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3D Printing: Evaluating Product Safety and Liability Risks, Avoiding and Defending Claims

Mitigating Manufacturer Risks With Quality Control Measures, Product Monitoring, Insurance Coverage and Contract Provisions

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JANUARY 28, 2016

Matthew D. Jacobson, Reed Smith, Washington, D.C. Colin K. Kelly, Partner, Alston & Bird, Atlanta Brandan P . Mueller, Partner, Husch Blackwell, St. Louis

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3D Printing Background and Basics

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Brandan Mueller Partner HUSCH BLACKWELL LLP

State of 3D Printing

• Fashion:

̶ Jewelry ̶ Dresses ̶ Shoes

• Food
• Aerospace
• Homes
• Prototyping
• 3D Printing Applications

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State of 3D Printing

• Pharmaceutical
• Medical

̶ Orthopedics/prosthetics ̶ Dental implants ̶ Prototyping surgical

• perations/surgical planning

̶ Skeletal reconstruction ̶ Tissue and organ replication (ear, nose, body parts)

• Hobby
• 3D Printing Applications

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State of 3D Printing

• As of 2014:

̶ 80,000 industrial printers worldwide since 1988 ̶ 140,000 desktop printers sold in 2014 alone ̶ 38% of industrial printers are in U.S.

 Japan is 2nd  China is 3rd

• Total market as of 2014:

̶ $4.1B (includes prototyping + other non-commercial uses)

̶ $2B in products

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State of 3D Printing

• Standards being formulated

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State of 3D Printing

• 3D Printing Technologies

̶ Blown Powder: Metal powder blown coaxially to the laser beam which melts the particles on a base metal to form a metallurgical bond when cooled

̶ Thermal Extrusion: Thermoplastic filaments heated through a nozzle ̶ Stereolithography: UV-light

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State of 3D Printing

• 3D Printing Technologies (cont’d)

̶ Selective Laser Melting (SLM); Selective Laser Sintering (SLS); Electron Beam Melting (EBM)

̶ Ink-jetting Photopolymer process: Tiny droplets of liquid photopolymer onto a tray & cured with UV-light

A laser or electron beam melts or sinters powder (metal or plastic parts)

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State of 3D Printing

Snapshot of the 3D Printer Players

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3D Printer Materials

State of 3D Printing

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State of 3D Printing

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State of 3D Printing

• Impact on

Manufacturing

̶ No entry barriers ̶ Digital scans/digital blueprints replace products ̶ Mass customization possible ̶ File sharing ramifications

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State of 3D Printing

• Impact on

Manufacturing

̶ Reduced shipping and production costs ̶ Reduced logistic footprint ̶ Potential applications (limitless) ̶ Customers replace manufacturers

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State of 3D Printing

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Legal Issues

$

Intellectual Property

Tax Treatment & Accounting of Print-to-Order Revenue

Packaging & Transportation Commercial Contracts Licensing Agreements Imports/Exports Higher Education Healthcare Food and Drug Administration (FDA) Regulatory Products Liability Product & Environmental Regulations

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Are Existing Product Liability Laws Adequate for 3D Printed Products?

Different Perspectives: §Printer Manufacturer §End User §Software Company/Designer

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3D Printer Manufacturer Perspective

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Printer Manufacturers

• The new boss is the same

as the old boss…for the most part.

• 3D Printer manufacturers

most likely to:

̶ Be a “seller” of goods; and ̶ Fall within traditional warranty considerations.

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Printer Manufacturers

• A Good Fit (But Not Perfect) for Traditional PL

Concepts:

̶ Printer likely:

 to be used as intended and marketed  To require/contain warnings

̶ Printer not likely:

 to be altered

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Printer Manufacturers

• Clearer Picture….

̶ Liability possible with:

 the operation of the printer  the warnings/instructions

• Murkiness Comes in with….

̶ The product that is printed!

 Most likely to be the cause of any harm.

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Printer Manufacturers

• Why May Current PL

Concepts Not Apply?

̶ Printer makes the product as intended ̶ Printer makes the product according to specification ̶ Defect in the Printer vs. Defect in the Product

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Printer Manufacturers

• Why May Current PL

Concepts Not Apply?

