Two IPs In A Pod
Brilliant inventions, fresh product designs, iconic brand names and artistic creativity are not only the building blocks of successful business - they deliver a better world for us all. But these valuable forms of intellectual property must be protected in order to flourish. We are the Chartered Institute of Patent Attorneys - the UK's largest intellectual property organisation. Our hosts Lee Davies and Gwilym Roberts chat with entrepreneurs, creatives, patent attorneys and the occasional judge about how patents, trade marks, designs and copyright can improve our lives and solve problems for humanity.
Two IPs In A Pod
Toy Story & Pixar: The IP Story
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Lee Davies and Gwilym Roberts speak to Rob Stumbles and Pete Salder from Reddie & Grose about how Pixar evolved from a struggling computer graphics start-up into the studio behind Toy Story. They explore the patents, licensing deals, Steve Jobs' investment, and ground-breaking technology that kept the company alive long enough to change animation forever.
Host Banter And Introductions
SPEAKER_06Uh yeah, so I mean we're here to talk about I mean Toy Story and Pixar and and sort of tale that led to the original, which is, you know, quite relevant with Toy Story 5 coming out very recently. Um I mean a massive film, massive film franchise. Um pretty impossible to escape, um, I've felt in the past few weeks. Um yeah, and there's there's an exciting tale there of of financing and and how patents helped help play a role.
SPEAKER_01Lee Davis and Willem Roberts are the two IPs in a pod, and you are listening to a podcast on intellectual property brought to you by the Chartered Institute of Patent Attorneys.
SPEAKER_02Willem, how are you, mate? How are you coping with the weather we've been having recently?
SPEAKER_04I just can't really keep up. We I got some I had some work done on the garden, because like I can't do garden, but I've got to be a good one.
SPEAKER_02You had some work done on the garden. You didn't get out there in the glorious sunshine and do it yourself.
SPEAKER_04Well, no, because then you'd have to be in the garden, though. So gardens are for looking at Lee. No, I but but it's gone mad. It's um gardens grow. I had no idea. What the the gardens grow? Yeah, it's just because you had the kitchen done, nothing changed. Then you get the garden done and boom, plants everywhere. Mary, Mary, quite contrary. How about you? How's your kitchen grow?
SPEAKER_02Um, how about you?
SPEAKER_04How are how are you, Lee?
SPEAKER_02Uh well as you know, I've been spending most of my working, oh non-working hours in the bathroom. Um, the bathroom is in the loft, which means it's like ridiculously warm. Uh and it's one of those things where I thought, yeah, no, I'm a plumber of note in a previous life. So um I'll do this myself, regretting it. Should have got someone in. Why, but you're good at this. No, I no, I no, I am good at it, but I'm probably too good at it, which means I painfully take far longer than perhaps a crash and bash merchant would if they came in.
SPEAKER_04Okay, well, I know a good gardener.
SPEAKER_02Yeah, not sure that entirely helps with my um the soil and waste stuff that I've got to do this weekend. Yeah, I've been saving the way through the last. They're good on soil. Yeah, just it's almost like you've been doing this for five years.
SPEAKER_04That was that was good bands. We have to do more bands. Was that good bands? That was great, Bans. Top of the top of the range. Oh, I've got I've actually got a joke which came. Um do you remember? Oh, this is only gonna work for people that are highly familiar with IP Inclusive. Right. So uh, and in particular the senior leaders part of IP Inclusive, ready, which I think you are. I am, yeah, I am. So this is just I'll gonna say it all. Don't don't this is not you don't have to jump in here, ready. Okay. Does your C sweet neat polishing? Then try the senior leader's pledge. Nobody, honestly, even the IP Inclusive people didn't get that.
SPEAKER_02So some of the other will be I get it, obviously, but you do have to have been like cleaning in the 90s to get it, don't you, really?
SPEAKER_04Oh no, I still like there. But I mean, as you as we both know, brands are very important and very persistently. Sometimes they just come back, don't they? They make a resurgence.
SPEAKER_02It is remarkable, four or five times sometimes. Yeah, yeah, yeah. Um, would we have anybody near us that we could talk about such a thing with? You don't often do segues. You don't often do segues. That's good for you. I know you do them so well, but uh that that that came out of, didn't it?
Why Toy Story Still Hits
SPEAKER_02Hey Rob, Pete, welcome to the podcast. Lovely to have you on.
SPEAKER_03Very nice to be here. Thank you, Lee.
SPEAKER_02Thank you, Cohen. So um, we'd love it if you would introduce yourselves, if that's okay, because it just works so much better that way. Does either of you have a preference for going first?
SPEAKER_06Rob Rob's gonna go first, I think. Excellent. Rob, sure. Yeah, happy to. Uh yeah, so I'm Rob, I'm a trainee at Radiant Gross. Um, my background's in mechanical engineering, um, and shockingly, I work in engineering and material science. Um, yeah, working on working on patents, much much like you, I suppose. Pete, far away.
SPEAKER_03Um I I'm a partner and patent attorney in our electronics and software group. And um I I'm here because uh Rob Rob bought me a brilliant blog piece that he wrote. Um and w when it when it came up that that we might we might uh present on your illustrious podcast, I told him what what scary, terrible people you and Gillam are. And so I'm I'm here for moral support, really.
SPEAKER_02Oh, is that it?
SPEAKER_03Yeah, you're Rob's done the hard work. We were talking, we were talking earlier about everyone knows Gwillem. Gwillam, you're you you live rent-free in my brain because uh because you uh it was at Q Queen Mary, this is going on about 20 years ago. Um, I think you you you were lecturing there and you you wrote a claim that rhymed uh greater with potato.
