IMO, a goofy patent. For all devices that offer digital zoom already, it will transition from optical to digital right at the maximum focal length. In his example, it would start doing digital zoom prior.
He's also banking on camera manufacturers to incorporate such a feature. I really don't see any that would want it.
Actually, it is a little better than digital zoom, it is more of a smart cropping. In a digital zoom the resulting image is the same size as the sensor with the extra bits interpolated. In this case, the resulting image would be a crop - a smaller image with no data added.
Depending on how it handles focus, it might have some benefit.