Sony Wins Bid for Ipix Camera Technology Patents

By Kim Hart
Washington Post Staff Writer
Monday, February 5, 2007

When President Bush gave his 2003 State of the Union address, Ipix captured the room with a panoramic image for online viewers. Movie star Will Smith relied on similar 360-degree photos to go house-hunting in Philadelphia from his California living room. EBay used Ipix technology to display items sold online.

So when the struggling Reston company announced it was auctioning off the patents for its high-resolution camera technology after filing for Chapter 7 bankruptcy in July, former chief executive Clara Conti wasn't surprised to receive more than 400 inquiries.

What did surprise her, however, was who won the bidding.

Sony purchased 28 patents for $3.6 million -- $1.4 million more than its original offer. Sony, who beat three competitors as an anonymous bidder in the Jan. 19 auction, disclosed its identity last week.

Sony declined to say how it plans to use the patents for cameras, which gained attention by providing video surveillance for such high-profile venues as Windsor Castle and the British Parliament. But Conti said the company "has the financial resources necessary to take the patents to the next level."

Tiny Ipix had a volatile history of trying to bolster its finances enough to stay afloat in the digital photography market. Its gigapixel camera lens captures wrap-around images that show rooms from all angles. Despite earning an early reputation as "the Eastman Kodak of cyberspace," the company's technology never really caught on, leaving creditors and stockholders with little hope of recovering funds.

"Ipix had never been profitable," Conti said. "There were just too many expenses."

Expensive legal battles over patents and accounting costs associated with running a public company ate into profit, hindering Ipix's efforts to keep stock prices stable.

"Had it been a privately owned start-up, the situation could have been different," she said.

Founded in an Oak Ridge, Tenn., research lab in 1986, Ipix grew rapidly in the 1990s with the popularity of virtual tours, mainly for real estate companies and tourist attractions. The company went public in 1999 as the technology bubble peaked, raising $69 million in its initial offering.

When the tech market collapsed, and after Sept. 11, 2001, put a spotlight on security, Ipix moved into video surveillance and touted its cameras as a way to prevent terrorist attacks. Supported by hefty payments from eBay and the real estate industry, Ipix appeared to have survived the dot-com bust. Its annual loss shrunk from $347 million in 2001 to $1 million in 2002.

Then eBay pulled out of the deal, taking 85 percent of Ipix's revenue. Conti, who rose to prominence as chief executive of Reston-based ObjectVideo, was brought on board to lead the company in 2004.

She moved the headquarters to Reston and landed some crucial contracts, including one for $2.4 million from the Defense Advanced Research Projects Agency to develop the world's highest-resolution video camera. After the 2005 bombings in London, Conti aggressively promoted the technology as a homeland security tool.

But the company was burning millions of dollars every quarter, even as it sold stock and raised private funds to fill the revenue gap. Industry analysts warned that, although Ipix's 360-degree video technology had security applications, there weren't enough buyers.

"It's a very tough market to break into," said Frost & Sullivan research analyst Dilip Sarangan. Local governments are increasingly buying surveillance technology, "but it hasn't really been tried and tested, so a lot of private companies aren't willing to spend money on it."

In June, Ipix raised $5 million in private financing in a last-ditch effort to buoy its accounts. But a month later, four top managers resigned. Conti announced her plans to liquidate all assets, a strategy she said was the best way to pay back the creditors.

Without a company to run, she worked as a consultant, earning $5,700 a week to assist Donald King, the bankruptcy-court-appointed trustee for the case.

The $3.6 million selling price, while higher than expected, still won't pay off the company's debts, which total $7.8 million. Ipix reported a cumulative deficit of $544 million at the end of March.

King, an attorney with the law firm Odin, Feldman and Pittleman in Fairfax, said he remains puzzled as to why the company threw in the towel.

"They had a significant amount of cash and what we now know to be valuable patents," he said.

Jim Phillips, former Ipix chief executive who oversaw its initial public offering, said he was "shocked and astonished" to hear of the bankruptcy. Now running a biometrics and medical imaging firm, Luminetx, in Memphis, he bid $3.5 million on the patents before he forfeited to the then-unknown bidder. Phillips purchased Ipix's furniture and computers for his new offices.

"Somebody completely ran that company off the tracks," he said. "There was so much promise on the security side. Sony got the bargain of the century."

Stuart Claggett, who was executive vice president of Ipix until it filed for bankruptcy, said Sony's interest in the patents makes sense, given the company's recent push into high-resolution cameras and video-surveillance products.

Claggett and Geoffrey Egnal, former Ipix chief technology officer, formed their own aerial digital imaging company, Springfield-based Argusight, shortly after Ipix shut down. They placed a $100,000 bid for Ipix's 50 percent ownership interest in technology jointly owned by the University of Alabama, but lost to Sony.

"We were very surprised" to learn Sony was the winning bidder, Claggett said, agreeing that the patents were a steal. "Patents in this business were worth at least that, if not more."