SPEAKER_04So that's still going to be a lecture, yeah.
SPEAKER_02That was that was last year, in fact. Yeah, I remember that. He's only got what he's only got one lecture.
SPEAKER_04I've only got two jokes. There you go. But yeah, that's one of the two. Yeah. Oh good. I'm glad that's stuck up. That's the only thing anyone remembers. No actually remembers anything actually tells them about patents or anything, obviously, but whatever, whatever.
SPEAKER_02So and if it and if it was uh greater lead, it would run with potato head, would it?
SPEAKER_04Oh very oh very good.
SPEAKER_03Did you see why I did that? One of the only branded toys, I think, that was actually actually one of the few branded toys.
SPEAKER_02What we what are we talking about, guys? What are you here to talk to us about?
SPEAKER_06Uh yeah, so I mean, we're here to talk about I mean Toy Story and Pixar and and sort of the tale that led to the original, which is you know quite relevant with Toy Story 5 coming out very recently. Um, I mean a massive film, massive film franchise. Um pretty impossible to escape. Um, I've felt in the past few weeks. Um yeah, and there's there's an exciting tale there of of financing and and how patents helped help play a role.
SPEAKER_02So my my exec assistant Charlotte, who I've worked with for the best part of 10 years now, uh, she had a little boy Ollie three years ago. He's three this weekend. Um and she's beside herself that we're doing um we're doing Toy Story because they they took Ollie to see the film for the uh Toy Story Five for the first time last weekend. So kind of he's a little three-year-old, nearly three-year-old, sat in a big theatre, big TV that he's never seen before in his life, and she said he was absolutely blown away by it. So um and probably too too young to appreciate the great moral kind of tale that sits behind Toy Story Five, but we can come to that, can't we? We can come to that.
SPEAKER_03Yeah.
SPEAKER_02Because it's yeah, because it's um I know there's a great story behind it.
SPEAKER_03The first Toy Story was uh was also, I think, one of the first Disney film, well, whether or not you call it a Disney film is another thing, but one of the first films of that nature where there was a lot for the adults as well. Before that, it was kind of you know, your your your fairy tales and things like that, and uh this great sharing of things between the adults and the and the kids.
SPEAKER_02Yeah, no, yeah, I rem remember it so well first time around because uh yeah, so for disclosure, six children, um cut adults from the ages of 19 to 37, I think, currently, or so or something like that. So yeah, they were they they've been around throughout the whole length of the Toy Story franchise, and of course I've got seven grandchildren, so they're they're um they're picking it up now. So it's really good.
SPEAKER_03So you've got more kids than there are Toy Stories?
SPEAKER_02So, Rob, you said something about taking this right back to the start of the story, back to the kind of origins of Pixar, yeah?
SPEAKER_06Yeah, yeah. I mean, obviously, Toy Story is a bit of a dynasty in the in the animation world. Um I know. I mean, like you were saying, I think it's great that it can uh sort of persist this long and spread across all these different generations, especially with the sort of soft reboot of the uh Toy Story 4 introducing um you know Bonnie as a as a new replayment or or continuation of franchise uh story itself. Pixar has a very interesting story of how they got there, um, being you know a pioneer in the animation space back. Oh, I mean, this is where the story unravels and unravels back before the 70s with you know ideas forming from universities in the States and
Lucasfilm Origins Of Computer Animation
SPEAKER_06really coalescing um interestingly with um uh to throw a big name in their George Lucas and Lucasfilms um when uh he hired um some computer scientists to form uh a computer division of Lucasfilms back in 79.
SPEAKER_02It seems like a story a long, long time ago. I can't remember the start of Star Wars guys. I was gonna try and riff them, but I can't do it. Um I was hoping you're gonna leap in and save me.
SPEAKER_04What just fill in the beginning of the Star Wars wording? I can do that. Yeah, because you're you're a bit of a geek, aren't you? A long time ago in the galaxy, far, far away. I believe there we go.
SPEAKER_03A long time ago at a university in uh in New York or thereabouts, um a guy a guy uh animated his hand using a computer. Uh is that it? Is that it? 1972, I think it's it's um you can you can look this up on YouTube. There's the the guy that his name will come up again and again. Is it Ed Catmole is it? Yeah, that's that's the one. Um he uh yeah, he he animated his hand, and you you there's a there's a mini documentary on YouTube. It's quite it's it's quite fascinating that armed with the technology available in in the 70s, he was able to come up with a model, um, you know, wireframe model that again wrapped textures around of of his hand opening and closing. That was one of the first computer-generated um short films of of the of of the ever.
SPEAKER_02Um how did Pixar come into being then? Was it always the intention that it was gonna be this great um world-leading animation studio?
