The Ultimate Disruptive Technology: 3D Printing Will Not Only Change the Way We Trade; it Will Change the Way We Live

10/05/2016

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Jonathan Engler

Today’s product regulation and trade regimes resemble World War One cavalry facing off against modern mechanized divisions.  It is imperative that we begin the process of entirely reimagining what functional health, safety and trade regimes will look like in the next decades.  3D printing and the disaggregation and diffusion of product design and manufacturing – which will touch all tangible items – will massively disrupt existing economic models and render much of today’s national trade and health and safety regulation anachronistic and ineffective. The intellectual property and international trade law regimes that are in place today are, in many respects, relics of the 19th century, a time when trade involved principally tangible goods – steel, cotton and finished products.  Since the mid-1990s, however, with the rise of digitized goods – starting with movies and music – technology began to move much more quickly than the law could keep up.  Consumers had access to counterfeit and pirated movies, music and books – frequently from off-shore servers such as Pirate Bay – and began to download unauthorized copies of these works in large volumes.   Efforts by the recording and movie industries to counter this piracy met with mixed success:  Congress and the courts largely absolved the “pipelines” – the internet service providers and other infrastructure providers – from liability. Efforts to go after the consumers themselves had mixed results, particularly in the court of public opinion.   The music and movie piracy situation today seems to have reached a fragile equilibrium, at least in the United States, thanks in part to the rise of viable online marketplaces such as iTunes. The music and film industry experience with digitized piracy may have been the proverbial canary in the coal-mine, however, for the rise of 3D printing.  Also known as “additive manufacturing,” 3D printing is potentially a much more significant technological development in terms of its commercial scope and potentially destabilizing effect on many industrial economic models. Additive manufacturing is, to oversimplify things somewhat, the use of “printing” devices that build, layer by layer, three-dimensional objects based on electronic data files, usually “computer-aided design” (CAD) files.  Today, it is possible to use 3D printing to print everything from titanium to pastry, and the speed and sophistication of these printers is increasing exponentially even as cost drops. Already, industries ranging from aviation to medical devices are building a wide range of components and parts using 3D printing. Over the next few years, companies that used to have to maintain expensive inventories of spare parts – such as airlines – will be able to print custom parts, on site, immediately.  Medical devices are already custom-built using 3D printers, with artificial bones and even artificial organs and human “replacement parts” a near-certainty over the next decade. The disaggregation of engineering and design from advanced manufacturing—with even complex manufacturing now possible with very low barriers to entry using commercial 3D printers – threatens to rapidly render much of today’s intellectual property, international trade and health and safety regulatory regimes obsolete.  We have a very limited amount of time left to re-imagine what viable future regulatory regimes could look like. U.S. courts, including the Federal Circuit in the recent ClearCorrect case, have already rejected the application of current U.S. trade regulation regimes – including Section 337 of the Tariff Act, a popular intellectual property trade remedy – to electronic files imported from overseas to print 3D objects in the United States.  It is already widely understood that the General Agreement on Tariffs and Trade (GATT) and General Agreement on Trade in Services (GATS) do not apply to trade in 3D CAD files, which are neither a good nor a service. To comprehend the disruptive effect that 3D printing will have on our trade regulation and health and safety regimes, consider two examples, one involving “incoming” merchandise and the other “outgoing.” In the first example, imagine an imported 3D file for a replacement part for an FDA-approved medical device. A doctor in the United States is able to extend the life of an expensive device by making her own replacement “disposable” parts in the doctor’s office, using CAD files downloaded from a server abroad. The U.S. medical device manufacturer’s business model – and pricing for the original device – is predicated on the ability to sell replacement parts at a high mark-up.  The device underwent an expensive and lengthy FDA approval process, which the medical device maker must recoup for the program to be profitable, and the device maker must comply with FDA-supervised manufacturing regulations. The doctor in her office, however, is able to side-step both FDA health and safety manufacturing regulation (since the replacement parts will be produced in her office, and the replacement parts themselves may not fall within the scope of existing FDA regulations) as well as any intellectual property rights the medical device company may have in the replacement parts (it is a simple matter already to simply scan and copy three-dimensional objects). The doctor will improve her profitability by cutting the cost of using the medical device, and patients may well benefit from lower costs as well.    But the FDA health and safety regime will have been side-stepped (who is liable if the device malfunctions and a patient is injured? How will fault be apportioned?) the international trade regime is inapplicable.  Under current law, the internet service provider will certainly not be liable. Consider an “outgoing” trade example – export controls. Let’s suppose a “rogue” third country wants to produce high-technology weaponry using U.S. designs, or purchase replacement parts for aging U.S. weapons systems that it already has in its inventory.  In the past, the U.S. export control regime could control the physical export of these products to third countries. But in a 3D world, industrial espionage, combined with sophisticated off the shelf 3D printers, allows third countries to print the sophisticated components needed to produce new weapons or repair existing weapons.  The restricted CAD designs can be either stolen – the examples of compromised computer systems at many high-technology U.S. defense contractors are already legion – or replacement parts simply scanned from physical examples and 3D files created on the spot. The process of reimagining the future is essential to protect consumers and to maintain the engine of innovation that today’s intellectual property regimes, for all their flaws, have provided for centuries.   One thing is certain: effective trade regulation regimes in the future – if they even continue to exist – will look nothing like what we are accustomed to today.
Jonathan Engler is a partner at the firm Adduci, Mastriani & Schaumberg LLP.  He represents high technology companies, foreign and domestic, in Section 337 litigation at the International Trade Commission.

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