By Joe Kleiman, InPark News Editor
In a complaint filed June 26, 2013 in the United States District Court, Central District of California, IMAX alleges that defendants China-based GDC technologies, a digital cinema hardware provider, and two of its subsidiaries have committed “illegal commercial exploitation of IMAX’s trade secret large format digital theatre projection system and film conversion technologies.”
GDC is owned by an international consortium, led by US investment firm Carlyle Group. On May 22, 2013, GDC filed a registration statement with the United States Securities and Exchange Commission to issue an initial public offering of stock on the NASDAQ exchange with a projected value of US$75 million.
In that filing, GDC states, “We . . . recently became the exclusive reseller and licensee of China Film Giant Screen systems in Asia (excluding China) and a non-exclusive reseller and licensee in the rest of the world. We expect to derive revenue from initial equipment sales and box office revenue for movies in China Film Giant Screen format beginning in the second half of 2013 or in 2014 . . . Furthermore, we have been selected by the China Film Group, the largest film distributor in China, to provide film mastering and exhibition technologies for the China Film Giant Screen format . . . We have already installed 24 screens in China as of March 31, 2013. We expect to derive revenue both from initial equipment sales and box office revenue for movies in China Film Giant Screen format.”
In its court filing, IMAX claims that “Former IMAX employee, Gary Tsui, stole . . . proprietary technology from IMAX, then surreptitiously provided it to film companies in China, including a company now called China Giant Screen, for which he is the ‘chief engineer.’ China Giant Screen uses IMAX’s trade secrets under the name ‘China Film Giant Screen’ (‘CFGS’).”
According to the complaint: “The illegal activities at issue here began several years ago. In 2009, IMAX discovered that Tsui had stolen its proprietary and trade secret information relating to IMAX’s core projection and conversion technologies, including software source code. While employed by IMAX, but unbeknownst to it, Tsui formed his own company in competition with IMAX, and used IMAX’s trade secrets to compete against – and beat out – IMAX on a bid for a significant project in China.
“Following Tsui’s trail from Ontario, Canada to Beijing, China (and now to Los Angeles), IMAX conducted its own investigation into Tsui’s activities and, after finding incriminating information, IMAX initiated lawsuits against Tsui in both Canada and China. Through those suits, IMAX uncovered voluminous, conclusive proof of Tsui’s retention and theft of IMAX’s confidential and proprietary trade secrets, including CDs containing the source code for IMAX’s 2D/3D conversion process and re-mastering technology, as well as the repeated use of IMAX’s trade secrets to form companies in Canada and China in direct competition with IMAX.”
China Film Giant Screen was introduced under the name DMAX, a joint venture between China Research Institute of Film Science & Technology and China Film Co., Ltd, neither of which are named as defendants in the suit. Although Tsui is also not listed as a defendant, IMAX notes previous legal actions regarding him in the court documentation: “Based on . . . evidence, IMAX has obtained extraordinary relief from two foreign tribunals, including a rarely granted, multi-site search and seizure order, a contempt order, and ultimately an arrest warrant issued by the Canadian court, and a broad search and seizure order issued by the Beijing court and executed by several Chinese judges. Tsui remains an international fugitive . . . ”
READ THE FULL COURT FILING HERE (PDF):