̶ Foreseeability

 Product  User  Misuse

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End User Perspective

Colin K. Kelly, Partner ALSTON & BIRD LLP

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“[O]ver time, [] hobbyist inventors will start selling some of the complex, sophisticated, and dangerous products they create, and certain individuals who purchase their creations will, unfortunately but inevitably, sustain injuries. . . . [I]n many instances, no one will be strictly liable for these injuries under current [product liability] doctrine.”

Nora Freeman Engstrom, 3-D Printing and Product Liability: Identifying the Obstacles, 162 U. PA. L. REV. ONLINE 35, 37 (2013).

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Current Strict Liability Laws

• Restatement (Second) of Torts § 402A

̶ “One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused . . . if the seller is engaged in the business of selling such a product . . . .”

• Restatement (Third) of Torts § 1

̶ “One engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect.”

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Consumer Expectations Test

̶ A product is “defective” under the Restatement (Second) of Torts § 402A if it is “in a condition not contemplated by the ultimate consumer.” (Comment g) ̶ The product must be “dangerous to an extent beyond that which would be contemplated by the

• rdinary consumer who purchases

it, with the ordinary knowledge common to the community as to its characteristics.” (Comment i)

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Risk-Utility Test: Negligence

̶ A product is “defective” under the Restatement (Third) of Torts § § 1, 2 if it has a manufacturing or design defect, or if it is accompanied by an inadequate instruction or warning. ̶ Despite its “strict liability” title, determining whether a product has a defective design or an inadequate warning mimics the negligence inquiry. ̶ The Restatement (Third) “adopts a reasonableness (‘risk-utility balancing’) test as the standard for judging the defectiveness of product[s].” (Comments d and i)

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States Applying Each Test

Consumer expectations

• Arkansas, Indiana, Kansas,

Maryland, Nebraska, New Hampshire, North Dakota, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, Wisconsin, Wyoming Either test

• Alaska, Arizona, California,

Connecticut, Florida*, Hawaii, Illinois, Mississippi, Washington Risk-utility

• Alabama, Colorado, Georgia,

Idaho, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, West Virginia Neither test

• Delaware, Iowa, Maine,

Missouri, Montana, Nevada, South Dakota, Virginia

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3D Suppliers/Manufacturers Remain Ripe Targets for Strict Liability Claims

33

Users Still Have Component Part Supplier Obstacles

• A supplier of a component part has no duty to warn end-users of possible

dangers from integrating the part into another product

• Exceptions:
• The component itself is defective
• The supplier “substantially participates” in the design of the integrated

product

• Can rely on an intermediary

manufacturer to transmit an appropriate warning

• Places legal responsibility with the

party best suited to prevent the harm

• Prevents the inefficiency of requiring

component part suppliers to warn end-users about products they did not make, market, or package

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“Unique” Obstacles for End Users of 3D Printed Products?

• Existing product liability laws provide

compensation for the majority of those who would be injured by 3D printed products

• End users may actually have a

deeper bench of responsible parties to sue since most parts/products are still being fabricated in-house

• For example, an auto company that

contracts out 3D printing of certain parts rather than doing in-house fabrication opens up 2-3 more potential defendants (and additional insurance)

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Key Issue: “Are you a seller?”

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§ 402A: “Engaged in the business

• f selling”
• The following are “sellers” under the Restatement (Second) of Torts

§ 402A: ̶ Manufacturer of a product for use or consumption ̶ Wholesale or retail dealer or distributor

• Strict liability does not apply to the “occasional seller” who

does not manufacture or distribute a product as part of its business. ̶ The basis for strict liability is “the special responsibility for the safety of the public undertaken by one who enters into the business of supplying human beings with products which may endanger the safety of their persons and property . . . . This basis is lacking in the case of the ordinary individual who makes the isolated sale, and he is not liable . . . in the absence of his negligence.” (Comment f)

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§1: “Engaged in the business of selling”

• Under Restatement (Third) of Torts § 1, strict liability “applies
• nly to manufacturers and other commercial sellers and

distributors who are engaged in the business of selling or

• therwise distributing the type of product that harmed

the plaintiff.”

