While many people involved in the RepRap movement and the modern desktop 3D printing industry think that Intellectual Property has been holding the industry back from growing to its full potential, Tom & Tracy discuss how Intellectual Property plays an important role in corporate asset value and is actually responsible for making desktop 3D printing what it is today.
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Intellectual Property 3D Printing
A business topic that bridges over into one of my special areas of interest which is intellectual property. There is so much discussion throughout the desktop 3D industry on the dislike of patents because of the whole RepRap Movement. This is the open source kumbaya thing where they think that everyone should help each other.
We have to go back to really the beginning of 3D printing in the 80’s to understand intellectual property’s place. 3D printing intellectual property may come off this more collaborative model of it. There are a lot of dollars involved. That is the essence of where everything comes back down to. When you’ve got grants and research dollars going into universities and these places, you can fund all kinds of 3D print patents and things like that. But in the world where it is commercially based, it is a really different world out there. Businesses get hardly funded these days by venture capitalists and large investors or big corporations if there isn’t some unique proposition, which in the most cases come from intellectual property.
It’s a combination of process patents, software code patents, could all be there. It involves hardware and software processing, material development. All of these things are related to that. There is copyright and trademark too. Thinking about all the complexities of all of that all adds to the asset base of value for a company. In the tech industry, it is extremely high. There are a lot of people in the early days. In the start of the tech boom, your intellectual property was really your people. In the start of the 3D print boom, the onset of the ideas of that back in the 80’s to 90’s in those time frames, it was the people, the universities, and the government. Those were the most valuable things.
Once those come to a level of maturity, you move into a world in which it is not the people anymore. It is the “what”, the stuff, and what they have of value. Those people are interchangeable. There are so many 3D print experts, researchers out there. As the tech becomes more accessible, understandable, and knowledgeable, you have less of a people exclusivity issue. You can interchange them and find someone new with more expertise. They are not a value anymore in the scope of financing venture capital and those kinds of things. It becomes an intellectual property and asset. Those things can also be of value. The way you build your printers and makes them extremely cost effective or something. It is an underlying value.
In today’s world, there is also a separate value and that is market access. There are lots of companies that are connectors. You have a connector in the middle of things accessing people who want to use something with the people who have those things. For example, with Uber, you have drivers with cars who move people who need a ride and you connect them together. Your IP is in that connection process and in the membership that you create. That is also another way to create an asset value being a connector, and not every connector is going to work. Pinshape did not work.
You are talking about companies that develop the very processes that the entire 3D desktop inventory is invested in. They also acquired a lot that is why they get a bad reputation about it. You get that because their model for acquiring and protecting is a little aggressive. It is business and it is the way it goes. When you are dumping the research dollars, you have to be more aggressive about it. The small guys in this 3D print industry are not aggressive enough with their Intellectual Property. The commercial world of 3D printing is where they live and there is a big business there. The entire 3D printing desktop industry knows this but in some ways should be more appreciative. Those companies really allow this desktop industry to exist and begin as all those patents expired.
Open Source vs Valued Intellectual Property
Intellectual property and 3D printing really don’t belong together and it should be of a more open source mentality is what they think. Sometimes, that is counter intuitive to building a healthy business. If you are making a 3D printer that is based on a Rep Rap system that is available to everyone and you are buying open source parts to build that printer, how and why should I buy it from you? If you are doing that and not building something to have enough value to be patentable or to be protected from a copyright and trademark standpoint, you are shooting your business in the foot in terms of profitability for future acquisition or merger. It is those assets that you have. You don’t own the production parts because you buy them from a source that could go belly up tomorrow, you don’t have anything that is special in how you are processing it. You have a labor force that puts it together. That is a liability and not an asset.
You may have a facility that you own, but that is replaceable and moveable. You better have a good lease, because that can get taken away from you. At the end of the day your x variable, your 3 x, which is highly likely what you can get from having good patents. 3D printing patents or 3D printing intellectual property as an asset can make your company three times as valuable in an acquisition situation than it otherwise would be. Normally, it would be based on your yearly sales. So if you did a million dollars in annual sales, but you have a good patent basis, then you have a 3x option. You might even have a five x option, it just depends on how significant your intellectual property is. I doubt someone can downgrade you unless your patent is very questionable.
