Disney has been temporarily granted a request to halt Digital Domain Media Group’s sale of 3D conversion patents. Disney has claimed that the proposed $5.4 million sale would infringe on its licensed ability to convert films from 2D to 3D and could make the company vulnerable to lawsuits. On Monday, Judge Brendon Shannon granted the media giant a 45-day stay of his order that had previously approved the sale; last week, Disney filed an appeal against the sale in federal court. Today’s order allows Disney’s federal appeal to go forward. It also allows the outcome of that appeal to not be rendered irrelevant if a sale occurred before the courts had reached a conclusion. In the interim, Disney will have to put up a $5.4 million bond to cover the projected patent sale fee.
In September of last year, the James Cameron co-founded special effects company and its subsidiaries filed for Chapter 11 protection. The division was sold off in a $37 million deal a few weeks later. In December, the judge permitted DDMG to sell the 3D conversion patents to RealD Inc. Disney objected to the sale, claiming that In-Three Inc., the prior owner of the patents, granted Disney a license that remains in force. (The now-bankrupt Digital Domain had bought the patents from In-Three in November 2010.) Previously, the company had granted Disney and Marvel Entertainment limited use of the 3D process for its films Alice In Wonderland, Thor and last year’s blockbuster The Avengers. The heart of the fight between Disney and Digital Domain is actually over a 2009 film called G-Force. That agreement offered Disney an option on a general, nonexclusive license for the In-Three technology. Disney claims those rights didn’t disappear when DDMG purchased the patents. The court said that because Disney never exercised its option of the G-Force licenses before Digital Domain bought the patents, its rights were limited to just four films. Now federal appeals Judge Sue Robinson will decide the matter.
Theresa Brown-Edwards and R. Stephen McNeill of Wilmington, DE’s Potter Anderson & Corroon and Lisa Hill Fenning and Harry E. Garner of Los Angeles’ Arnold & Porter are representing Disney in the case. Debra Grassgreen, Robert Feinstein, Timothy Cairns and Maria Bove of Pachulski Stang Ziehl & Jones are representing Digital Domain.