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3D Printing News: Recent M&A Activity; Copyright’s Conceptual Separability Test; Expiring Patents

October 31, 2016

Recent M&A Activity

Here are recent and significant M&A deals in the 3D space.

In September, GE acquired SLM Solutions and Arcam, reportedly spending $1.4 billion for both. Arcam provides a cost-efficient additive manufacturing solution for the production of metal parts. SLM Solutions is focused on laser-based metal additive manufacturing. In August, Siemens acquired Material Solutions, a 3D printing firm also specializing in selective laser melting, reportedly focusing on turbomachinery parts (gas turbines) and producing components for the aerospace, power generation, and motor sports industry sectors. This past July, HP Products purchased David Vision Systems, a manufacturer of 3D laser scanning systems and 3D scanners on the base of structured light technology. The company develops the software DAVID, which allows users to create 3D models. In addition, Carbon 3D recently raised an additional $81 million in venture funding through a Series C round. According to an article in TechCrunch, “Carbon plans to use the new funding to manufacture and lease their CLIP or “continuous liquid interface production” technology, and develop and sell materials to customers internationally.”

Private equity funds are looking for where to invest in 3D. Our 3D Printing Industry Group can help diligence a 3D printing-related target to help determine whether it comports with a fund’s investment criteria. Hiring counsel with a grasp on the patent landscape, market, and current issues and cases is fundamentally important.

Copyright and 3D Printing

Now we move to the most important 3D printing case since ClearCorrect. This week, the Supreme Court (to quote an article in this past Sunday’s New York Times) is “hearing arguments about fashion, in a case that aims to determine whether anyone can own the stripes on cheerleader uniforms.” The case has more profound ramifications than stripes on uniforms, and we have covered this case in prior bulletins.

Last May, the U.S. Supreme Court granted a petition for writ of certiorari to clarify an important test: how is copyright protection applied to articles that are “mixed,” i.e., that are both functional and also have expressive features. The case is Varsity Brands, Inc. v. Star Athletica, LLC, 799 F.3d 468 (6th Cir. 2015).

Varsity Brands concerns the copyrightability of articles of clothing, which are useful and functional (in this case, cheerleader uniforms). Under the Copyright Act, a “useful article” such as a dress or cheerleader’s uniform (or a pair of sneakers, a bicycle rack, a lamp, an ornate chair, a belt buckle, a mannequin, or many other useful articles such as replacement parts for airplanes, automobiles or other big machines) fundamentally cannot be copyrighted. 17 U.S.C. § 101. However, a useful article’s component, expressive features may be protected if they can be “identified separately from, and . . . existing independently of the utilitarian aspects of the article.” Id.

Star Athletica states the problem in its petition: “Circuit courts, the Copyright Office, and academics have proposed at least nine different tests to analyze this separability. The Sixth Circuit rejected them all and created a tenth.” So, what is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act? It seems now the Supreme Court will provide an answer, perhaps later this year or in early 2017.

In addition to providing clarification for the apparel industry, a predictable test for conceptual separability is important for the growth of the 3D printing industry. 3D printing, of course, allows the production of objects through scanning existing articles or through the creation of digital blueprint files (or through a mix of both methods). Many 3D printed objects contain both functional and expressive features and they will be created by consumers, large companies, and entrepreneurs – and ultimately sold, licensed, or otherwise shared over the Internet. Remember what happened in the music industry. Pirate Bay, the notorious torrent site that has traded music and movie files for years, is now trading files in a whole new category: PHYSIBLES, i.e., 3D files for 3D printing. In a blog post, Pirate Bay wrote: “Today most data is born digitally. It’s not about the transition from analogue to digital anymore. We don’t talk about how to rip anything without losing quality since we make perfect one to one digital copies of things. Music, movies, books, all come from the digital sphere. But we’re physical people and we need objects to touch sometimes as well!” Pirate Bay’s site administrators further stated: “We believe that things like three-dimensional printers, scanners and such are the just the first step. We believe that in the nearby future you will print your spare parts for your vehicles. You will download your sneakers within 20 years.”

To be sure, illegal file-sharing sites will not care about navigating the conceptual separability test for sneakers. On the other hand, established companies like Shapeways and Thingiverse, who respect the intellectual property rights of others, do care. Both Shapeways and Thingiverse host thousands of 3D digital models for a variety of articles, sometimes only expressive and sometimes only useful – but often a mix of everything in between. Can the Copyright Act be leveraged by the owner of the design of a lamp to demand that Shapeways (through a DMCA take-down notice) take it down and its displayed 2D photo/rendering? (Assume it was scanned and posted by a third party to Shapeways’ site without the owner’s permission.) Yes, if the lamp itself is protected by copyright law, which begs the question. We know a basic no-frills lamp would not be protected by the Copyright Act. We know that a lamp as expressive as the famous “leg lamp” in the Christmas Story movie would be protected by the Copyright Act. And, as for the myriad of lamp styles that fall along the continuum in between, it gets blurry. As succinctly stated in Shapeways’ amicus brief in support of Star Athletica’s petition, “Shapeways and its users will often be called on to navigate the landscape of conceptual separability and would benefit from the certainty and clarity of a single test.”

There are a number of reasons why a physical article may not be protected by copyright, including that the article is merely useful. Notwithstanding this, many people will automatically send take-down notices. These content owners have been trained in the YouTube era where take-down notices are the norm (and mostly appropriate) to take down copyrighted movies, television clips, and music – though, even with respect to these creative works, fair use clouds the issue.

We will write about the Supreme Court’s decision when it issues. Similar to what digitization did for music, books, and movies, 3D printing facilitates the sharing of physical articles’ digital models over the Internet. As 3D grows, expect to see many more people demanding take-downs because they assume their works are copyright-protected. But, as you now appreciate, these works may not be protected by copyright and sites like Shapeways and Thingiverse (who host user content and provide a marketplace for it) must grapple with uncertainty. A clear standard articulating when a feature of a useful article is protected by copyright will remove some uncertainty.

Expiring Patents

It bears repeating (as we move towards December) that among the next generation of 3D printing patents that will soon expire are key patents for metal-based printing processes. The patents’ expiration will almost certainly result in significant price reductions for 3D printers in the metal-based field. For example, a key patent for selective laser melting held by the Fraunhofer Institute for Laser Technology will expire in December 2016. As a result, 3D printer manufacturers in 2017 and beyond will produce SLM printers at substantially reduced prices (SLM is a great technology for metal 3D printing). The bottom line is that we expect dramatic growth for printing processes that can produce functional parts in metal.

Almost every business doing long-term planning should be thinking about 3D printing and the impact it will have on its business. Our 3D Printing Industry Group is here to help.

3D Printing will impact the way we make almost everything. Because the technology will change our clients’ businesses, Benesch has formed a 3D Printing Industry Group, a multidisciplinary team led by core members of the firm’s Innovations, Information Technology & Intellectual (3iP) Property Group.

For more general information and to learn more (including by viewing more than 20 Benesch-produced videos on 3D printing), click here.

To contact Benesch’s 3D Printing Team, call or e-mail Mark Avsec (216.363.4151) mavsec@beneschlaw.com or anyone on the team.