When you are in a highly competitive world, which for us product design and retail products are highly competitive, you need to have a value because you haven’t had an exit strategy that involves a merger. You need to give yourself as much portfolio power as possible. You want to diversify yourself in an asset portfolio in an asset standpoint. You want to have some patents. You want to have trademarks. If this is your core value patent or intellectual property, what would someone do if they decided that you are just so much trouble to acquire and how they would get around you. You have to really understand patents and what makes them valuable. It is really fun. Some people think that their intellectual property is very strong. They don’t understand what makes a patent meaningful. People are going to look at your valuation. When you have every door covered or window shut or locked, then they can’t devaluate on you. You have given yourself a protective measure. We call it a patent fortress. Some of those are not going to be any good. They are not highly patentable of enforceable. It doesn’t matter at the end of the day as you are selling your company as a group. Not only do you have three x, but you have more than the value of more than three x.
Corporations get these blinders on. A patent, while it can be a very important asset to your company, the reality is, you get tunnel vision and you don’t even put yourself in the mindset of a competitor. When we do it, we do it from the outside and you might have a lot of insider issues. You might be highly invested in plastic injection molding. That is how you are making most of the parts in your machine. Your patents are geared towards that processing. Somebody could come in from a metal side and look at it from a different perspective. All of a sudden now, it is a cheaper and sturdier machine. Because you did it, it has a bias to it. It might hurt you in the scope of things because you don’t know what field your competitor is coming from.
It reminds me of an old movie, Sneakers. When you look at now, the tech is so old. This was a group of guys that had a business. They were tech geniuses. They were hired to help companies. One bank hired them to break in and steal money from the bank. The bank was smart and they didn’t just trust that they had the best systems in the world, but it took hiring someone from outside to look into that to find the vulnerabilities.
We don’t do this for evil. We don’t help companies figure out how to go and hurt the other one. This is done to help them strengthen it and make their intellectual property position stronger while building more asset value for them to get more money in the acquisition. There are times when we see an unreasonable monopoly and we step over when we say that we wouldn’t use it against someone else. That is when they are being aggressive and unreasonable. They don’t have a right to that from the way their patent reads. We have concerns for what the greater good is. We are trying to stay on the right side of that.
Competition, Intellectual Property, and 3D Printing
There is enough room for this world for a lot of competition. Competition is healthy. It is not dangerous. It is okay. When you get into a world which is very aggressive like a Stratsys or 3D Systems, there is a real reason that there are a lot of small companies that are able to take decent market shares away from them. That’s because they were so protectionist, they put a big target on their backs. They have no interest in serving the maker community. The point of them leaving the consumer world with discontinuing the Cube, is that by staying where they stayed in the commercial world, they left a big vacuum there for others to fill. When patents expire, the intellectual property became no longer a deterrent to these other 3D printing companies to go into these things. They flocked to it.
These companies get so big and can’t turn in the other direction, these smaller companies are more flexible and are taking advantage of the size of these big companies. Competition is a good thing. We have evolved in our careers to be less competitive and to be more cooperative. We cooperate with companies because there is room in this economy for every one of us. There is a lot of money to be made. We don’t need to squash you or not cooperate in any way with what you are doing in order to succeed in myself. It does not also mean that I don’t value intellectual properties. I value intellectual properties and it helps industries to create real value for investors and owners. There is nothing wrong with that.
Just because you are big, you are all things to all people – that is where you have the mistake. But when you give your specialty, which is the right thing to do, that is the impact that you have. That impact shouldn’t be diminished in its financial value, market value, customer based value because you failed to patent it and you didn’t want to be that kind of 3D print company.We have seen a lot. We have held 37 patent issues. We have had patent litigations. We had a David and Goliath fights in the past. In the end of the day, we file patents. We believe in them, but we have an understanding of there they are valued in a business and where you should spend the money or how much effort or emphasis you place on them.
Final Thoughts on Intellectual Property 3D Printers
We have 86% commercialization rate. It means that it would be better and we would have a lot of new patents. It takes time. There have been only 2 that has been commercially successful from our past mature patents. You don’t get there if you don’t understand that they have a value from the get go. In the 3D printing technology world, you should know if it is worth of a patent. There are also other companies that do not belong to the world of patents. They lost lots of business because someone else went into their space. This is a company that makes $200 to $300 million per year. They regret not filing the patents. Losing $20 million is really a big thing; compare that to the $3,000 you spend to get patents.
- Copyright and Trademark issues with Michael Weinberg of Shapeways
- Cooperative Capitalism – New way of doing business
- Our David and Goliath patent litigation
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