• “It is not necessary that a commercial seller or distributor be

engaged exclusively or even primarily in selling or otherwise distributing the type of product that injured the plaintiff, so long as the sale of the product is other than occasional or casual.”

• Whether a defendant is a commercial seller or distributor is a

question of law to be determined by the court. (Comment c)

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Predictions…

• How many EBay or Amazon

sales does an individual with a 3D printer selling products have to have before they are subject to strict liability?

• Over time the distance

between commercial and casual sellers will shrink dramatically.

• Solution will not require a

change in law-- only a change in interpretation.

39

Broad Definitions of “Seller”

• Courts and New York and Pennsylvania have already applied broad

definitions of “seller”

̶ “Under the strict products liability doctrine as it exists in New York,

defendants can be manufacturers, distributors, retailers, processors and makers of component parts who sell the product alleged to have caused injury, in essence, those responsible for placing the defective product in the marketplace.” Nickel v. Hyster Co., 97 Misc. 2d 770, 771 (N.Y. Sup.

• Ct. 1978) (internal citations omitted).

̶ “Under our products liability law, all suppliers of a defective product in the chain of distribution, whether retailers, partmakers, assemblers,

• wners, sellers, lessors, or any other relevant category, are potentially

liable to the ultimate user injured by the defect. This rule of law ensures the availability of compensation to the injured party, and helps place the burden of such injury on parties who, unlike the consumer, have a better

• pportunity to control the defect or spread its costs through pricing.”

Burch v. Sears, Roebuck & Co., 467 A.2d 615, 621 (Pa. Super. Ct. 1983) (internal citations omitted).

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Matthew Jacobson REED SMITH LLP

3D Printing Software Company/Designer Perspective

41

What counts as a “product”?

• Computer code?
• CAD models?
• Software program?

Product Liability and 3D Printing Software/Designs

If a “product,” than may be strictly liable for

• Defective original design
• Defective digital file
• Corrupted copy of downloaded

digital file

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• Restatement (Third) of Torts—“tangible personal property

distributed commercially for use or consumption”

• Case law on code for 3D printing designs?
• Case law on code constituting a product?

Is Computer Code a Product? A Service? Something Else?

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ClearCorrect Operating, LLC v. Int’l Trade Commission, No. 2014–1527, 2015 WL 6875205 (Fed. Cir. Nov. 10, 2015)

• 3D printing digital files are not material things

U.S. v. Aleynikov, 676 F.3d 71 (2d Cir. Apr. 11, 2012)

• Computer source code was not

a stolen “good” under NSPA

• Need tangible property to be

deemed a “good”

• Am. Online, Inc. v. St. Paul Mercury Ins. Co., 207 F.Supp.2d 459 (E.D. Va.

2002), aff'd, 347 F.3d 89 (4th Cir. 2003)

• “Tangible” is something that can

be touched—not an imperceptible piece of data or software that can

• nly be perceived with the help of

a computer

Computer Code in Other Contexts

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Whether something is tangible does not necessarily dictate whether it qualifies as a product for strict liability purposes

• Non-tangible items, such as electricity and aeronautical maps and

charts have been held to be products

• On the other hand, information in books

generally has not been held to be a product

• Publishers not liable for “informational defects”

in published material pursuant to the First Amendment

Tangible is Not the Be-All End-ALL

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Software company 3D digital designer 3D printing companies Traditional manufactures

Need to Know Checklist

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Product Liability and 3D Printing—Emerging Issues & Industry Specific Best Practices

• Medical Device and Health Care
• Automotive
• Aviation

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3D Printing and the Impact of Medical Device and Health Care

3D Printed Medical Devices/Drugs

• FDA has cleared

through the 510(k) process 3D printed medical devices

• Hearing aids, dental

crowns, bone tether plates, skull plates, hip cups, spinal cages, knee trays, facial implants, surgical instruments, braces

• Bioprinting may be

the future

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• What is considered a product?
• Who is the manufacture?
• What is the marketplace?
• Did the product substantially change when it left the designer’s

control?

