Microsoft Corporation (NASDAQ:MSFT) is apparently working to develop a patent that would basically turn a family's living room into the inside of a video game played on an Xbox console system. That is the report coming from a British video-game web site, which has seen a patent application from Redmond, Wash., that essentially presents the possibly of a living room being turned into Tron.

The patent submitted by Microsoft Corporation (NASDAQ:MSFT) is titled "Environmental Display," and seems to be based on the technology that runs the Xbox Kinect, with the main difference being that users would directly interact with objects on the wall rather than looking into a camera and imitating actions on a TV screen. This upgraded technology was adopted in a prototypical way before, when Microsoft Corporation (NASDAQ:MSFT) introduced what was possible in so-called "smart homes." however, this tech is applied to a video game environment in this patent.

The technology involves a special projector camera installed within the room, and users would wear specially made 3D glasses while using the technology, but the theory is that Microsoft Corporation (NASDAQ:MSFT) would turn a living room into a video-game environment - and users would be figures in the video game. This would take virtual reality to another level. In technical jargon, the patent is described as "an immersive display environment is provided to a human user by projecting a peripheral image onto environmental surfaces around the user – the peripheral images serve as an extension to a primary image displayed on a primary display."

There is no telling how soon this patent might be approved, but just the concept of the patent that would establish a virtual-reality video-game experience provided exclusively by Microsoft Corporation (NASDAQ:MSFT) may be an opportunity for investors, including hedge-fund manager Seth Klarman of Baupost Group.