This week was the start of an epic legal battle that began between augmented reality players Magic Leap and Nreal, the small China-based startup accused of stealing trade secrets.
However, a new ripple has emerged in the legal skirmish that could change everything.
If you are just aware of the case, the background is that Nreal co-founder and CEO Chi Xu previously worked at Magic Leap as a software engineer in 2015. Later, he continued to create Nreal and the world knowledge have it made with the Nreal Light. Things went smoothly with Nreal for a while until Magic Leap dropped his legal bomb at US courts accusing Xu trade secrets of theft, copying of brand names and breach of contract (after hard work to track down company officials).
Now a new flurry of legal filings has emerged in the first two weeks of 2020, just a few days before the first judicial meeting between Magic Leap, Nreal and the court would take place on January 1
"The parties have ADR [alternative dispute resolution] Certifications submitted on January 8, 2020 after meeting and granting on January 3, 2020," is a January application filed by Magic Leap and co-signed by Het Nreal legal team. "The parties have agreed to private mediation and are discussing the timing of such mediation."
Alternatively, the transactions behind the scenes can also lead to a hardening of positions, possibly leading to an even more controversial legal battle. If that happens, the judge of the case, judge Lucy Koh (known from Samsung versus Apple), set up a jury case in October 2021.
Why is this important? Well, with Apple, Facebook and Samsung still officially taking part in the race to bring commercial AR hardware to the mainstream, and HoloLens 2 from Microsoft fully focused on businesses, the AR hardware space for consumers is still wide open. Previously, despite mixed reviews, it seemed that Magic Leap had secured a lot of mindshare in its attempts to pave the way for the eventual mainstreaming of AR headsets with the Magic Leap One.
But since industry observers and consumers are asking for a smaller portable AR form factor that looks more like the look of, say, a few shades, competition has increased as others have tried to sacrifice some of the high-end graphics and interactive of headsets such as the Magic Leap One for something lighter, more portable and cheaper than Magic Leap's $ 2,295 price tag.
Enter, among other things, the Nreal Light, whose developer version looks like (usually) a few shades, costs $ 1,199 for the developer version, and has a consumer version that connects to Android smartphones on the go for $ 499.
The pressure on Magic Leap is even greater because the company had to hand over its patents as collateral to JPMorgan Chase when looking for a new financing round. With the HoloLens 2 that is ultimately sent to customers and absorbing much of the business interest in high-end AR, and future funding for Magic Leap, still in doubt from this point on, the Florida startup's legal move against a former employee no surprise.
Nevertheless, win, loss or settlement, at this point Magic Leap can fight a lost battle. Nreal is only a company that is active in the growing ranks of portable AR makers. There are already two more China-based startups – 0glasses (RealX) and Pacific Future (Am Glass) – with products that look as good or even better than the Nreal Light, offered in strikingly comparable packages and at affordable prices.  Of course, the aforementioned companies are provisionally focused on the Asian market, but some of the Chinese investors behind these startups are no longer satisfied with simply playing locally. Like the example of China & # 39; s Bytedance and the now worldwide success story of apps in TikTok, Chinese startups are increasingly ready to challenge the best tech startups in the West on almost all fronts. AR is currently one of the most active sectors in China in the field of fast software and hardware development, iteration and distribution.
Win, loss or settlement, at the moment Magic Leap can fight a lost battle. Nreal is only & # 39; one & # 39; company that is active in the growing ranks of AR wearable makers.
The Magic Leap One has been on the market for almost a year and a half and there is still no hint that a cheaper, smaller version of the device is available to regular users. This is especially surprising, given the focus of Magic Leap on entertainment tie-ups with franchises such as Star Wars, Game of Thrones and a healthy menu with AR games and apps for passive content consumption. If Magic Leap manages to obtain new financing, take back its patents from the bankers and produce a non-developer-focused version of its device in the next 12 to 24 months, it will still have a growing crowd of aggressive AR Challengers have to deal with, including, if the rumors are true, Apple, possibly sometime later this year.
Therefore, although this legal battle may be important for the Florida-based startup for various reasons, getting some sort of resolution earlier than rather later would probably be in the long-term interest. By the end of 2021, when the jury test would take place, the AR landscape will probably look very different and be a lot more competitive. For its part, Nreal has completely denied the allegations of Magic Leap, making a settlement unlikely unless there is a major shift from at least one of the parties involved.
Judge Koh gave the two companies until June 3 to try things out before they seriously start up the legal machine and trigger a potentially expensive series of events that are unlikely to end in 2022 at the earliest.