A battle over 3D conversion patents has emerged between the Walt Disney Company, RealD, and Digital Domain Media Group. Digital Domain declared bankruptcy last year, after acquiring a broad set of patents for 2D-to-3D conversion from 3D conversion pioneer In-Three in an asset sale. Within a year, the poorly managed Digital Domain declared bankruptcy, quickly auctioning off a major part of its assets to a joint venture formed by Beijing Galloping Horse Film Co. in China and Reliance MediaWorks Ltd in India. In a second auction, to have been concluded end of December 2012, the company auctioned In-Three’s patents for $5.45M to RealD. But the patent sale was blocked by the Walt Disney Company in court. It’s an interesting turn of events, given that Disney is the company that effectively put RealD on the 3D map.
The problem at hand stems from an agreement between the former Disney-owned Acceleration Productions and In-Three for the 2D-to-3D conversion of the movie G-Force. Without going into details that would prejudice the case, Disney was granted certain rights in the agreement, which it now claims gives it the right of precedence in the sale of the patents.
Disney has reasonable concern that causes it to voice its claim. The In-Three patents have been licensed for several of its movies. In fact, in this author’s opinion, the patents are so broad that they would best benefit the industry if made available for fair licensing across the industry.
RealD, on the other hand, is in dire need of diversification. It’s a public company, and it’s primary source of revenue, that of licensing 3D add-on technology to cinemas, has a limited lifetime, in this author’s opinion. RealD faces substantial competition today in the 3D add-on space, both in terms of technology and business model, which should cause the company to expand in new directions. 2D-to-3D conversion has not been the most lucrative area to play in, but obviously, RealD has an interest in acquiring IP in this space. In-Three’s goal was to convert older libraries, but it was too early to market for such demand to materialize. In turn, RealD’s timing for entering the conversion market could be just right.
Perhaps the best indicator that RealD’s timing is good is from Disney itself. No doubt Disney has a strong interest in converting a major part of its animation library. A reason for having an interest in doing so could be seen at CES this month. Tucked away in a suite was MasterImage, known to cinema operators as a competitor to RealD for 3D add-on technology. But on display was an Android tablet using MasterImage-licensed auto-stereoscopic technology. I.e., a 3D tablet that doesn’t require glasses. The tablet is targeted for kids, and will be test marketed in Asia later this year, an area where Disney would like to build its brand. That could be a double-whammy for RealD.
