The new world of 3D printing… and counterfeiting

Photo Kimiya Shams / Legal Counsel, Devialet / March 13th, 2017

3D printing is considered the new industrial revolution, likely to disrupt the behavior of consumers and manufacturers, involving relocation of production facilities, reconstruction of labor, changes in material applications and what's more, a growing challenge for intellectual property owners. To copy an object you only need two things: an electronic schematic of the product and a 3D printer. This means that anyone can reproduce any available design, putting designer brands in the same situation that the music industry found itself in when MP3 files hit the market.

Until recently, printing – on stone, leather, fabric or paper – was always a two-dimensional process but then, in the 1980s, various technologies evolved which enabled machines to build three-dimensional objects from a CAD model or a 3D scan. 3D printing, as we know it today, has become the promise of the future, ready to provide a viable alternative to conventional manufacturing processes. When the American manufacturer M3D launched its Kickstarter in 2014 with the promise that it would be selling 3D printers for $249, the company ended up raising $860,000 in less than one day, leading to 11,855 backers who pledged a final amount of $3,401,361 to help bring M3D’s project to life.

3D printing is considered the new industrial revolution, likely to disrupt the behavior of consumers and manufacturers, involving relocation of production facilities, reconstruction of labor, changes in material applications and what’s more, a growing challenge for intellectual property owners. In 2016, Deloitte reported that the global 3D printing market is poised to hit $20.5 billion by 2020. This development not only fascinates creators and legislators, but also worries them. How can technical and legal solutions support 3D expansion while still maintaining the interests of intellectual property owners?

The development of this rich technology inevitably raises the question of infringement, more specifically the issue of dual infringement since the infringement of intellectual property rights in 3D printing can be realized both by the unauthorized copying of the digital file containing the form of a protected object and also by the physical impression of an object from that file. To copy an object you only need two things: an electronic schematic of the product and a 3D printer. This means that anyone can reproduce any available design, putting designer brands in the same situation that the music industry found itself in when MP3 files hit the market.

While brands such as Nike and Adidas have openly embraced 3D technology, designer brands on the other hand find themselves in a new dilemma in the fight against counterfeiting. The OECD and the European Union Intellectual Property Office released a report in March 2016 outlining that the global imports of counterfeit goods are worth $500 billion a year.

A report issued by OHIM found that approximately 10% of fashion products sold worldwide are counterfeits, amounting to approximately $28.5 billion of lost revenues per year in Europe alone. 3D printing will inevitably add to that number and the fear is that budding counterfeiters could soon be creating bags, apparel and jewelry at a lower production cost per item than ever before.

Counterfeiters can now easily access pirated blueprints or digital files containing 3D scanned images of an object, thus simplifying the process for manufacturing copies. The Internet has certainly made accessing such files easy as sites such as The Pirate Bay, known for giving access to pirated music and movies, have added a new section called Physibles where people can share files for printing objects.

The threat of a major surge in counterfeiting based on the availability of relatively cheap 3D printers, increasingly sophisticated printing materials and a never-ending supply of designs will add to the already enormous black market of counterfeits, and the potential impact of 3D printers used for counterfeiting just keeps on growing. The Gartner Group, an American research and advisory firm, reported as soon as 2014 that “by 2018, 3D printing will result in the loss of at least $100 billion per year in intellectual property globally.”

3D printing will radically change the environment in which we live in. Similar to how the Internet enabled file sharing and infringed on the rights of copyright owners, 3D printing will have similar implications for design right owners and the owners of trademarks and patents. Consequently, regulation is required which controls the allowed number and use of 3D impressions.

To date, 3D printing has been a largely unregulated practice, save for a few exceptions, such as when it involves guns or pharmaceuticals but it still has not included designs. The problem we are facing is the improved tools for mass scale counterfeiting which has already cost the designer brands millions of dollars and the same goes for governments worldwide. The ICC reported in 2011 that counterfeits cost G20 governments and consumers over $125 billion every year, and of this, the G20 economies lose $77.5 billion in tax revenues and higher welfare spending, $25 billion in increased costs of crime, $18.1 billion in the economic cost of deaths resulting from counterfeiting and another $125 million for the additional cost of health services to treat injuries caused by dangerous fake products.

3D printing will have a disruptive impact on manufacturing processes which poses many difficult questions such as, how can we ensure that 3D printed products live up to the safety standards that manufacturers have to adhere to and how can consumers distinguish 3D printed counterfeits from originals?

One way of fighting 3D printed counterfeits is to introduce a form of copy control, similar to the digital rights management (DRM) system that is applied to music files. Several brands such as Vivienne Westwood and Moncler have started to apply radio frequency identification (RFID) chips to their products. The chips each contain a unique ID that will allow consumers to scan and authenticate their goods via their smartphones or on the fashion brands’ websites. Salvatore Ferragamo began in 2014 with embedding RFID chips into the left soles of its women’s shoes. It has since added the tags to products in other categories, including bags and luggage but this has not decreased the production of counterfeits which remains to be the main issue.

Since 1982, the global trade in illegitimate goods has increased from $5.5 billion to about $600 billion annually with counterfeited goods representing 7% of the global trade and with revenues nearly twice that of the illegal drug market. Counterfeiting may be viewed as a “soft crime,” but it is no longer a small-scale business of insignificance. Counterfeiting remains to be a large issue for designer brands, because not only does it reduce the sales of original goods but it also adversely affects the brand equity, consumer confidence and it hurts channel loyalty, which directly affects brand-customer relationship. What is needed in the new world of 3D printing is regulation that controls illicit manufacturing and that enforces the intellectual property rights of designer brands. While 3D printing may be a new industrial revolution that holds potential for major innovation of economic models, the current idle situation of today is not a state that will protect an industry which is already facing financial turmoil.

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