Shares in video tech company Atomos are rocketing after it resolved a patent dispute with the maker of the ‘camera that changed Hollywood’.

Red made the camera Peter Jackson used to film Lord of The Rings, while ‘explosions-plus’ filmmaker Michael Bay used it for Transformers: The Last Knight.

Atomos (ASX:AMS) has signed a royalty-based licence agreement with Red covering some patents.

They relate to two RAW formats used in Atomos products: ProRes RAW and CinemaDNG. The recording or playback of these formats is what RED alleged was in breach of their patents.

Atomos identified the patent dispute as a key risk in its prospectus, before it listed in December.

But they also said the royalties will not impact much on earnings.

Atomos said the two companies have become closer through these negotiations, and both hope this leads to joint business opportunities in the future.

The famous camera

Red made a computer chip that was the same size as a frame of the standard sized 35mm film used in Hollywood. They then produced from it an image that appeared to look exactly the same as a film image.

They’re cheaper and more portable that film cameras, and can capture more images per second allowing higher definition movies.

Red also released a very hyped smartphone with a holographic display in October — to shocking reviews.

It has also sued Sony for patent infringement, who counter-sued. It ended when both parties both filed for dismissal.

Atomos only listed on December 28 but has handsomely repaid any investors wanting to sell out early.

The stock rose 25 per cent on Thursday morning to hit 80c, and was still moving upwards.

Atomos makes software and equipment which lets digital filmmakers record and edit in the field, but it’s priced so the products are accessible to amateurs as well as professionals.

But its main drawcard are the partnerships with brands like Apple and Adobe to build add-ons for cameras made by Canon, Sony, Nikon, Panasonic and JVC.

Last year revenue hit $35.6m, almost half of which comes from the US, and it reckons it can get that up to $42m in fiscal 2019.

Atomos shares since listing in December.