Cinemark Sues Imax Over Theater Conversion Patents

Cinemark Holdings Inc. (CNK) the third- largest U.S. cinema chain, sued Imax Corp., seeking a court declaration that it isn’t violating Imax patents for converting theaters to giant-screen theaters.

Cinemark said Imax, which sells projection and sound systems for giant-screen theaters, sent a letter Oct. 26 claiming the chain is violating two Imax patents. The suit, seeking a declaration that the Imax patents are invalid, was filed yesterday in U.S. District Court in Sherman, Texas.

“Cinemark has plans and intends to continue to convert and update movie theater facilities to maximize the use of available technology,” Plano, Texas-based Cinemark said in the lawsuit.

Imax has struck distribution deals with Regal Entertainment Group (RGC) and AMC Entertainment Inc., the two biggest U.S. cinema chains, to refit more than 150 movie screens with new digital Imax projection and sound systems that allow them to charge higher admission. Cinemark is planning to overhaul some of its own theaters with bigger screens and new technology.

Imax representatives visiting a Cinemark theater a few weeks ago noticed aspects of the design that appeared to violate Imax’s patents on theater design and geometry, Imax Chief Executive Officer Richard Gelfond said in a telephone interview.

Lawyers for Imax sent Cinemark’s counsel an e-mail to discuss concerns about possible patent violations, Gelfond said. Then today he said heard of Cinemark’s legal action.

Violation ‘Highly Likely’

“It seems highly likely that they’re violating the patents,” Gelfond said. “Otherwise, why would they sue to say they’re invalid?”

Imax, jointly based in New York and Mississauga, Ontario, is consulting with its lawyers while it decides how to respond to Cinemark, Gelfond said.

“Historically Imax enforces its intellectual property vigorously, and I wouldn’t expect this to be a different situation,” he said.

Cinemark rose 23 cents to $11.40 in New York Stock Exchange composite trading. Imax fell 22 cents to C$11.26 in Toronto.

The case is Cinemark USA Inc. v. Imax Corp. (IMX), 09-CV-549, U.S. District Court Eastern District of Texas (Sherman).

To contact the reporters on this story: William McQuillen in Washington at bmcquillen1@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net.

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net; Julie Alnwick at jalnwick@bloomberg.net.

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