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Disney Loses 3D Patent Appeal

Delaware judge says the studio can't stop RealD from acquiring patents, potentially hampering Disney's ability to turn 2D movies 3D without fear of being sued.

 Walt Disney Studios has lost an appeal in a dispute that could open up questions about whether it still has the right to distribute some of its recent 3D blockbusters as well as create new films using a patented 2D-to-3D conversion process.

According to a report by The Hollywood Reporter, the dispute emanates from the bankruptcy of Digital Domain Media Group, which sold most of its assets to Galloping Horse America and Reliance MediaWorks last year. DDMG, the parent company, remained in bankruptcy and to satisfy debts, sought to sell its remaining assets including prized patents relating to the 2D-to-3D conversion. The bankrupt company had acquired these patents when merging with In-Three, another visual effects studio, in late 2010.

Disney objected to the sale of the patents last autumn, claiming that the studio’s ability to exploit films such as Tron Legacy and Alice in Wonderland would be impaired, but it was allowed to move forward anyway and eventually the patents were acquired by 3D cinema giant RealD.

At issue were agreements made in 2008 and 2009 wherein Disney contracted In-Three to provide services on the films G-Force and Alice in Wonderland. As part of that agreement, according to Disney, the studio got an option to be granted a full, nonexclusive license for the patents as well as extracted "covenant not to sue rights."

The courts were tasked in determining what rights survived the patent sale -- a question potentially highlighting a conflict between patent law and bankruptcy law.

On Tuesday, a Delaware federal court judge issued a memorandum order denying Disney's appeal and affirming the patent sale order, noting that the studio did not attempt to negotiate a licensing fee for the technologies despite an agreement in place to do so.

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