• Who has a duty to warn?

Tort Liability Questions Related to 3D Printing of Medical Devices

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• Majority rule traditionally holds that hospitals and physicians

are not strictly liable for personal injuries arising from product defects

• What if hospitals start to incorporate

a 3D printing center on-site?

• Is the hospital “engaged in the business
• f selling” the 3D printed product?
• Is the hospital placing the product on

the market?

• Remains to be seen whether hospitals potentially

become a “manufacturer” for purposes of either strict liability or negligence

Will Hospitals and Physicians Become Manufactures?

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• Duty to warn of reasonably foreseeable dangers
• 3D printed medical devices will need

to be accompanied by adequate warnings

• Learned intermediary doctrine
• Buckley v. Align Tech., Inc.,
• No. 5:13-CV-02812-EJD,

2015 WL 5698751 (N.D. Cal. Sept 29, 2015)

• If no traditional product “manufacturer” exists, who has duty to

warn?

Who Has a Duty to Warn?

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• Manufacturing

facilities—clean and hygienic

• Manufacturing

processes are controlled

• Controlling the product

design

• Traceability at all stages
• f production
• Controlling production

and process

• Controlling inspection

Current Good Manufacturing Practices/Quality Systems

53

• Recalls probably limited to 3D printers and centrally

manufactured products

• No way to have quality control with either the CAD files or

the facility (if not centralized)

• How does one recall products that are not centrally

manufactured?

• Do all recalls become voluntary?

Recalls

54

3D Printing in the Auto Industry

• Colin K. Kelly

55

Emerging Issues

• Testing and prototyping is currently the most common use of 3D

printing by automobile manufacturers (huge cost savings and ergonomic/quality control process improvements)

• Resins and polymers used in most auto 3D “additive”

manufacturing have limits compared to metal parts so actual printing of component parts are mostly interior or non-structural

• Huge expansion in 3D “additive” metal printing technology is

potentially more important future area for auto industry

56

Component Parts

• Many automobile companies and OEMs are using 3D printers to

manufacture component parts

• Ford uses 3D printing technology to print the engine cover for the

new Mustangs, engine components for the Fusion, and the exhaust manifolds for the F-150

• The next-generation Mercedes-Benz S class is predicted to have

printed trim pieces such as air vents and speaker grilles

• Audi recently announced that their use of metal-based 3D

printing is imminent, and had even produced a fully 3D printed functional replica of the 1936 Auto Union Type C Grand Prix racer

57

Print Your Own Car: The Strati

• Local Motors is working on

crash-testing a 3D printed car.

• The car is printed with carbon-

fiber-reinforced plastic body and components using a 3D printer machine.

• The car will likely cost between

$18,000-$30,000 depending upon options

• Seats two and can drive up to 25

mph on a fully electrical battery.

• Some components are metal

and are added to the body but it has only 49 parts to assemble.

• The car only lasts about five

years and can be recycled.

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Issues to Watch….

• How will this impact the definition sellers for strict product defects in the

design, marketing and manufacturing by individuals?

• NHTSA has been active in driver assisted technology (and recently

directed $4 billion dollars to safety initiatives in this area).

• Will NHTSA get involved in setting forth new standards or regs governing

home printed component parts, replacement parts?

• Stick to existing guidelines?
• As more casual car enthusiasts/shade-tree mechanics print and swap

their own parts will the day come when auto-part stores are obsolete?

• How will the insurance industry respond?
• Cheaper policies for individual users?

59

3D Printing – Aviation

• Brandan Mueller

60

3D Printing - Aviation

• One of largest growth sectors

for 3D printing

• FAA Considerations
• Approval of parts
• Approval of crafts
• Piloted
• Drones

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3D Printing - Aviation

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Aerospace America, July-August 2015 edition

3D Printing - Aviation

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3D Printing - Aviation

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Thank You

Matthew D. Jacobson Reed Smith mjacobson@reedsmith.com Colin K. Kelly Alston & Bird colin.kelly@alston.com Brandan P. Mueller Husch Blackwell brandan.mueller@huschblackwell.com

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