecting their innovation against 3D printing infringers. Whilst some manufacturers may take the view that 3D printing is, at least at present, not suitable for manufacturing at large scale, developments in 3D printing technology over the last 20 years provide a clear indication that it is not safe to assume that this will remain the case over the next 20 years. The problem this presents is it is difficult, if not impossible, to extend IP rights, once created, to cover additional subject matter. It is therefore imperative that IP protection created today anticipates the 3D printing challenge, and other challenges that are likely to arise in coming decades.
For companies that derive considerable value from their IP portfolio, a de-valuing of parts of the portfolio can have a detrimental effect on company value
Failure to future-proof IP today risks an awakening tomorrow to the fact that IP rights—often a company’s most valuable assets—may not be suitably protected in a digitising world. For companies that derive considerable value from their IP portfolio, a de-valuing of parts of the portfolio can have a detrimental effect on company value. The tools for building adequate protection now exist, and now is the time to use them.
Parallels can be drawn to other paradigm shifts in digitising markets and IP law, for example the initial challenges in patent protecting networked devices and the difficulties faced by the music industry when streaming went mainstream. Now we see a similar dynamic with 3D printing and already certain industries are being impacted by this, such as the medical devices industry (i.e. the unlicensed ventilators printed at the start of Europe’s coronavirus epidemic).
An IP strategy prepared with additive manufacturing in mind will ensure automotive and other manufacturers are well placed to protect against risk and allow companies to maximise the opportunities that this fast-growing manufacturing technology provides. Companies that do not adapt their IP strategies now to accommodate 3D printing are likely to be left behind.
Thomas Prock is a Partner at IP firm Marks & Clerk