Co-developed by State-owned China Film Group Corp and GDC, China Giant Screen hasbecome a major rival of IMAX in China and cost only about half as much as IMAX

IMAX sues former employee for passing secrets to rivals in China

Staff Reporter

2013-08-21

Montreal-based IMAX has filed a lawsuit against a former company employee for stealing trade secrets and handing them to Chinese film companies in direct competition with them in China. IMAX claimed in a high court in Los Angeles that Gary Tsui had stolen big-screen trade secrets and provided them to film companies in China, including a company called China Film Giant Screen (CFGS), where Tsui had previously worked as a chief engineer. CFGS runs big-screen businesses along with GDC Technology in China and the two together have been offering competitive pricing against IMAX, resulting in huge losses for the Canadian firm. IMAX has sued GDC Technology and Tsui for their illegal exploitation of its large-format digital theater projection system and film conversion technologies.The Canadian firm stated in court documents that Tsui had stolen its giant-screen projection and the source code for IMAX’s 2D/3D conversion process and remastering technology, and provided them to Chinese film companies. The company further said it had uncovered “voluminous, conclusive proof of Tsui’s retention and theft of IMAX’s confidential and proprietary trade secrets.” The hostile competitive strategy employed by its Chinese competitors had resulted in losing a bid to build a giant theater in Hangzhou, the company said.

Responding to the accusations, Yang Xuepei, head of the China Research Institute of Film Science & Technology, said that all the technologies employed by CFGS were original and innovative and not copies of IMAX.

Shi Leiming, a longtime movie industry expert, told Shanghai’s First Financial Daily that CFGS’s prices were half those of IMAX’s and offered similar quality, which posed a serious threat to IMAX’s market share in China. Each IMAX screen in China generates nearly 8 million yuan (US$1.3 million) of box office takings on average each year, Shi told the daily.

GDC terms IMAX suit ‘baseless’

Updated: 2013-08-20 07:48

By Huang Ying ( China Daily)

GDC Technology Ltd said in an e-mail response to China Daily on Monday that a lawsuit filedagainst the company by IMAX Corp is “baseless”. GDC disagrees with and disputes theallegations in the complaint. IMAX Corp, the leading giant-screen movie theater operator, is suing GDC, a Hong Kong-headquartered digital cinema equipment maker backed by Carlyle Group, for using what itclaims are stolen trade secrets tied to its large-screen digital movie projection and conversionsystems.

IMAX also claims that its former employee, Gary Tsui, stole the proprietary technology fromIMAX and provided it to film companies in China.

The legal move demonstrates the fierce competition in the giant-screen movie theater segmentof the world’s second-largest film market.

The burgeoning film market in China in recent years and the fast-growing demand for watchingmovies on the giant screen have attracted more companies into the sector, in addition to theCanadian industry pioneer.

As of July 25, IMAX had 108 theaters open in China. Moreover, it has a backlog that’s expectedto take years to complete.

Co-developed by State-owned China Film Group Corp and GDC, China Giant Screen hasbecome a major rival of IMAX in China, with a comparatively low ticket price and a rapid pace ofexpansion.

The number of China Giant Screen theaters is expected to reach about 50 by the end of theyear, although it only officially entered the business in April 2012.

Separately, Poly Film Investment Co Ltd, a wholly owned subsidiary of the State-owned ChinaPoly Group Corp, formally introduced its internally developed giant-screen projection systemknown as PolyMax in June.

Both China Giant Screen and PolyMax systems cost only about half as much as IMAX.

The revenue picture is also different for these systems.

The average annual box office revenue for a single IMAX screen is close to 8 million yuan ($1.3million), while even China Giant Screen’s highest-grossing screens only generate about half asmuch.

China continues to be a very important market for IMAX. In the first quarter, China contributed$11 million of the $50 million in the company’s revenue worldwide, up 58 percent. That was thefastest growth rate in the world, according to the company’s financial reports.

In the complaint filed by IMAX, it claims the theft of its trade secrets and their sale to competingcompanies has reduced its value and has hurt the company’s profits and its relationship with itscustomers.