Iwerks Sues Rival Imax Over Film Use Terms

Iwerks Entertainment Inc., a Burbank producer of big-screen theater systems and motion-simulator rides, has filed suit in Los Angeles federal court accusing its archrival, Imax Corp., of violating antitrust laws by stifling competition.

Toronto-based Imax, the top supplier of big-screen theater systems, also owns the biggest library of the large-format films that play in the specialized theaters.

In the complaint filed late Monday, Iwerks asserts that Imax has tried to undermine its competitors by refusing to supply its large-format films to theaters that use systems supplied by other companies, or by attempting to impose “arbitrary, discriminatory and unreasonable terms and conditions” on the use of its films.

Iwerks also accuses Imax of using its position as the main supplier of the cameras used in large-format filming to impede competition. In January, the lawsuit says, Imax acquired the only other “meaningful” supplier of the cameras.

Imax has told customers they won’t be able to lease the cameras to make large-format films for Iwerks, the complaint says. And the company signs agreements with filmmakers that prevent their films from being shown on any large-format theater systems that Imax did not produce, it says.

As a result of Imax’s actions, the lawsuit says, the barriers to entering the large-format theater systems market have become “practically insurmountable.”

Iwerks seeks unspecified damages and an injunction.

An Imax spokesperson said company executives have not yet seen the complaint, but “we believe that it is without merit.”

Imax is the older and larger of the two companies. Considered the pioneer in giant-screen theaters, its shows are well-known at entertainment complexes, theme parks and museums, such as the facility at the Museum of Science and Industry in Los Angeles and the Smithsonian Institution’s National Air & Space Museum in Washington.

In 1995, Imax earned $3.7 million on revenue of $88.5 million.

Iwerks was founded in 1986 by former Walt Disney Co. executives Don Iwerks and Stanley Kinsey, who oversaw a rapid expansion of the company and took it public in one of 1993’s hottest stock offerings. But Iwerks’ stock plummeted and its financial condition deteriorated when it couldn’t find investors for its ambitious concept to build multi-venue, urban entertainment centers.

In its fiscal year ended June 30, Iwerks lost $8.1 million on revenue of $36.6 million.

Kinsey resigned as chairman in October. The new management team has cut costs, laid off staff and refocused the company on its theater systems and ride simulators. Iwerks has reported small profits in its last two fiscal quarters.