IMAX wins $7-million victory against ex-employee who stole technology

Fresh off its almost $7-million court victory against a former employee found to have copied its film technology and started a rival business in China, IMAX Corp. is hoping a new Canadian ruling will help persuade the Chinese government to disassociate itself from its competitor.

“He’s a national and they’ve been supportive of him,” IMAX counsel Sarit Batner says of the Chinese government’s support for film projects like the rival DMAX started up by Gary Tsui, a former software engineer at the Canadian-based digital cinema company.

Batner, a partner at McCarthy Tétrault LLP, made the comment following Superior Court Justice Todd Archibald’s July 3 ruling awarding IMAX $6 million in damages for conversion and misuse of confidential information and trade secrets against Tsui as well as several companies associated with him, including Sunway Digital Inc.

In addition, Archibald ordered them to pay IMAX $456,000 for disgorgement of profits and awarded $50,000 in punitive damages against Tsui. The judgment also included $300,000 in costs to IMAX.

“From a technical perspective, the only plausible explanation how Sunway was able to compete against IMAX in the 2D to 3D conversion business so quickly and without any significant investment in research and development is that Tsui stole the 2D to 3D technology from IMAX,” wrote Archibald.

The case centres on Tsui’s use of IMAX’s 2D and 3D film conversion software that it had been developing for decades. In November 2009, Tsui resigned from IMAX. Around that time, his Sunway Digital Inc. company won a competition against IMAX for the Hangzhou Threatre project in China after underbidding his employer by 13 per cent.

In late November 2009, IMAX uncovered e-mails to Tsui from his wife that linked him to Sunway. He left for China after the company fired him. IMAX has since been taking action against him and the various companies associated with DMAX.

After one of the people Tsui worked with on the Chinese project came forward to say what happened, IMAX was able to get an Anton Piller order for computer evidence that backed up its case. While it attempted to access Tsui’s computer at his home in Canada, it “was intentionally destroyed at the Anton Piller search,” Archibald noted in IMAX Corp. v. Trotum Systems Inc.

According to Batner, Tsui’s family members shut themselves in the bedroom when a lawyer showed up to execute the order.

“When they handed it over, it had quite literally been hacked with a screwdriver,” she says.

“It was very dramatic,” she says of the circumstances surrounding the case. “You get this often in a civil case.”

According to Batner, the proceedings so far include an outstanding warrant for Tsui’s arrest for contempt of court as he has yet to return to Canada.

“Gary Tsui is still very much in the film business in China,” says Batner, who notes the plan now is to get the court order certified and sent to China in the hopes the Chinese government will take notice of it. A court action in China is ongoing as well. Batner doesn't represent IMAX in China.

As for the Canadian action, Batner says her client was happy with the recent ruling.

“They’re very pleased that they were able to have their day in court. They feel satisfied that the Canadian legal system didn’t throw up its hands.”

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