The term "disruptive innovation" may be a bit of an overused term, but 3-D printers do truly have disruptive potential to change many aspects of our day-to-day lives.

While still very early in the 3-D revolution, companies such as 3D Systems (NYSE:DDD) show promising technologies and business plans, but so few 3-D printing companies yet have proven that they truly deserve investors' money.

Patent risk
3D Systems has one of the largest product lines in the business with its seven print engine technologies, and it has a history of being aggressive in acquisitions to stay ahead of its competition and invest in its future.

The best argument against 3D Systems' excessive acquisition-shopping spree comes from Bank of America's Wamsi Mohan who downgraded shares to underperform from buy on Feb. 24. Mohan also lowered his price target on shares to $65 from $90. "We view the increased investments as a catchup in spend necessary to stay competitive rather than driving incremental growth," Mohan said.

3D Systems could be on an acquiring spree because some of its patents are expiring this year, and 3D Systems has a history of fighting vigorously to defend its intellectual property.

Back in November 2012, 3D Systems sued Formlabs and Kickstarter, alleging that Formlabs' Form 1 Printer (which received funding from a Kickstarter campaign) infringed on its '520 patent entitled "Simultaneous Multiple Layer Curing Stereolithography."

Most investors are likely to have no clue what this patent relates to, but the case shows that 3D Systems felt threatened by a Kickstarer-funded entry into its space. "3D Systems invented and pioneered the 3D printing technology of stereolithography and has many active patents covering various aspects of the stereolithography process," said Andrew Johnson, general counsel of 3D Systems.

Unfortunately for 3D Systems, its '520 patent expired on Jan. 28 and its case against Formlabs was voluntarily dismissed on Nov. 8, 2013. According to, "[These] cases illustrate why many believe expiring patents will open the door to advancements in the technology: the inventions of expired patents are freely available for all to use, which may lead to new investment, innovation, and competition."

3D Systems saw its '824 patent related to "Rapid and Accurate Production of Stereolithographic Parts" expire on March 11 of this year. The patent relates to 3D Systems use of a beam with different intensities and a laser that can be directed over portions of the material without curing any appreciable amount.

The patent expiration benefits all 3-D printing manufacturers as explained by "[This] can be particularly useful for large and complex objects, where a more powerful laser is required."

3D Systems will also see its '618 Patent expire on June 27, and '856 Patent expire in June 9, 2015.

One important note investors need to understand before jumping to a foregone conclusion that patent expiration will spell the doom of 3D Systems. The company derives a substantial portion of revenue from SLM and material jetting technologies.  

Damon Gregoire, 3D Systems' chief financial officer, defended the company's patent holdings at a Deutsche Bank Technology Conference:

We have about 1,200 different patents that we have a lot of the different – the other barriers are around the expertise that the company and others that have established over the 20-year and 30-year period. We have been in business for workflow, for technology, the materials to develop and how they all work together. Again, it's not an insignificant portion of it. It's not as simple as a 2D printer company saying I wanted to start making 3D printers and being like I can move a lot of boxes. There is a lot that goes into having these go together. And maybe some do try to come in. And maybe some try to come in by acquiring companies too, which seems probably be an easier way for them to come in.

The big player still decides to enter the space
3D Systems said that it acquired Xerox's solid inks business in part because Hewlett-Packard (NYSE:HPQ) announced it will enter the 3-D printing space.

3D Systems said that it believes it has better materials capabilities than Hewlett-Packard, despite the fact that Hewlett-Packard CEO Meg Whitman has said that the company will be making an announcement about its 3-D printing intentions later on this year.

It is likely that Hewlett-Packard will focus more in the industrial and commercial market than the consumer market, according to UBS analyst Steve Milunovich. The analyst added that Hewlett-Packard's entry to the market will "ratchet up competition" and is a "net positive in legitimizing and expanding the market."

These are words that investors don't like to hear, especially when the leader in the 2-D printing market with a $60 billion market cap has plans to enter the space, and could very well do so at a time when a lot of core patents are expiring. Consequently, Hewlett-Packard might not have to spend large amounts of money on developing technologies.

By Hewlett-Packard's own admission, the 3-D printing technology is "really still immature" so the company's expansion nito the industry shouldn't automatically translate into a buy thesis.

According to Wohlers Associates, sales of 3-D printing products and services will reach $10.8 billion by 2021. By comparison, Hewlett-Packard saw its first-quarter revenues total $28.2 billion.

Hewlett-Packard maintains a portfolio of IT hardware with exposure to software, services, storage and networking, making it a fully diversified company, as opposed to 3D Systems that is completely exposed to only to the 3-D printing industry.

Foolish take
Investors (and followers of the 3-D printing industry) should always examine the full scope of a patent. With the loss of key patents comes the inability of a company to maintain an edge in the competitive environment.

More importantly, 3-D printing is an evolving technology and there is no way to know how the industry or the legal environment will change over the coming years. For now, it is reasonable to say that the expiration of key patents could open the door to growth in the industry, but new laws and an unpredictable economy could dictate otherwise.

One other scary fact for 3D Systems' investors: Hewlett-Packard holds around $16 billion in cash on its books, roughly three times the entire market cap of 3D Systems.