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Sunday, 14 June 2015

Is 3D printing good or bad for counterfeiting?

Back in March, this Kat had the privilege of taking part in a two-day programme in New York, under the auspices of the International Trademark Association (INTA(, on the subject of 3D printing. For sure the highlight of the programme (clearly not this Kat!) were the presentations by the husband and wife 3D printing gurus, Professor Hod Lipson and Melba Kurman. While the focus of their collective remarks was not in the main directed to trade marks, or even to IP issues generally, one observation by Ms Kurman caught my attention, namely that 3D printing may not lead to an increase in the manufacture and distribution of counterfeit products, pointing to the economic requirements of product counterfeiting. Her observations on counterfeiting have stayed with this Kat.

When we talk about counterfeiting, we do not mean the scenario whereby an individual makes an unauthorized copy of an item in the comfort of his home. While this may well be a blatant infringement, the end result is that a lone item has been created for use by its maker (indeed, this convergence between manufacturer and consumer is one of the defining characteristics of 3D printing).  Seen in this way, such unauthorized copying is simply the most recent manifestation of the time-old question: how do we deal with technological advances in our ability to make reproductions? Rather, the question addresses a very different issue: how do we understand the economics of counterfeiting and how does 3D printing fit into this economic ecosystem?

This Kat’s hands-on experience with counterfeiting focuses on frequent interactions with the local customs authority on behalf of various clients. From this perspective, we see the finished product, in transit from its overseas manufacturer and assorted middle men, on its way to the local distributor, subject to the vigilance of customs. If we are lucky, we can obtain information from the local distributor about the identity and location of the overseas manufacturer. Otherwise, we have to satisfy ourselves with information about one of the overseas distribution middle men, if at all. What we never encounter is the underlying business infrastructure by which products and product designs are identified and then manufactured abroad; the means by which prospective customers for these counterfeit products are put into contact with the manufacturer; and how payment is made and shipping arrangements are dealt with.

While we may not like the counterfeiting business, it cannot be gainsaid that it is a complex enterprise, both organizationally and logistically. Underpinning all of this is the need for extremely tight cost controls to support the counterfeit version of economies of scale. Counterfeit products have to be price-competitive with the original product. How much the price differential needs to be will depend on the nature of the particular product. But, whatever the pricing, the counterfeiter will likely work on the basis of a small profit margin. It does not pay to maintain a counterfeiting operation in order to make a single copy of an item, but it also does not pay to set up a counterfeiting operation unless a critical mass of items can be cheaply made and distributed, usually to other countries.

This being so, how might 3D printing affect the counterfeiting business? At first glance, the argument can be made—not very well. First, there is the need to purchase 3D printers. While there is much talk about a 3D printer in every house, this Kat suspects that a counterfeiter would need to purchase a more expensive version of the machine. How will the cost of such a machine stack up with the cost of kit in a traditional counterfeiting operation is not clear. So too is the cost and availability of the materials needed for 3D manufacture. Moreover, no matter how cheap or expensive are the machine and the materials, not to speak of labour, the perspective counterfeiter will need to deal with the simple fact that 3D printing is a slow way to make the same item on a repeated basis. The bespoke nature of 3D printing is of no advantage here. The question is: what is the aggregate time differential between making 1,000 counterfeit units of a hot designer hand-bag as opposed to making them in the conventional counterfeit manner? To this, then, needs to be added the other cost factors in assessing the economic viability of using 3D printing as the basis for a counterfeit operation. This Kat admits that he simply does not know the answer.

Perhaps, however, this Kat is ultimately not asking the right questions. First, maybe the real inquiry is whether a counterfeiting model based on wide-scale distribution of unauthorized production files is possible (keeping mind the convergence between the manufacturer and consumer in the 3D printing world). Secondly, product counterfeiting depends in significant part upon whether brands will continue to be commercially relevant. If the answer is “no”, the results could be devastating for both the genuine brand manufacturer and the counterfeiter. Stay tuned.


Anonymous said...

"Perhaps, however, this Kat is ultimately not asking the right questions."

You are not.

I winced repeatedly throughout the article at the linguistic gymnastics being performed to define "counterfeiting" as necessarily requiring a complex and extensive mechanism.

It does not.

Any visit to a local swap meet or even eBay or other such low-level transactional place reveals that the attempt to place a detailed and complex structure as some form of prerequisite to the act of counterfeiting reveals the error of such an effort.

All that is being done here is setting up a strawman of a certain type of counterfeiter. The plain fact is that this certain type of counterfeiter is not - and never has been - the exclusive meaning of counterfeiter, and that the rights holder loses out every bit as much in a lost sale to a mass-producer counterfeiter as he does to a backyard low volume counterfeiter.

I would also add that the discussion concerning cost and ubiquity of the counterfeiting machines rather poorly misses the point that the evolution of the market is changing that dynamic. The discussion reminds me of several famous quotes denigrating the idea that a personal computer would ever find widespread acceptance in the marketplace (and now, the advancements have made even cell phones to have FAR more personal computing power than that person - a highly respected and knowledgeable expert in his field - would have contemplated.

Perhaps the author should take a look at the situation from the shoes of the person having the rights that are being transgressed, rather than some aggregate societal viewpoint that "necessarily" invokes complex mechanisms...

S. Gebbett said...

Dear Neil,

I have read your thoughts with great interest and concur that counterfeiters shall not necessarily use 3D printers to execute/upscale their illegal activities.

In order to predict the consequences of the 3D print revolution, I find it often helpful to compare it with the inkjet/laser printer revolution that took place during the past decades.

Household printers and copiers at home (or their availability in copyshops) have unmistakenly had some influence on IP though have not been the greatest game changer. It has been the internet which made it easier to distribute digital files of copyrighted work (books, music, films, ...) which has caused the greatest disruption for copyright holders.

I suspect a similar process shall take place on the 3D printing level. Not the actual printing of objects which might be an infringement of copyright, design rights, trademarks or patents shall cause disturbance, but the possibility to easily distribute digital files of such objects over the internet.

However, price and convenience are factors that shall influence this evolution as well. In countries where afordable online legal music services have popped up, illegal downloads have gone down. If it is easier and cheaper to print a handbag at home, than buying it online or in a shop, consumers will do so. However, if the price difference is not substantail enough, consumers shall find it more comfortable to buy it throug the normal commercial channels.

If the illegal distribution of 3D files which are protected by an IP right can be stopped, regulated, managed or even made redundant by modified business models, I don't think 3D printer should cause much upheaval.

Kind Regards,

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