SPEAKER_06Um no, no, absolutely not. Um that I think was in the minds of some of the employees, but certainly not um part of a direction from the higher-ups. So, I mean, George Lucas started this computer division not with a clear goal, but more with the idea of just progressing, you know, computer graphics for film, um, that being both hardware and software. Um, because, you know, how could that not be useful for a man like him? Star Wars being the industry titan and relying quite a bit on computer graphics and um yeah, moving magic in that sense. Um so this is where we see a lot of the the core developments that that form what will be Pixar in the in the coming years. Um, in particular, some of the the computer capabilities. Um we'll we'll later find this is known as the the Pixar image computer, but is a very powerful piece of kit for the time. Um, I'm sure, you know, doesn't hold up to our modern standards, but it was uh leaps and bounds in in terms of computing power, um, which was obviously essential to try and bring some of those early early graphics uh into reality. Um and we saw that get used uh for the first time on uh on Star Trek, actually, so not Star Wars, if we're just gonna have the competitor uh quickly drop in. Um there's a there's a famous scene of transforming a barren planet into a into a lush green paradise um that is the first use of this team's computer animating technology um before it is also used um very fittingly in Return of the Jedi. So um, you know, back to the home the home franchise of Lucasfilms. Um yeah, so this is sort of the beginnings of of everything there. Um where um at this point uh certainly films being entirely computer animated is not the goal. Um, but we see that the now ex-Disney animator John Lassiter is hired to Lucasfilms, who does have more of a vision for an entirely CG film, which is you know going to underlie quite a lot of his his future career as he becomes very well known in his own right, obviously directing Toy Story, Toy Story 2, cars, and I mean the amount of films that have shaped people's childhoods and and interests to this day is quite astounding. Um yeah, so his introduction sees um some short films getting getting produced from this Lucasfilms uh computer division. We have um The Adventures of Andre and Wally B. I'm sure we all we all remember that classic, um which um prem uh premiered in the 1985 um special interest group on computer graphics and interactive techniques, um Siggraph. Uh something that will come come back up again, so best to get that little mouthful out now. Sig Graph. Sig Graph. Sig Graph. Sig Graph? I mean, how do you I don't know how you say that one.
SPEAKER_03That's a that's a conference, right? You you don't get many kind of Disney who was an animator and director going to kind of computer hardcore computer conferences. He was clearly interested in the technology.
SPEAKER_06Yeah, yeah, yeah, for sure. Um, I mean I think it's safe to say this was a group of computer nerds at the time, you know. They really were not maybe what what you think of as a sort of Hollywood group of computer.
SPEAKER_02Can I um can I can I ask a kind of computer nerd related question there then? Is that okay? So if they were computer nerds, were they more wrapped up in the tech side of things, or were they already kind of IP savvy? Were they already sort of looking towards what what was new and inventive in all of this and what could be protected?
SPEAKER_06That's a good question. Um I mean this sort of sprung out of um projects for the from what the New York Technology Institute and from universities. So I think it was more of a an academic push in a sense and a passion push. Yeah. Um because these were guys that just loved what could be done with with a computer, what could be done with computer animation. And yeah, no, like quite a singular view amongst this this group of people to produce the film, the the film that could be solved.
SPEAKER_02Let me bring my seasoned um partner in podcasting in. So Gillam, question for you on all of this. So Pete and Rob over there really, really excited about kind of the tech side there, and in the background, sort of 40, 50 years ago, we've got the kind of geeky tech people building all of this. How how do you in a fast moving world where kind of invention is probably moving faster than people can protect it, how how do you get people to take a step back and reflect on the value of their IP in all of this?
SPEAKER_04It's tricky, although these guys will know perfectly well that it's tricky because you've especially if the IP as a creative group in many ways, kind of technically creative in the sense that they you know they're at the forefront of what they're doing and they're creating new stuff, but also artistically creative too. And unfortunately, they're not always the most um they're not that interested in patents. Some of the patents of people, you know.
SPEAKER_03They they they were clearly savvy enough because they did file patent applications when they were at Lucasfilm. So there was enough filed there that um, and this will come in a bit later. So they were someone was thinking about it. Um, I mean, I get the impression that Ed Catmole, who's the kind of the one of the founders of of Pixar was behind his doctor Ed Catmole, he's the he's the PhD in in computer science. Um so they were someone was clearly thinking about it, and I think one of the things that's interesting here is that the techniques they were coming up with um were uh were useful software techniques, a lot of them, but the hardware wasn't there. So you could protect the techniques actually, and they were probably going to last quite a long time in terms of how long people were gonna be using these in the industry, um, because you were waiting for the for the for the technology, the compute power to catch up so you could actually then use those techniques more efficiently than in in the early days, it it took more people to anim and and took them longer to animate something using a computer than it did drawing it by hand. So um they were at that kind of edge of the of they were at that stage of the technology.
SPEAKER_04I think it's it's interesting how they were trying to push the bands even then. Um and I I think I guess it there's there's there's real vision in saying here's a nascent tool, but we absolutely believe it can be turned into something really important. And actually, let me go back to your other point, is of course, somebody somewhere is probably advised me on how to actually monetize this amazing technology they'd come across. I guess that was part of it as well. Do those patents doing? Do they ever use the patents to be now?
SPEAKER_06Do they come in useful or oh they'll they'll come back in a story. Um yeah, that's another one. You have a you have a narrative R.
SPEAKER_03Yeah, the buzz like year of the story, possibly.
SPEAKER_02Sorry, Rob, I'll cut you off there. Back on, back on.
SPEAKER_06Yeah, so I mean, I as P was saying, someone in their in their wisdom does file some some key patents around this time. Um, in we've got sampling techniques, we've we we do have some some hardware patents as well, all of which sort of remain you know, remain to be used in the future, but their filing,
Funding Chaos And Steve Jobs Steps In
SPEAKER_06obviously, uh is is important and will will be very important for Pixar later on. Um because at this point, sort of 1985, we're we're seeing some problems with the um computer division of Lucasfilms. Um not due to the fault of the the computer division themselves, but um external factors that I mean you can't possibly be expected to to account for if you're if you're Ed Catmill at the time. Um, because we have uh George and Marcia Lucas having you know quite a notable divorce in 1983 that occurred in California. So George Lucas lost almost half of his fortune at the time um and needed some you know liquid liquid cash to be able to make that all work. And it seemed to to him that the the place to get it was was the computer division. So between 1983 and 1986, he was he was splitting it up, he was he was selling it on all in service of this this divorce settlement.
