IMAX Sues Cinemark For Building Competing System... While Being An IMAX Customer

from the can't-take-the-competition? dept

Tue, Nov 24th 2009 12:55am — Mike Masnick

IMAX theaters have become an increasingly important part of the movie business's continuing success over the past few years, as theaters have realized that (1) you can't "pirate" the IMAX experience and (2) people are often willing to pay more for it. But, it appears that at least one theater began to wonder why it had to pay IMAX so much for such an offering, and decided to set out on its own to build a competitor. The only problem is that this theater, Cinemark, has been a customer of IMAX, so now IMAX is suing Cinemark for trade secret violations and breach of contract (sent in by Eric Goldman).

The details of the case certainly look like a business deal gone bad, and also involve Cinemark preemptively going to Texas (of course) to file a patent action against IMAX, asking the court to make clear that it does not infringe on IMAX's patents. There may very well be breach of contract issues involved here, so IMAX may have a decent case on that front. But what's more interesting is the question of whether or not there are trade secret violations here. We don't talk about trade secret protections as much around here, because they really don't come up that often. But IMAX is claiming that it shared proprietary trade secret info with Cinemark as part of their relationship, and that info was used by Cinemark to build its competing service.

Perhaps much more interesting, however, is the fact that, at least according to the IMAX lawsuit, the Cinemark XD quality has been reviewed poorly compared to IMAX (I looked around and actually found the reviews to be mixed, with many saying that the two are comparable in terms of experience). Cinemark is a much bigger company than IMAX, and had direct access to all of their technology -- and, even so, at least some are saying that the end result doesn't measure up. I'm reminded again of how silly it is to claim that big companies can always "steal" good ideas from smaller ones. It's simply not that easy. Beyond just the basic quality issues, IMAX really has built up a great brand name, and many people do think specifically about going to see "IMAX films." Cinemark can chip into that, but it's going to take a lot of marketing effort. And, really, what's wrong with a bit of competition? IMAX has had the market to itself for years, and some competition between two different methods of "immersive" movie-going experiences seems like it should only create a better situation for consumers.

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Filed Under: big screen, competition, immersive experience, movies, trade secrets
Companies: cinemark, imax

16 Comments

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vyvyan, 24 Nov 2009 @ 1:45am

Sounds to me like primary school children telling secret to their best friend and when that friend rats out, they go to teacher crying and complaining. Is it the same or law has really got something to do with it? And, yes I understand that, breach of contract is a different beast.
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bob, 24 Nov 2009 @ 3:32am

Nitpicking
Two things, more about the presentation than the content: Cinemax is headquartered in Plano, TX, so "preemptively going to Texas (of course) to file a patent action against IMAX" is potentially not quite the egregious action this story would imply. [That said, I think Plano is in a different Federal district than that used by the patent trolls, but IANAL.]

Second, "big companies can always "steal" good ideas from smaller ones" - it's true that Cinemax is larger (by market cap) than IMAX, but it's 1.3B vs 0.5B - neither is exactly an embattled sole proprietor.
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John Doe, 24 Nov 2009 @ 4:06am

It have never been about the customers
It has never been about the customers, it has always been about the profits. That is why we see so many court battles over technology, IP, etc.
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Rob Andrews, 24 Nov 2009 @ 4:43am

Did Cinemark sign a non-compete / non-disclosure?
IMax should have had Cinemark sign a non-compete / non-disclosure as part of the partnership agreement. If Cinemark did, then sign one, they it sounds like they are in violation, if Cinemark did not sign one, then IMax may be out of luck.

In any case, folks like Microsoft have been stealing the work of others for years. Having been at a small company, have seen these partnerships produce huge increases in sales and huge competitors.

From a legal perspective if folks within Cinemark wanted to create a competitor, all they had to do was walk out the door and start a new company that Cinemark would be happy to invest in and buy product from in advance. This would have created more value for Cinemark since other movie chains might have been willing to buy from an independent company.

