Formlabs Grows, Counts Millions in Sales Despite Patent Lawsuit

Patent lawsuits from a deep-pocketed competitor can crush a young company before it really gets going. But at the bustling headquarters of 3D printer startup Formlabs, you’d never know the past two years have been spent fighting accusations that its flagship product is a brazenly illegal knock-off.

The company now employs about 90 people, and recently added a second chunk of office space at its gritty home base in Somerville, a working-class city just outside Boston. And that new space is filling up fast—on a recent midmorning tour, workmen were still hanging drywall in the foyer as CEO Max Lobovsky explained Formlabs’ plans to expand again, giving it leases on about half the building.

There’s also a new Berlin office, which Lobovsky hopes will grow into a significant sales, marketing, and operations office for the European market. And Formlabs is in the middle of rolling out two new types of liquid print materials: a “castable” resin that can be used to make jewelry molds, and a flexible resin that makes stretchy, rubbery items rather than the hard plastics typically churned out in 3D printing.

Oh, and they’re selling plenty of printers, too. The startup unveiled its second-generation printer this summer, the Form 1+, which features upgraded components that promise faster, more detailed 3D prints.

Lobovsky wouldn’t discuss hard sales figures, but when I suggest that Formlabs probably isn’t pulling in millions of dollars just yet, the bleary-eyed startup executive smirks a bit and says that his company is actually selling “between 1,000 and 10,000 per year,” at $3,300 a pop.

“We’re selling many thousands. We’re not quite profitable at the moment, but we have very significant revenue,” he says. “We actually were profitable when we raised the last round of funding, so it’s a real business. It’s not a venture-funded game.”

Those economics are likely a big reason that venture investors were willing to pour some $19 million into Formlabs last summer. Lobovsky notes that one of the main investors in that deal, DFJ Growth, knows the peculiarities of the hardware business through its backing of ambitious manufacturing and logistics companies like Tesla and SpaceX.

“We had learned through our first round of fundraising that going to people who didn’t know a lot about these kind of products is tough,” he says. “They might be excited, but as soon as they get to the details, they get kind of scared—and rightly so. It’s very different from software.”

Growing a hardware startup is difficult enough. But writing multimillion-dollar checks for a hardware startup as it’s in the middle of a patent infringement lawsuit is another kind of confident. At the time, it seemed as if Formlabs and its opponent in the case, 3D Systems (NYSE: DDD), might be on their way to settling the dispute. But that was more than a year ago, and the case winds on.

Lobovsky declined to say much about the ongoing suit, but a search of court records reveals that attorneys are optimistic that a deal can be reached. In a recent letter to the judge in charge, lawyers for 3D Systems wrote that “the parties are close to settling the case” and “have exchanged draft settlement papers …. We remain hopeful that this case will settle shortly.”

That would clearly be a boon for Formlabs. Unlike some of the more maligned “patent troll” cases that crop up in the technology sector, this lawsuit is from a company that actually makes a product that it’s asserting protection for.

And Rock Hill, SC-based 3D Systems would seem to have a relatively strong intellectual property claim: its founder, Chuck Hull, actually invented the 3D printing process, called stereolithography, that Formlabs’ printers use.

Stereolithographic printers use special liquid polymers that harden when they’re exposed to intense light. The printers shine lasers into that resin, allowing them to build a model layer by layer. The process offers more detail and better quality than many new-era consumer 3D printers, which typically build their products with thin layers of a fast-hardening plastic material, which is kept in spools of spaghetti-like strands.

One of Formlabs’ central defenses comes down to the fact that patents aren’t forever, and 3D Systems’ crucial protections are getting too old to use as legal barriers to new competition. 3D Systems, however, has many patents at its disposal: it’s asserting eight different patents that cover various detailed aspects of the stereolithography process.

“People told us, `This is it. You’ll never be able to raise money, people will never buy your product. This is like a death sentence.’ And honestly, that is probably what 3D Systems was thinking, but it’s not that simple,” Lobovsky says. “Obviously, we believe we weren’t infringing. And the patents expire in a very short timeframe, and we were able to keep operating and raise another round of funding, and kind of power through it.

“But it certainly wasted a whole lot of time and energy and money, and I wouldn’t recommend it.” … Next Page »

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