SPEAKER_04Might you refer to that as a new hope?
SPEAKER_06I see what you've done there. Yeah, carry on. Just thinking of jokes in the background. Yeah, so I mean, I think, you know, understandably a bit of a rocky time uh for two of the key players at uh at the computer vision being Ed Catmull, as we've mentioned, and Al V Ray Smith, who are seeing how they can salvage this this group of you know ragtag computer nerds, as we've said, um, but also just the the business concept as a whole. Um so they are pitching a company that they don't really know what is yet. You know, I neither of these guys are business minds. We we've said they're they're scientists, they're computer scientists, um, but they're trying to come up with what is a business case to do with the software we've come up with and the hardware we've come up with. Um and while they think it's a good idea, it doesn't seem anyone else does because they approach almost 40 venture capitalists to try and get funds and are turned down time and time again. The technology is you know obviously fascinating and very innovative, but the you know, potential revenue, the the business case just isn't there in 1986. Um they get close, they do get close. They uh they get um are in talks with GM and Philips, uh who are gonna make a pretty sizable offer, potentially, uh at least that's what they think of somewhere in the realm of 10 to 30 million, uh, if you could allow for such a large range. Um but the the uh yeah, the the the hardware and the software is already seen as very applicable to just computer graphics and and modeling very generally. Uh GM thought they could use uh use some of their developments to replace clay modeling in their car designs, so just do it for 3D modeling. And Philips wanted to use it for medical reasons, um, internal views from CAT scans. So, you know, this is a very far reaching uh development in their software and uh in the in the processing and sampling techniques.
SPEAKER_02Still not an animation business yet.
SPEAKER_06Absolutely not an animation business yet. No, no. I mean there may be there may be desires of an animation business, but this is not what's being pitched. So they get close here, they sign a letter of intent, but the the deal falls through. And you know, our soon-to-be Pixar is not looking on on very safe ground at all. But they they find a savior in the end. And it's it's another big name. It's um Steve Jobs who comes in and saves the day. Um he sees he sees potential in this. He's actually already approached them uh once before this, but was offering significantly less money than GM and Phillips, so it wasn't obviously their first choice uh to leave money on the table. Um but when they have no options and nowhere to turn, um Catmull and Smith go go back to jobs and they present him a deal. They don't want jobs in charge, they want to stay, you know, in control of what the company does and in control of the creative vision. So they offer a 70% share of this unnamed soon-to-be company um for 10 million, and uh Steve Jobs takes them up on it, which is you know where where Pixar begins, where it becomes established as a as an independent company. Um but I think an interesting thing to note about this is that one of the reasons it was so hard to get funding and so difficult for them to sort of make those next steps is because they didn't own any of the rights. You know, they didn't have the intellectual property, they didn't have the patents, they didn't have the copyright to to any of the names or the trademarks. This was owned by Lucasfilms. So when they get bought for 10 million by jobs, they had to immediately spend five million uh to purchase the rights of technology that they'd developed in order to have a business at all, really.
SPEAKER_03I think that shows that those guys are quite it, there's a bit more credit for them, I think, that than they might otherwise get because they're out pitching this to VCs. They don't even know the rights at this point. Um, and they manage to they manage to do a deal and the they get handed 10 million, and the first thing they have to do is fork over half of it to actually buy the rights.
SPEAKER_04It's there is a there's a question of it, there's a due diligence issue, isn't it? There's a due diligence issue.
SPEAKER_03Indeed. You'd hope that Steve Jobs was aware that that is what was going to happen with when he when he handed over that money.
SPEAKER_02So so when when does Pixar become Pixar? What's the what's the tipping point?
SPEAKER_06No, so this is this is it. This is the moment in in time. Uh 1986, um it's spun off, it's put you know, it's funded as as venture capital from Steve Jobs, um, and is now a fully fledged company by the name of Pixar with about 40 employees. So not big, but it it is a very technically capable team, and you know, we'll we'll see that goes on to do great things in in the space and in in animation. But you know, to reiterate,
Pixar Tries To Sell Hardware
SPEAKER_06still not an animation company at this point by any stretch of the imagination. Um as pitched and as envisaged by jobs, this is now a hardware company. Um I mentioned before the um Pixar uh Pixar image computer, which is uh a significant development that they made while working in the computer division of Lucasfilms, but this was the product, this was the product to be, and animation, if anything at all, was more of a demo reel. It was it was an advertising tool to show what they were capable of as a company, um, which is a really interesting business model, I think. Um because who would think about how hard? Sorry. No, no, just who would think to use short films as uh the way they sell computers. It's it's interesting.
SPEAKER_04How hard was the hardware in the sense that I mean were they designing their own chips or were they just putting them together at the next layer up?
SPEAKER_03I I don't think they were designing their own chips because um later on you'll see that they were um they were actually buying stuff in from silicon graphics. So I think that there was uh they they were clearly constructing the hardware themselves, but I don't think they were designing the actual processor layouts or anything like that.
