FLASHBACK: The Litigators

For much of its early life, In-Three found itself mired in a legal battle with IMAX over patent infringement.  Caught in the fray were a number of key films such as IMAX/Playtone’s “Magnificent Desolation,” Universal’s “King Kong,” and Lucasfilm’s “Star Wars Episode III: Revenge of the Sith.”  IMAX had licensed a patent from David Geshwind, a New York-based computer scientist and animator who, years earlier, had created the animated logo for the PBS show “NOVA.”  In-Three and IMAX settled out of court, but the trial has not been dismissed as Geshwind and IMAX continue arbitration proceedings regarding licensing of his patent. 

News today is that In-Three has been purchased by Digital Domain, a visual effects company founded by James Cameron and Stan Winston, and now partially owned by Michael Bay.  Within the next few weeks, the company will switch operations from Los Angeles to Florida.  In the meantime, we look back at the IMAX/In-Three trial with the following piece.  It first appeared in August, 2005 on the World Enteractive website.

Monday, August 1, 2005, Los Angeles. 9th District Court Judge Florence-Marie Cooper announced her latest decision in IMAX Corporation and Three-Dimensional Media Group, Ltd. v. In-Three, Inc.. She denied both parties’ motions for preliminary injunction against the other. The case consisted of IMAX suing In-Three for patent infringement and In-Three petitioning for a counterclaim arguing no wrong doing and asking for an injunction preventing IMAX from infringing on In-Three patents. The lead litigators on each side of the table, Chad S. Hummel for the plaintiffs and Bill Coats for the defendant, are quite familiar with IMAX and its legal standing, each having served as a barrister in at least one landmark IMAX case.

CHAD S. HUMMEL

When the court papers for IMAX v. In-Three were filed in the Federal Courthouse in downtown Los Angeles on March 11, it wasn’t the first time that Chad S. Hummel had his name attached to an IMAX lawsuit. As a partner at Manatt, Phelps & Phillips, one of the most esteemed entertainment law firms on both coasts, Hummel had overseen antitrust litigation involving IMAX, Iwerks, and Simex in two groundbreaking cases in the late 1990’s.

In March of 1994, IMAX was sold by its original partners to a partnership consisting of Bradley Wechsler, Richard Gelfond, financial firm Wasserstein Parrella, and Showscan inventor Douglas Trumbel. That same year the company went public on the NASDAQ exchange. When Trumbel entered IMAX, his Ridefilm corporation was merged and became an IMAX subsidiary. IMAX was suddenly in the motion ride business, with a number of locations opening between 1996 and 1998.

At the same time IMAX was entering the ride market, Iwerks, their main competitor, was planning a major expansion into large format cinema. In Feburary 1996, Iwerks sued IMAX in Iwerks Entertainment v. Imax Corporation in federal court for antitrust violations under the Sherman and Clayton Acts. A year later, with the case still pending, Iwerks acquired Pioneer Technology Corporation, a company that had developed linear loop technology, similar in some aspects to IMAX’s patented rolling loop technology. In December 1997, Iwerks and Showscan, another 70mm firm, announced a planned merger. The merger was ultimately voted down in March 1998 by Iwerks’ shareholders. On April 8 1998, Iwerks’ case against IMAX was dismissed for summary judgement. IMAX’s lead attorney on that case was Chad S. Hummel.

A year earlier, in Imax v. Showscan Entertainment, Hummel had delivered charges against Showscan for antitrust in their proposed merger with World Odyssey, a manufacturer of rolling loop 1570 projectors, and Odyssey’s company, NJ Engineering, alleging that the merger would violate provisions of a 1994 settlement agreement between all three companies. Hummel’s team was able to successfully gain an injunction for IMAX.

BILL COATS

NJ Engineering also played a prominent role in Imax Corporation v. Cinema Technologies, Incorporated and Neil Johnson, a very famous case often cited regarding intellectual property law. Bill Coats represented the defendants. Coats currently acts as lead council for In-Three in Imax Corporation, et al v. In-Three, Inc., his second case involving IP infringement involving IMAX.

Coats’ first case involving IMAX and IP infringement bears study. In 1988, engineer Neil Johnson, David Mariani and large format film director Keith Merril formed NJ Engineering to develop a 1570 projector that could compete against IMAX. Johnson was given a copy of an IMAX service manual along with copies of IMAX’s patents, and spent some time in the booth of a Los Angeles IMAX theater watching how the system operated.

Following this, NJ Engineering rented the IMAX theater at Santa Clara, California’s Great America theme park, where they disassembled the projector for reverse engineering. Johnson also flew to Buenos Aires to inspect an unassembled IMAX projector that had been delivered for use in an Argentinian theme park.

Two years later, in 1990, NJ Engineering and its subsidiary, World Odyssey, introduced their 1570 rolling loop projector at a trade show in Amsterdam. Three years later, Johnson founded his own company, Cinema Technologies, Inc. (CTI). He claimed that the projectors CTI developed were based on publicly available knowledge.

IMAX disagreed, believing that existing patents protected their trade secrets, which traditionally had been the case. They argued that because Johnson had been handed the documents and began studying how the IMAX projector operated while their patents were still in force, CTI’s projector infringed upon IMAX’s trade secrets which were protected under those patents. However, in California, where the suit was filed, patents and trade secrets are considered by separate means, and as separate variables, when it comes to protection.

In the lower court, Coats and his team won a summary judgment for CTI, based on Imax’s refusal to give exact numerical dimensions and tolerances for the projectors. Imax appealed, arguing that because these numerical values were not included in their patents, the summary judgment was invalid.

However, the Appeals Court, maintaining the summary judgment for CTI on claims of misappropriation of trade secrets brought forth by IMAX, stated that “under California law, a trade secrets claim based on the misappropriation of a complex film-projector system must specify all the dimensions and tolerances constituting the alleged secrets, even if the system’s patent does not.”

CTI is now known as Cinema Development Company, or CDC. Their victory in the 1994 case has allowed their 1570 projection equipment to now be found in screening rooms at both Iwerks and RPG Productions in Burbank. The 1570 is also at a number of theaters under the both the CDC and Iwerks brands in Oklahoma City, Okalahoma; Kansas City and St. Louis, Missouri; Orlando, Florida; Athens, Georgia; and Salt Lake City and Zion National Park, Utah. One of their most recent installations was in 2003 in Lubbock, Texas, replacing an IMAX Dome projector.

THE FUTURE

Since March, these two experienced litigators have once again been shaping the future of the large format industry. With the denial of both parties’ motions for preliminary injunction, the case is expected to continue later this year. As Judge Cooper stated in one of her recent opinions, “Each [IMAX and In-Three] has claimed that the market for conversion from 2D to 3D motion pictures is at a critical juncture, and that it is the party destined to be the leader of the market.”

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