What the 3D Systems/EOS Settlement Means to the Industry

In early February, I received news that 3D Systems and EOS had entered into an agreement that settled all worldwide disputes and litigation between the two companies. This news was big for the RP industry. Very big! In fact, the lingering battle between the two companies has been one of the obstacles to the growth of the industry, when you consider the magnitude of its impact. Not only were these two companies spending enormous amounts of cash on these disputes, the friction between the companies was a serious deterrent to the sale of products to major corporations. I was privy to more than one instance in which a company here in the U.S. put the brakes on purchasing new systems because they didn't want to risk legal entanglement. This is risk is now gone.

Prior to the arrival of Abe Reichental, 3D Systems' president and CEO hired in September 2003, I had held little hope for a settlement based on conversations I had with top management at both companies. Both sides stated more than once that they were willing to negotiate a deal, but both would say the other would not budge. It became clear to me that a settlement would not happen until a major change occurred at one or both companies. That change took place in September 2003. Congratulations to Reichental and Hans Langer, chief executive at EOS, for working through the deal.

Without a willingness and determination to bring the senseless fighting to an end, EOS and 3D Systems would still be burning through dollars, euros and yen. Both companies can now apply what they would otherwise spent on legal fees to R&D, commercialization of new products and product upgrades, and the development of new markets. It also means that customers can anticipate more and healthier competition for laser sintering products and services in the U.S.

As part of the settlement that was announced in February, EOS will pay 3D Systems a royalty based on the future sales of certain laser sintering products in the U.S. Even so, EOS maintains that it had the right to offer its products in the U.S. prior to the settlement. Meanwhile, 3D Systems said that it plans to sell under its own brand laser-sintering equipment and related products under an OEM supply agreement with EOS. In a February 2004 statement, 3D stated that it would resell the large EOSINT P 700 system from EOS.

Where does the OEM agreement stand as of early August 2004, the deadline for this column? Comments from various industry sources suggest that it has not progressed and that it may not develop at all. In mid-July, Hans Langer explained to me that 3D Systems has not ordered or taken delivery of any systems from EOS, nor has it given any recent signs that it plans to do so. It is believed that 3D overlooked the costs associated with adding value to the existing EOSINT P 700 platform, coupled with the expense of offering spare parts, documentation, training, service and support in the U.S. EOS would manufacture and supply the base machine only, but would do nothing more. This is typical of an OEM supply agreement.

One key source believes that 3D Systems is currently in the process of developing its own large-frame laser-sintering machine to compete with the EOSINT P 700. I hope this is true because it would provide customer prospects with another product option. As we all know, competition is a good thing.

3D Systems may or may not choose to exercise its option of the OEM supply agreement with EOS. Regardless, the two companies are on the right path. They are competing in the marketplace instead of the courtroom and that's healthy for them and the RP industry.

Indeed, this is a happy conclusion to a long and costly struggle between these two companies. The settlement gives 3D Systems and EOS a much better chance of developing winning products-systems and materials that will help their customers succeed. The next time you communicate with either Reichental or Langer, thank them for putting their differences aside and concentrating on helping to grow and further develop our vital industry.

Industry consultant, analyst and speaker Terry Wohlers is principal consultant and president of Wohlers Associates, Inc. (Fort Collins, CO). For more information visit www.wohlersassociates.com.