SPEAKER_04Yeah, it's interesting just because obviously graphics chips have just become such a complete powerhouse of astonishing processing parent. But then I think the AI AI revolution, while they wait for their own chips, they're just using up all the graphics chips, aren't they? So it's interesting that in a sense Pixar were also realizing the the power of that kind of technology in a different way, even back then.
SPEAKER_03The Pixar imaging computer, by the way, sold for about a hundred and hundred and thirty-five thousand dollars back in the day. It's about probably about four four hundred and fifty thousand dollars or something in in current money. So it wasn't the sort of thing that everyone was gonna have in the in the homes. It was quite a specialist um device, as I guess as you'd expect.
SPEAKER_06Yeah, but um with a price tag like that, it's no surprise it does not does not sell very well. Um only yeah, 300-ish units. And I mean, that's even after they they they go to the bargain bin and drop it down to almost 30,000 in in hopes to try and get any sales, but they're not doing well as a as a hardware company. Um, I don't think anyone wanted to see this as their their big first venture uh after being spun off to see such little uptake for their product, in spite of it being you know ostensibly very good uh for its specific purpose of computer graphics. Um so this is a bit of a you know a problematic time for Pixar, you'd have to imagine, uh, particularly in the in the hardware sense. Uh and I think it does inspire a little bit of a pivot uh internally in terms of what they're gonna do and what their focus is, because um while the hardware was the goal, uh the hardware was the main main product, they are working on other products in the background. They have um the uh computer animation production system known as CAPS, which is a hardware and software pipeline for digitally colouring hand-drawn cells, um, obviously the main animation medium of the time, uh, which they they collaborated with and licensed to Disney, um, which is the first time Disney's mentioned here uh for a long and seemingly fruitful uh relationship between the two companies uh that we'll we'll see more and more as as we get into it. Um but even this is not a significant revenue poll for Pixar. Um it doesn't see significant uptake beyond Disney. Um once again, despite being what seems to be a pretty good product because it is widely used among um, I think it's the the Renaissance era of of Disney films, uh starting with they use it in one scene at the end of The Little Mermaid um and go on to use it uh all the way from 1989 to 2004, um, with you know some heavy hitter films produced in there. Uh I mean The Lion King was um credited actually. They they mentioned that uh caps made some of the more demanding scenes possible. I think the Stampede uh was mentioned in particular. So, you know, this is a good piece of kit, but it's just not it's not working financially for Pixar at the time.
SPEAKER_02Is that because they didn't have a proper grasp of the market? Are they doing something that's so uh advanced in terms of what other people are using that there's a kind of mismatch between where they are with the tech and where the industry is? What's what's what's the reason for the mismatch?
SPEAKER_06It's it's a very specialist piece of kit. And I think what what they're selling is is niche and expensive, um, which you know not always a fantastic combination to um springboard a company forwards. There are other companies uh you know selling competing products at a lower price that are more accessible. Um but you know, I I it's also just that the the woes of a new company, I guess, it's it's difficult to break into any market.
SPEAKER_03You've also got traditional animators, particularly in Disney. Um the head of animation at Disney was very anti the idea of computer generated anything. Um you sort of see it a bit, it's kind of akin to the AI stuff that's going on at the moment. Um that they don't want to be doing themselves out of a job. Um, and therefore you get people taking quite hard lines against this kind of technology as well. When they're established in Disney, it's quite difficult to that's that's an uphill, uh that's an uphill battle.
SPEAKER_06Yeah, absolutely. I mean absolutely absolutely. Um Pixar are also developing um in the background their own proprietary rendering software, which is going to be pretty
RenderMan, Shorts, And Disney’s Leverage
SPEAKER_06significant for them uh both in terms of their output but also in terms of uh direct revenue streams. Uh so this is uh known as Render Man. It makes its internal debut in 1987 uh within Pixar and is sort of the foundational tool to make their computer-generated animations, which starts with one called Tin Toy, which you know I think you can already see is a bit of a spiritual predecessor to Toy Story. It has you know a very similar idea of of Toys coming to life. And this goes on to win uh the Academy Award for best short film that was animated in 1988, and it's the the very first computer animated film to do so, uh, which is you know kind of a landmark in the in the industry when obviously hand-drawn animation is the is the standard, and this is you know a little bit of an upset and definitely a claim that I think Pixar needs at the time when they don't have a lot going for them, financially speaking.
SPEAKER_03They're still not making any money from this, right? It's still making no money. Advertising rather than yeah, yeah.
SPEAKER_06So this is still part of the vision of using these shorts to sell hardware and software uh that that intends to be the main product.
SPEAKER_04Um this is another kind of long spin-out startup kind of story, isn't it? And yeah, yeah. At the beginning, they've got the patents in well done, and then um they've they've developed the technology they got angels in, basically. It's it's not an unfamiliar story. So I mean, and they've also got a technology looking for a home, which I think often you often see people I mean, like the BlackBerry story, they they're the original technology was nothing to do with um what they ended up selling, but they just got them going and they were looking for the market and then moved quickly, which it sounds like they did as well. Who was propping them up financially? Was it still Steve Jobs? Because presumably was still poking money in all the time.
