In the year 2000, the music business was still strong. Record companies produced albums and shipped these physical objects to the stores that sold them. The internet was slowly becoming a system of mass consumption and distribution, but most consumers still purchased physical media. And while the record industry was aware of piracy online, the threat seemed minimal.
Then came Napster.
The music industry tried to stop this large-scale piracy by pursuing both the platforms and individual downloaders — including poor college students. But public opinion turned against the industry. After all, stealing digital music is intangible; it’s different than physically swiping actual CDs or tapes from brick-and-mortar stores. And while today many people access their music legally, it’s safe to say that music industry revenues have yet to recover.
What do pills have in common with MP3 downloads? More than you might think
3D printing, another revolutionary and disruptive technology, makes it cheap and easy to produce physical objects. And just as home copying has changed the copyright industries beyond recognition, 3D printing is poised to do the same to patent-based industries.
That means practically any business that makes physical objects will potentially face a Napster scenario. It may not happen to everyone, but as printer technologies improve and more materials — such as proteins, specialized polymers, metals and other chemicals — become available for printing, it will happen to many.
Take the pharmaceutical industry. Just like a musical recording, where most of the costs are incurred while producing the initial release (hiring the musicians, booking the studio, editing and the like), the bulk of the cost of developing a new pill goes into the front end: research and development, clinical trials and getting through the FDA approval. In fact, the raw ingredients may cost only a few pennies. And 3D printing — or digital manufacturing and distribution, as it’s also known — will make reproducing and delivering these pills, lawfully or unlawfully, much easier.
Houston, we have a (patent) problem
If people felt sorry for those poor college students being picked on by the big music industry, imagine how the public will feel about patients with inadequate insurance availing themselves of necessary but pirated prescriptions.
Aprecia may be the exception today, but it has proved that medicines can be printed.
Digitally manufactured pills are not far off. In 2015, the FDA approved the first 3D-printed pill, Spritam levetiracetam, an epilepsy drug manufactured by Aprecia. The manufacturer claims that the 3D-printed pills are actually more effective, because their layered structure is more easily absorbed by the body, courtesy of the way 3D printers work. With 50 patents on its unique proprietary process, the company also claims that its IP is protected. Aprecia may be the exception today, but it has proved that medicines can be printed.
The pros and cons of a DIY maker culture
Despite the potential for threats to IP, 3D printing promises a wealth of benefits, like customization, both to consumers and, if they handle things right, manufacturers. With 3-D printed pharmaceutical medications, doses can be readily tailored to the needs of each patient, much like when pharmacists compound ingredients to make a custom pill for each individual. Likewise, prosthetic limbs are being created to fit each patient exactly.
That is not the only positive aspect of 3D printing. As printers get cheaper, they’ll no doubt begin to appear in pharmacies, which will print pills only as needed, cutting down on costly waste, spoilage and storage. That’s terrific news for the pharmaceutical industry, but there’s a darker side, too. In time, nearly anyone will be able to make the components for almost anything — patented or not, protected or not, dangerous or not.
If a 3D printer in every home sounds a bit far-fetched, a forecast by Gartner predicts that 3D printer shipments will more than double every year between 2016 and 2019, and notes that lower-end models, like those costing less than $2,500, are expected to grow to 40.7 percent of offerings by 2019. Gartner also predicts upwards of $100 billion loss a year in intellectual property worldwide because of 3D printing, because of not only pirating, but industry disruption.
Planning strategically now for a 3D-printed future
Much can be learned from how various industries have dealt with new technology. For the music industry, Napster met the effective end of legal exclusivity in copyrights. When distribution channels shifted and everyone with a computer could download and reproduce songs, copyright became hard to enforce. As soon as a record company sued one infringer, another popped up, like a nightmarish game of Whac-A-Mole. As a result, the value of the copyrights quickly degraded.
However, as we have also seen, not all IP or the products it protects will go down in value. Some things will become more valuable — and that’s where today’s executives should prepare.
Preparing for the ways that 3D printing will affect the market doesn’t always have to be costly.
There are numerous ways companies can proactively plan for the impact that 3D printing technology will have on their business. By investing in quality control and supply chain protection now, pharmaceutical companies, for example, can protect their patents and their market share by ensuring that their supply chain is pure, that their quality is guaranteed and that their customers are getting a safe medication, even when that reassurance costs more. This will appeal to consumers who want to be sure they are getting the real deal when it comes to medication — FDA-approved and quality controlled — not an illegitimate knock-off.
Preparing for the ways that 3D printing will affect the market doesn’t always have to be costly or go against the grain. For example, appliance or automobile manufacturers may encounter sales loss if third-parties 3D print replacement parts at a lower cost than those that are manufacturer-issued. Instead of fighting against this likelihood, manufacturers would do well to adopt the third-party business model of 3D printing spare parts to order. This reasoning can apply not only to heavy manufacturing, but also to medicine, bringing down the costs of so-called “orphan drugs,” those currently not manufactured because of their low potential for profit.
Alternatively, manufactures could skirt similar issues by creating a design that requires a specific type of material, one not compatible with 3D technology. Materials and shapes that have to be mixed or joined in certain ways, for instance, do not easily lend themselves to digital manufacturing technology. Remember, though, that when financial incentives combine with evolving technologies, these types of plans may be short-lived.
Even with the advent of 3D printing, we will still live in a world where legitimate businesses are engaged in the licensed manufacturing and distribution of copyrighted works and respect intellectual property. Patent owners could license manufacturing rights to legitimate 3D printing companies — the official 3D printer of Nike products, say — in which only authorized entities could make the official products. That way, patent owners would get income, 3D printing companies could develop new markets and buyers could get legitimate, quality-controlled products. This could be done with branded and lower-cost white labelled options.
Along with all the good that digital technology can bring, a major challenge to patents and other forms of intellectual property may be in the offing. Major industry disruption will soon follow. Only this time, with changes perhaps as long as five to 10 years down the line, manufacturers have time to prepare for it and pivot.