Sorry but to me, Cinemark just looks like poor business managers and slimy.
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Anonymous Coward, 24 Nov 2009 @ 5:06am

Which IMAX?
Is this the screen that is slightly larger or the screen that is huge, like the size of a three story building.
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LumpyDog (profile), 24 Nov 2009 @ 5:33am

Re: Nitpicking
Glad someone else made this point. Not commenting on the broader case, but they are headquartered in Texas, so it makes sense that they'd file the case here.
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LumpyDog (profile), 24 Nov 2009 @ 5:34am

Re: Nitpicking
Glad someone else made this point. Not commenting on the broader case, but they are headquartered in Texas, so it makes sense that they'd file the case here.
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NullOp, 24 Nov 2009 @ 5:36am

Competition
Competition is what defines us. From day one we are in a competition. Businesses are no different. Let someone build something and someone will come along and build it better, cheaper, whatever. Its how it works.
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MBraedley (profile), 24 Nov 2009 @ 5:53am

Re: Which IMAX?
This concerns the Canadian based IMAX Corporation. The slightly larger screen still uses, AFAIK, 35mm film, although it may use 70mm in standard direction (IMAX uses 70mm film in transverse direction).
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Luci, 24 Nov 2009 @ 6:20am

Re: Competition
That's all fine and dandy, except when you're a customer of the business you just decided to compete with. In this case, as quoted from the article:

'Thus, IMAX seeks redress for Cinemark's willful breach of contract, fraud, tortious interference with existing and prospective economic relations, breach of the implied warranty of good faith and fair dealing, unjust enrichment and deliberate acts of bad faith, as well as misappropriation of trade secrets.'

Come on. At LEAST wait until the contract has expired!
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Pitabred (profile), 24 Nov 2009 @ 8:02am

Re: Re: Which IMAX?
The visuals on IMAX are great. The actual narration and everything seems like it's geared to nobody older than, say, 10.
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staff, 25 Nov 2009 @ 8:30am

contradict
"...also involve Cinemark preemptively going to Texas (of course)"

You contradict yourself. Previously you assailed TX as a patent friendly jurisdiction. Yet in this case Cinemark went there to obtain a ruling unfavorable to a patent. Is TX favorable to patent holders or those who challenge patents? You can't have it both ways. Which is it?
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Gene Cavanaugh, 25 Nov 2009 @ 9:17am

Big companies stealing from little companies
For "fluff", like cinematic "experiences", I agree.
For important stuff, I repeat, that is why the founding fathers specified IP in the Constitution (yes, they said "arts and sciences" - in those days, "arts" did not mean the same sort of trivia it means now).
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Steve, 25 Nov 2009 @ 12:05pm

IMAX is going to eat Cinemark's for it lunch in court.
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IMAX Fan (profile), 12 Feb 2010 @ 9:40am

IMAX is the Competition
Many comments I read regarding the IMAX vs. Cinemark litigations argue in favour of Cinemark, by saying "Competition is a good thing". Yes, I couldn't agree more... that's why I'm 100% behind IMAX on this one! IMAX is the Competitor that has "Pushed the envelope"... "Raised the Bar"... "Changed the game"... If it weren't for IMAX our Cinematic options would still be very limited in scope. The monoliths like Cinemark have clearly woken up and taken notice. They are running scared... Perhaps not surprisingly they have reacted quite unethically by entering into a good faith contractual joint venture with this "Up and Comer" with what we now clearly see as thier hidden agenda.... Steal their secrets (technology, marketing, planned locations, etc...) and rush to market with a cheap imitation of the IMAX experience.

Yes competition is good but it should be fair. Cinemark should respect their joint venture agreement as the mutually beneficial deal it was intended to be, and not exploit it in such an obviously unethical way. Once the agreement has expired they are free to compete but they should benefit the consumer by coming out with original ideas/designs of their own and not simply copying their competitor's product while arguing that the patents aren't enforceable. We should all be supporting IMAX because they are still the underdog here. Cinemark is the bully that is trying to knock them down before they have a decent chance to get up on their feet and fight fair.
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mfan, 15 Dec 2010 @ 6:25am

More Flexibility
The patents IMAX has are worthless and should never have been issued. IMAX simply needed them to get financing, so basically they lied to the money men to get money for their business. Their hands are not clean.

Strictly from a self-interested point of view, I welcome Cinemark's XD system because only three of four of the next dozen films I'm hot to see are liable to be available on IMAX, whereas ALL films, if they are popular enough, have the chance of being seen on XD.
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