SPEAKER_06Yes, no, he's poking money in and a lot of it. Uh they are making almost nothing from these animated shorts. They they do some advertising deals and and get a little bit of money in that way, but it's not anything significant in quantity. So yeah, no, they're relying pretty heavily on personal funds from from Steve Jobs, who puts in by the early 90s about 50 million of his own money, um, which is no small feat. Even with his uh his Apple, his Apple uh money that he has of his own, this is still a pretty big amount uh to invest, because I think, you know, yeah, at least around 100 million in today's money. Um you'd notice that if uh if if that went missing, I think. So definitely uh I think they are very keen to try and make some money. Steve Jobs himself, I think, is not feeling confident about this business. What what he'd thought could be an uh you know a big win after Apple has not gone to plan. Um but you know, all is not lost. We're we're in the 90s and we're getting close to them being an animation studio at this point. We're not quite there yet, but it's it's it's on the way. Uh because in 1991, uh Disney comes back and they have a deal to make three computer animated films, which sounds like the lifeline that they need, but I think the the poor situation financially that they've had really colours this deal because it is extremely one-sided. Um Disney are making all the returns, they're gonna get 90% of the revenue. Um, they have creative control over the films, they own the intellectual rights to to any characters from these these three films. Um, but I think it's just it shows the the desperation maybe of jobs to just try and get any money out of this business that he's poured a lot of his own cash into.
SPEAKER_04Um so he's not coming across as very business-like for one of the most famous businessmen of all time. It's funny, isn't it?
SPEAKER_02Yeah, I think he's missed a trick. I think he's missed a trick. I would have been playing on the Renderman thing, and I would have been creating, right, a cohort of construction superheroes. So you've got Render Man, who is like a uh uh a super plasterer. Grillam, you've gone somewhere. Where have you gone? Yeah, forget forget the Toy Story thing. I'd have been straight into this with construction superheroes, would have blown the Marvel universe apart.
SPEAKER_04The Tyler. There you go. The Tyler.
SPEAKER_02Yeah, yeah. Who would have just been called Tyler? Yeah, because that that that really works. Yeah.
SPEAKER_04Pipe, pipe guy, pipe guy.
SPEAKER_02Yeah, pipe guy, yeah. WYSY Chippy or something like that. Yeah, this is this has got so much there's legs in this. Let's okay, me and you, we're gonna do this, right?
SPEAKER_04Uh, please, please stop him. Please carry on.
SPEAKER_02Back to the back to the podcast.
SPEAKER_06Yeah, so I mean, at this point, they're producing films. Thank, thank God. They're doing what, you know, we we find out, it turns out they're quite good at. Um, so they're using to come back to it, the the the Pixar, the their own computer, their hardware, and their software, Renderman, to produce uh, you know, what goes on to be classics. And more than that, it serves as another revenue stream. Um to sort of talk a little bit about what it is that they have, I suppose. Uh, we should we should just go back a step and and think what exactly is Renderman and what what what how did it come to be? Um so I mean this was built on an algorithm that was developed at Lucasfilms. Um render everything you ever saw. Uh Raise was the algorithm, uh I believe to do with Rays Point in California. Um, you know, like they had fun with their names, I suppose. Um and this was just uh, you know, uh innovation in rendering and and sampling, which made computer graphics possible at the time when when hardware was not powerful, to say the least. Um but what was particularly useful was the broad patents that they had that were filed, as we talked about back in the 80s at Lucasfilm, um, but thankfully transferred over uh when they purchased the IP rights when Pixar spun out uh on its own. Um because these were extremely far-reaching um patents that as we'll find out, uh into the development of Toy Story um were being potentially infringed by a number of other companies. Um I mean, through the development of Toy Story, which is uh going on from uh 91 to its release in 95, uh Pixar's financial situation has not picked up. They're still struggling, and Toy Story itself is a little bit of a nightmare in terms of its production. Um, its budget has ballooned, there's been a lot of studio interference from Disney. Um they've made some some strange decisions, I think, when you look at the the final release of the film in the characterization of Woody and Buzz, because uh, in an attempt to appeal to more adult audiences, which you know, I think we we already talked about has succeeded in the actual release of the film, they they made Woody quite mean, I think, which is you know an interesting decision creatively uh to have like a cynical lead character.
SPEAKER_03You can see these clips on YouTube um of early early scenes from it, and yeah, Woody is is he's just there's no polite way of saying he's just he's mean, he's very uh um, and Buzz is is is a lot uh he's they're very different characters. Disney did not like this.
SPEAKER_04No, they did not. Disney do know what families want. That's basically that's what their job is.
Licensing Patents Instead Of Suing
SPEAKER_06Yeah, so uh, I mean, through this development and with their poor financial situation, um Steve Jobs, I think, is quite sick of putting money into this uh you know company that's a black hole for him. Uh so they bring in a uh chief financial officer, Lawrence Levy, in um 1994, end of 1994, beginning of 1995, um, who seems to have a bit of sense, I think, uh, financial sense, for the first time in this in this company's history that we've talked about so far. Um, because Steve Jobs, ever the hothead, is keen to try and sue any anything and everything that is potentially infringing these patents that were developed at Lucasfilms and now transferred and assigned to Pixar. Um I mean, I think he expects to get a large amount of money. He uh according to Lawrence Leafy says that he he could get 50 million, he expects, from from suing patent uh for suing for patent infringement, uh, which obviously a lot of money for a company that has got no money coming in realistically. But we see that potentially the smarter decision and the decision that they end up making is um actually to seek licensing instead of going for patent infringement because the company needs money and it needs money fast, and it I mean, it just makes more financial sense when there is no guarantee that they're gonna keep surviving, even when they know Toy Story is on the horizon, um, that they're gonna be seeing returns from this anytime soon, um, with revenue not looking very good uh uh around the mid-90s. So they managed to agree a deal with Microsoft uh for around six and a half million dollars, and a deal with Silicon Graphics for around six million in cash and another five million in hardware and software credits, which is I mean, both useful in the in the cash injection, but also in the sort of long-term thinking for for producing future ventures to have have that hardware coming in in chips, like we we talked about.
