You First: Manufacturing, IP, and the Coming 3D Printing Disruption
Like it or not, the manufacturing industry looks like it will be first in line to feel the potential transformative impact of 3D printing or additive manufacturing. A number of factors are combining to push manufacturing out of the chute first. Many manufacturers have already embraced 3D printing, making the technology an essential part of at least some of their manufacturing processes. When combined with advancements in other areas like open-source software and robotics, 3D printing seems destined to redefine the manufacturing supply chain and manufacturers’ approach to mass production, customization, consumer demand, and global logistics.
At the same time, changes in intellectual property (IP) law unrelated to 3D printing will impact the disruption in manufacturing. Patent litigation in general has become more unpredictable and expensive. And some say the Supreme Court recently made patenting software — the ghost in the 3D printing machine — significantly more difficult. These changes make it harder to choose what rights to protect and what kind of protection to claim for proprietary innovation.
As with other industry disrupters, 3D printing will affect both manufacturing overall and the industry’s most important IP. If past is truly prologue, then looking back to other disruptive advances can help illustrate some of the manufacturing IP rights 3D printing may take down, possible areas of new rights creation, and strategies for protecting manufacturing, and other IP likely to be affected by 3D printing’s disruption in manufacturing.
Manufacturing and 3D Printing: Now and Then
Despite its relatively recent entry into mainstream consciousness, 3D printing has had a strong — and growing — presence within the manufacturing industry for more than a decade. Multiple industry sub-sectors ranging from aerospace and automotive to medical devices and defense have all made 3D printing a part of their production process.
3D printing’s rapid prototyping capabilities make research and development faster and less expensive, especially for complex parts. Unlike traditional manufacturing, 3D printing does not require the time and costs associated with creation of molds and dies, part and mold milling and lathing, and shipping from place of manufacture. 3D printing also allows for the creation of parts with complicated shapes, often consolidating manufacturing time and eliminating the need for assembly from multiple, smaller parts.
The majority of manufacturers who currently use 3D printing do so primarily for research and development prototyping, with some exceptions. For example, the medical device industry has moved into 3D printing production for a number of devices, including hearing aids, with delivered units of 3D printed hearing aids now numbering well above 10 million. The customization required for medical devices explains why 3D printing works in that industry — and why it has not yet crossed over into widespread production for the rest of manufacturing.
There, for most of traditional manufacturing, the rules from the Industrial Revolution that dictate success still apply. Cost-per-unit and profitability are controlled by economies of scale that leverage fixed infrastructure costs against high-volume output and lower cost labor and materials. Under this rubric, standardization and integrated modules based on standardized units have fostered the creation of extended, global supply chain networks. Improvements in global communications and logistics allowed manufacturers to rely on the labor savings offshore production created to offset the added costs of shipping and transportation. Just as it was 200 years ago, competitive advantage goes to the company — or companies in a supply chain — that produce the highest quality good at the lowest cost.
But industry analysts say 3D printing is set to transform many of these core manufacturing precepts. Sources within the 3D printing industry as well outside observers like IBM and PwC predict that profound, 3D printing-driven changes will take place in the manufacturing industry within the next five years. Whether acting alone or in concert with other developments like open source software and robotics, these forecasters envision a new manufacturing environment founded in 3D printing and digital data. See, e.g., PwC, 3D Printing and the New Shape of Industrial Manufacturing, June 2014, at http://pwc.to/1Et92t1; IBM Global Business Services, The New Software Defined Supply Chain, 2014 at http://ibm.co/1xbnbvk.
Specifically, current and ongoing 3D printing and 3D printing materials innovations will lower the costs of infrastructure investment. This in turn will help change manufacturing’s current economies of scale rules, making it easier to have a smaller, more local, and more customizable supply chain — thereby creating what one commentator calls the “economy of one.” See Irene J. Petrick and Timothy W. Simpson, 3D Printing Disrupts Manufacturing, Research Technology Management, Nov-Dec. 2013 at 1. Under this scenario, more manufacturing gets re-shored, manufacturers need to change design and retail strategies, and everything from worker skill-development to the global logistics platform gets upended — in other words, 3D printing has the potential to irrevocably change the manufacturing industry.
The Changing State of IP
3D printing’s likely disruption of manufacturing comes at an interesting juncture in IP law and patent law in particular. Patent law remains a compelling, constitutionally mandated source of innovation protection. But perceptions about excess litigation and damages awards have soured some courts, companies, and sectors of the country toward patent litigation. This overall climate has led to developments like the validity challenges allowed under the America Invents Act in the U.S. Patent Trial and Appeal Board and more stringent damages proof requirements for any surviving infringement claim. See, e.g., Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (2011) (eliminating use of the 25% rule of thumb to estimate reasonable royalty rate for patent damages).
Moreover, some say protecting software-based inventions under patent law has become increasingly difficult since last year’s U.S. Supreme Court decision in Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347 (2014). Though Alice did not eliminate the possibility of gaining patent protection for software inventions, some say it made it much more difficult to do so.
These difficulties have made some look toward trade secret law as a source of protection for proprietary innovations. This practice area continues to offers a variety of protections, including those for processes and methods, as well as protection against misappropriation. Damages for trade secret misappropriation also do not typically have to meet the same exacting requirement demanded in patent law—or receive the same scrutiny patent awards now always seem to garner. And, currently, Congress is considering two pieces of federal legislation that could create a more uniform, federal trade secret cause of action. See Trade Secrets Protection Act of 2014 (HR 5233); Defend Trade Secrets Act of 2014 in the Senate (S2267).
