MarketsandMarkets LogoWhile they have always been a touchy subject in just about every industry built around technology, patents are an especially touchy topic in the 3D printing industry. That is likely due to the fact that the industry as it exists now probably would not exist had the RepRap Project not encouraged makers to experiment with at the time newly patent-free FDM 3D printing technology. In fact, most 3D printers on the market today are loosely based on one of the several open source 3D printer designs that emerged directly from the RepRap community. It was the very act of those patents expiring that caused this entire industry to build a strong and loyal user-base, and convince the world that 3D printing and STEM education are vital.  

3D printing was a relatively unknown and underused technology for decades, mainly because only a small number of companies actually held patents for the processes. But as soon as those patents expired, the maker community quickly latched onto 3D printing and has never let go. It was in that small maker community that 3D printer companies like MakerBot would develop technology that would lead to their eventual purchase by industry giant Stratasys in a stock swap that could have been valued as high as $600 million. It seemed to be a case study in the value of open source technology and the leveraging of a talented and committed community for successful product development.

makerbot-logo-kickstarter-1.originalSeveral of the early iterations of the classic MakerBot 3D printers are perfect examples of the brilliance of using open source technology, and the robust community that built up around MakerBot helped drive their 3D printers to once be called one of the best options in the industry. But as MakerBot started to shift their focus away from open source technology and filed a series of high profile patent applications, that community did not react well. Many saw it as not only a betrayal, but considering many of the features on newer MakerBots were built off of technology that was essentially road-tested by the community, many saw it as unethical. To this day it remains one of the most controversial decisions that the company has made under the leadership of parent company Stratasys.

Still, it is widely believed that the 3D printing industry is an example of using open source technology leading to tremendous success. But according to a newly released market research report from MarketsandMarkets called “Outlook of Mergers & Acquisitions, Investments, and Patents in the 3D Printing Market (2010-2016)”, much of the industry’s rapid growth was due to patented technology. According to the report, several high-profile mergers & acquisitions and patent publications were a primary driver of growth, and led to increased investments. From the report:

“The M&A [mergers & acquisitions] activity in the 3D printing industry has picked up pace in terms of the value as well as the number of deals. The analysis of many M&A deals reveals that 3D printing companies look for small- and mid-sized players that have lower operating expenses compared to their growth potential in the 3D printing industry value chain. Small-to mid-sized companies lacking the scale to grow have become attractive takeover targets for major players.”

The highest year of M&A deal announcements occurred in 2014, which is also when the industry peaked on the stock market, with both Stratasys and fellow industry leader 3D Systems reaching record high stock prices. The report is suggesting that the health of the industry is tied both to the stock market and to the investments that higher stock prices brought in. Based entirely on numbers, that is a hard hypothesis to handwave away, and without question having a willing public invest in an industry is generally understood to be a good thing. And patented technology has always been very good for drawing investors in because it makes them feel more secure in their investments.

But, the other side side of the story suggests that Stratasys’ and 3D Systems’ over-reliance on mergers & acquisitions and patent publications is what ended up sinking their stock prices in the end. That is a narrative that is just as compelling, and has a lot of supporting evidence. Just those two companies alone acquired nearly 60 smaller companies, many of them primarily to gain access to their patented technology. 3D Systems alone purchased an astounding 48 companies and startups since 2010, and Stratasys acquired a still significant 10 companies in the same time frame. If industry growth was based on how successful the filing of patents and lucrative M&A deals was since 2010, then the low stock prices of Stratasys and 3D Systems should be a problem for the 3D printing industry.

3dp_ipcase_copyright_infringmentHowever it turns out that the opposite is true, not only is the industry in general doing far better than Stratasys and 3D Systems, but it is actually thriving. It seems that the problem could lie with the newly acquired small companies and patents suddenly shutting out the useful open source community and their invaluable testing, refining and feedback. I suppose that it could be a coincidence that 3D Systems’ Cube platform was developed entirely as closed source, patented technology. But the Cube was such an abject failure that it ended up chasing 3D Systems from the desktop market entirely. And MakerBot’s sterling reputation took a beating with the release of the monumentally flawed Smart Extruder, which is coincidentally the first major product that was developed away from their enthusiastic open source community.

There is no question that today’s 3D printing technology would not exist without the open source community. Alternately, Carbon just pulled in more than $100 million in crowdfunding to continue developing their revolutionary CLIP technology. The same CLIP technology that is owned and has been patented by Carbon. Many investors suggest that closed source technology is in fact a requirement for them to consider investments in new, unproven technology. Is it possible to be partially open source and still file new patents when it is absolutely needed? You can read the full MarketsandMarkets report for yourself here. Discuss further in the Mergers & Acquisitions Driving 3D Printing Industry forum over at 3DPB.com.

 

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