SPEAKER_03Um and these were uh one-off payments, I think. So it's not like they they had an ongoing royalty coming in um from either of the deals, they were one-off cash payments or cash plus um plus uh credits on on hardware and and software from from Silicon Silicon Graphics. Um if you if you look at their so you can go back and look at their SEC filings at uh at this time, and you can see their balance sheet um for the different periods, and you know it's very lumpy, shall we say? They get um periods where they get huge payments, and uh it's a license fee payment, there's no there's no cost to them associated with it. So the balance books look very healthy on in certain quarters um because they've uh they've they've had these huge payments in. Um, and if you read the comments that they put in their filings, they say something like, um, yes, it it looks pretty good this this uh this quarter. We do not expect uh this to be an ongoing uh an ongoing uh uh uh situation because they know that they've they've got that money in, they're not going to get more money in from from those particular deals.
SPEAKER_04Is it going to be a happy ending for Steve Jobs? Well, do you mean ultimately or do you mean kind of uh I suppose he didn't have that happy ending, did he? The framework of the story.
SPEAKER_06Yes, I think a very happy ending. Yeah, no, I I think he's pleased where where he ends up with Pixar in the end. Um, because you know, I think in part because of this patent licensing revenue that manages to act as quite a bridge for for Pixar in in the lead up to and in the distribution of Toy Story. Um, because even though Toy Story is obviously a smash hit that brings in a lot of money, most of this is going to Disney. Um and while Disney, as part of their agreement with Pixar, were paying the uh production costs as as reimbursements, they were often lagging on the on Toy Story's revenue sheets. So it was it was still no no certain uh no no no no no real amount of certainty for the company. Um but thankfully for for Steve Jobs and for Pixar, Toy Story, you know, ended up doing quite well. Uh got uh cool 362 million worldwide, so you know, nothing to sniff at. Um but Pixar themselves still only made approximately uh 50 million because of the the deal that they made with Disney. Um but I guess the big win for Steve Jobs comes with the fact that a week after Toy Story is released, um the company goes public and bring in an extremely large amount of funding that that propels Steve Jobs to being a billionaire for the first time in his career, which you know sounds like a pretty happy ending to me for him.
SPEAKER_04They take it back, he's a really good businessman.
SPEAKER_02Um I'll take that as an ending for me. I'd I'd stop there.
SPEAKER_04I'm not reading Steve Jobs is good at business.
SPEAKER_03You heard it first. I mean it just helps to have you know 10 million spare to to buy a company to start with, and then uh you get lucky with how that ends up. But it it's uh and that's not the end of it, is it? I mean, he he he becomes a billionaire on the on the um IPO of uh uh of Pixar, but but Pixar goes on to be bought out effectively by by Disney. Steve Jobs becomes the largest single shareholder in Disney, um, which again is not a bad place to be.
SPEAKER_02And and did I take from that that a significant part of that success was Jobs' um ability, capacity to leverage the IP in the in the way you talked about him being kind of quite active in litigation and like that. That would have been happening in the background, wouldn't it, alongside the inventive, creative stuff that was going on.
SPEAKER_06Yeah, yeah. I mean, it was definitely I mean extremely significant to Pixar at the time. Um I mean, these are not small amounts of money for uh you know what is a very small company, even even back then, despite the the Disney deal. Um getting, yeah, I mean 20 million almost in in licensing fees is extremely significant and and allowed them to keep on on producing and and distributing Toy Story and making that success from going public because you know, without Toy Story, they don't get the big IPO that they do. And without the patent licensing, do they have the financial stability to see Toy Story through and to and to get that money on the other side?
SPEAKER_04There's also a good backstory, and Lee, we don't often touch on this on the podcast about all the trade secrets and know-how sitting behind all of them, just the confidentiality generally. I mean, yeah, why why were people using Pixar? Because they could do something no one else could do. Why could no one else do it? And it was a mix of the the registered IP, as it were, the patent side, presumably, and also the fact
Toy Story Launch And Pixar IPO
SPEAKER_04that vast amounts of investment in creating an intellectual product that people couldn't access. They had to go to Pixar. So uh we didn't talk about the trade secret side, but it's it's always always a mix of the two things. You know, people just couldn't do what they did, not without probably injecting as much money as Steve Jobs had all over again, I guess. I think that's right.
SPEAKER_03I think they also were they they they knew about the tech side, but they also had the creative side. John Lassiter was um clearly a creative guy. He he was heavily involved in in the Toy Story and the concept. Without both of those two things working and and an appreciation of both from both sides, you probably wouldn't have ended up with uh with you know it would have been no good if if Toy Story was technologically marvelous, but the story was was uh was rubbish. Uh it wasn't a rubbish story, it's a very good story, and and so it had legs.
SPEAKER_04So you said Disney had creative control, but who were the where were the writers? Who who were the writers? Were they a third party again, or were they part of one of those two entities?
SPEAKER_03So it was John Lassiter, I understand, was heavily involved in in the writing. He was originally a Disney animator as well, so he came from that that that that um that background. Um, but they also bought in a bunch of um uh Disney bought in in some writers themselves as well, and some screenwriters, including um uh Josh Josh Wynn was was one of the uh one of the screenwriters, I believe.
