In 2014, Microsoft paid around $150 million to acquire a trove of ODG patents after deciding not to buy the company outright. In documents reviewed by TechCrunch, ODG highlights a number of AR patents in its collection on which it believes existing products from companies like Magic Leap, Google and Facebook infringe, specifically pointing to diagrams of systems like the Magic Leap One and Oculus Quest that they claim conflict with its prior art. The 20-year-old company has already seen its early work in foundational AR patents pay off. With the deal shot and the indebted company in shambles, the team dwindled down further to a skeleton crew - essentially a deals team - as company assets were put up for sale by IP advisory firm Hilco Streambank. The company’s patent portfolio up for sale next week includes 107 issued patents and 83 pending applications. Magic Leap did not respond to a request for comment. “Ralph turned around and he didn’t have a company or team anymore, and then Magic Leap goes, you know what, we’re just going to buy the IP, we don’t want the company, you don’t have a company anymore,” one source said. As the startup whittled itself down to prepare for a disappointing, yet relatively dignified, sign-off, Magic Leap began to grow cagey about finalizing the acquisition, sources say. As the deal started to fall through, some in ODG’s leadership began to wonder aloud whether Magic Leap was “acting in poor faith” and was only looking to starve the company before purchasing assets at a discount in a patent sale. This offer came with stipulations for the types of engineers Magic Leap wanted to bring aboard, leading ODG to shrink its staff to just a couple dozen employees. The final proposed purchase price ended up at $35 million, still a far cry from its 2016 valuation, a source familiar with the deal tells TechCrunch. Sources say that Magic Leap continued to bump up its offer, eventually signing a letter of intent in the final months of 2018 to purchase the startup. “I think the heart of ODG’s downfall was its lack of focus.” “That’s a little bit the story of ODG and Ralph, in general: everything is a prototype, nothing is finished, and before one thing is 60 percent done, you’re already onto the next one,” a former employee tells TechCrunch. Ralph Osterhout’s strong internal popularity kept these concerns at bay even as the company faced double-digit return rates from customers of its current-generation R-7 glasses due to manufacturing issues. Talks fell through, but ODG’s leadership was at their most ambitious and felt like they couldn’t be stopped.Īt the same time, following the CES 2017 product unveil, some employees wondered whether having three distinct product lines under development aimed at roughly the same customer was the right direction for the company with around 100 employees. Months later, a large Chinese firm approached ODG with an offer north of the company’s $258 million Series A valuation, a source tells TechCrunch. I want everyone in AR to be a huge success,” Osterhout said in an interview with TechCrunch in 2017. “ is going to be transformative.” Osterhout wanted to get AR glasses into the hands of consumers and take advantage of new tech advances, even as Magic Leap was teasing the release of its own heavily hyped consumer product. ODG was already getting thousands of orders for its R-7 glasses, an enterprise-focused product that it billed as a head-worn Android tablet that could help workers go through checklists, review documents and share live video feeds hands-free. At the end of 2016, the company raised a $58 million round led by 21st Century Fox. Ralph Osterhout, 73, founded ODG 20 years ago as a high-tech toy company, built after his previous venture, Machina, collapsed in what a Wired report at the time called “a spectacular bankruptcy.” After underwriting ODG with $14,000 of his own cash, Osterhout kept the startup plugging along on its own merits before he decided that it was time to reach for outside funding to turn his company into a powerhouse in the burgeoning augmented reality industry.
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