But trade secret law does not offer certain protections that come standard with a patent, for example, protection against reverse engineering. Trade secret law also requires the holder to have a stronger tolerance for risk. The lack of skilled workers needed by increasingly complex manufacturing processes has increased worker mobility — and the likelihood that critical trade secrets can walk out the door when workers leave.
3D Printing , Manufacturing and IP
As likely one of the first industries to face disruption from 3D printing, manufacturing will probably have to bear the costs of navigating both sides of IP rights disputes. On the one hand, as 3D printing increases the capacity to fabricate physical things, manufacturers face increased risks that the things they make using 3D printing may infringe on someone else’s IP rights — whether patent, trademark, trade dress or copyright. On the other, as manufacturers innovate and advance design, process, materials, and production using 3D printing, they face unclear risks as old laws seek to protect new technological paradigms. Prior disruptions and advances illustrate just how some of those conflicts may play out.
For example, before the advent of modern photocopy technologies, copyright’s fair use doctrine presumed a right for researchers to duplicate library books and articles as needed for their research without prior permission. The copying, which researchers did by hand and then by early and expensive centralized processes, was allowed because no technology existed that made commercialization possible. Fast-forward to the speed, ease and low cost of modern photocopying and suddenly the fair-use doctrine no longer clearly allows commercial researchers their once presumed duplication rights. See, e.g., Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 931 (2d Cir. 1994) (finding photocopying of journal articles by science researchers at Texaco not protected by the fair-use doctrine).
Patent law’s doctrine of permissible repair may face similar pressures, given the kind of copying that 3D printing has made feasible. Under the doctrine, the owner of a patented object has the right to preserve the useful life of the object and, sometimes, the right to produce a wide range of replacement parts for the object, even if the replacement activity is done on a commercial scale. See, e.g., Dana Corporation v. American Precision Company Inc., 827 F.2d 755 (Fed. Cir. 1987).
This right of repair was created under the paradigm of traditional manufacturing processes, where the relative time and expense required to create replacement parts was an unspoken factor that mitigated the potential losses to the patent holder. With 3D printing, manufacturers can now easily create parts for aftermarket and older-generation products with complex or obsolete components. When patent owners complain that that production crosses into a prohibited reconstruction, the feasibility tensions inherent in the doctrine of permissible repair may not survive.
Or, as with copyright protection in the digital age, legislation may be required to delineate and protect manufacturers’ IP rights associated with 3D printing. When digitization facilitated wide-spread, online copying of copyright protected music and literary works, Congress acted to create Digital Millennium Copyright Act (DMCA). The DMCA helps control efforts to circumvent digital rights management and provides a notice and takedown process to limit the liability of online service providers for copyright infringement. See 17 U.S.C. § 512, 1201-05, 1301-22.
Already, there have been calls for similar liability limitations against patent and trademark liability for those sites that provide the CAD/CAM files used in 3D printing, now that, with 3D printing, digitization has reached the world of “things.” See Deven R. Desaiand, Gerard N. Magliocca, “Patents, Meet Napster: 3D Printing and the Digitization of Things,” 102 Geo. L.J. 1691 (2014). Congress may act as it did in the DMCA to cement old rights in the face new technologies, or it may re-imagine those rights entirely. Any legislative outcome will depend on myriad factors, including the power of the rights holders, prevailing public sentiment, and the ability of the legislature to enact meaningful reforms.
Similar pressures will work to shape the ongoing innovations in 3D printing most important to the manufacturing industry. In particular, the industry will need to navigate the IP pressures inherent in ongoing advancements in the materials and combinations of materials that 3D printers will use to create manufacturing’s brave new world. See Bryan J. Vogel, 3D Printing, Materials Development, and IP: Protecting What’s in the Printer, 88 PTCJ 502 (6/13/14).
Manufacturing IP Strategies for the Meantime
As manufacturers determine how to prepare for the changes 3D printing will bring, they need to remember to keep IP considerations part of their strategy. Despite the challenges, important, proprietary advances that meet the stringent requirements for patentability continue to deserve patent protection. Older inventions whose innovations see replication in new technologies also deserve protection through infringement enforcement when the strength of the claim justifies litigation costs. When patent results seem uncertain or too costly, trade secret offers protections, but demands adherence to protocols that demonstrate the innovation claimed is in fact secret.
Perhaps most importantly, manufacturers need to take their cybersecurity very seriously. Much of 3D printing’s proprietary advantage will be created in the digital space. Making sure those digital assets have the necessary protection from cybercrime will go a long way toward protecting manufacturers’ 3D printing advantage.
As manufacturers both large and small begin to move 3D printing from prototype into production, the changes the technology imparts to the industry will have an extraordinary, exponential impact. At every stage of the manufacturing process, the full extent of those changes will be influenced, shaped and, from time to time, redirected by prevailing IP laws as it struggles to respond to a truly disruptive technology. As a result, more than any other industry, manufacturing will likely serve to shape 3D printing IP laws while the technology reshapes the industry itself.
Reprinted with permission from the April 2015 issue of The Corporate Counselor. Copyright 2015 ALM Media Properties LLC. Further duplication without permission is prohibited. All rights reserved.
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