SPEAKER_02Guys, I'm I'm conscious that we're kind of there or thereabouts on time. Quillam knows that one of my great tasks on the podcast is to try and keep us to time. Um we've gone well over, but that's not a problem. I'm sure um I'm sure people are hugely interested in the story of Pixar and Toy Story. Um anything anything missing from the the story that you kind of want to weave in before the end? If not, I've got a cracking closer question, right? Well, I think it's a cracking closer question.
SPEAKER_03You might it's racing ourselves.
SPEAKER_02So come on, Rob, anything else to finish the story off or are you done?
SPEAKER_06Uh I mean I guess we can sort of just look at it more broadly about what what we can learn from yeah, yeah, from uh you know how how Pixar operated. Um because you know, as I said, these patent licensing deals that were a bit of a lifeline um in the lead up to Toy Story and and just on the other side of it um started all the way back at Lucasfilms and required that this was not just a patent for exactly what was being done at the time, but the underlying technology itself that allowed it to be so valuable uh for anyone um at the time to create products within computer graphics. So I mean that's obviously uh a lesson that we we take with us in in the profession today and and I think you know underpins the uh the idea of a good patent. Um get the fundamental technology, not a specific implementation of it. Um and also to uh think how you can use patents uh in in a multiple, you know, i in in many different ways within a business. It's not just uh a way to exclude people from the market, but it's a it's a business tool. It's something that can be used to generate revenue, to negotiate deals.
SPEAKER_02Strong narrative through the life of the podcast, is we always come back to the way that you can use your IP to leverage business. I think that's um that's that's the story we wanted to tell. And this one and you got there, so well done. Amazing. So can I can we finish up with my closer? Because expecting me to ask a question and I'm not gonna ask it. No, no, no, no, no. So I'm not gonna ask. So the way the closer works, guys, is ask Gwillem first, uh, and then I'll ask you too. And then he surprised me by asking me the question in return, okay? And Gillam's expecting me to
Trade Secrets And The Fun Closer
SPEAKER_02ask him um, if he were a Toy Story character, which Toy Story character would he be? And I'm not going to, okay? But it is an animation question, right? So, Guillem, Pixar are gonna animate the story of your life. Which otherwise inanimate object, household object, sports object, whatever it might be, would you choose to play you?
SPEAKER_04Uh oh, carrot.
SPEAKER_02Carrot. Yeah. Come on. How? Why? Well, apart from the natural colouring and that sort of thing.
SPEAKER_04It's mostly the natural colouring. Plus, I think carrots is an enormously versatile vegetable, and I'd like to think of myself as a very versatile person. So it kind of reflects one of my strengths. And I'm also kind of the same shape as a carrot.
SPEAKER_02What? Your hair's like fluffy on top and you're very thin towards the bottom. Yeah, nothing at the bottom. Yeah, yeah, yeah. So kind of Rob, Rob, your shout. What would you be? Story of your life, which inanimate object is playing you? Oh, that's a good question. Um I know, I told you it was a goodie.
SPEAKER_06I'm gonna I'm gonna go with a can opener if I can do that. Oh wow. Rob, you better get ready. Uh I spent actually a decent chunk of uh my second year at uni trying to improve upon trying to open a tin. Yeah, it was a very, very stiff can. Um, no, no, of uh trying to improve upon can openers. Um and then coincidentally ended up being a big chunk of my interview to uh get into the pattern profession, discuss about the novelty and and inventiveness of of different can openers throughout throughout eras that they present to me. So I thought that feels that feels quite fitting. Yeah, yeah. I can see he was a can opener as well, actually.
SPEAKER_02Yeah, yeah, yeah. That works that works for me.
SPEAKER_04But there's cans on his head.
SPEAKER_02Yeah, yeah.
SPEAKER_03So Pete, how about you? Uh the problem is I've had too long to think about it now, and I'm second guessing myself. Um I I'd go with some I don't know, uh I'll go with my first thought, which is TV remote. T remote? I was more aspirational because people people might notice when the TV remote isn't there in my house. So I can't I like that. I'd like to be, if I wasn't around, people could notice. Where's the TV remote? Also, it's nice to fill in control of something.
SPEAKER_02Go on then. Hit me with it.
SPEAKER_04Can you remember what the question is? Holy, this is possibly the most obscure close you've ever done. Uh what inanimate object would play you in the animated film of your life?
SPEAKER_02Do you want to pick one for me? Would you like to tell me what should play me?
SPEAKER_04I can't think of a polite one.
SPEAKER_02Um the one I picked isn't particularly polite. Uh, I'd be a space hopper, I think. I think I'd love to be a space hopper, just kind of bouncing around all over the place, entirely kind of like without purpose. Yeah, that yeah, that'd be I was gonna say squash racket, obviously, that being the way, yeah. That that would be the definitive me, wouldn't it, squash racket? Because that's featured most in my life in terms of the the object that's always around me. Yeah, I quite like yeah, maybe a bright yellow space hopper, um, with a slightly glum face.
SPEAKER_04Yeah, there's a lot you could do with that as well.
SPEAKER_02Yeah. Yeah. Yeah. Yeah. Guys, thank you so much for coming on. It's been um it's been a real blast. Uh Gwillem, lovely to see you again on the podcast. I'm sure we'll be together again shortly. And uh, for all the new listeners that we've now got, because they've come to this podcast through the medium of Toy Story, thinking they're going to hear about um toys and stories, and I'm thinking what's IP, stay with us, tell your friends where you found us and grow our listenership. Cheers, I'm not sure.