MELBOURNE, Australia, 25 May 2011 - The Federal Court has found that Omnilab Media knowingly assisted a former director of Digital Cinema Network (DCN), Mr. Michael Smith to provide it with valuable Hollywood contracts belonging to DCN.

The contracts, known as the „VPFs. (Virtual Print Fee contracts) are offered by the Hollywood Studios (Fox, Sony, Warner Brothers, Disney, Paramount, and Universal) as a rebate scheme to encourage the mass migration of cinemas from 35mm film to digital projection. Australia.s major cinema chains (Village, Hoyts and Greater Union) already have VPF contracts, leaving independent cinema owners with an uncertain future if they do not follow suit. DCN began negotiating the VPF contracts in 2008.

Justice Gordon found that Omnilab Media knowingly assisted DCN.s director Michael Smith to hand over DCN.s contracts and its negotiations to Omnilab behind the backs of fellow DCN directors Martin and James Gardiner.

In a scathing judgment, Gordon noted, „The breaches of fiduciary duty by Smith were dishonest and fraudulent.. These breaches of the Corporations Law have potential criminal consequences (with a maximum penalty of 5 years imprisonment).

The judgment has significant implications for Omnilab Media. Justice Gordon found that Omnilab Media entered the digital transition market from a „standing start. before improperly acquiring DCN.s proprietary information from Smith. Omnilab maintained at trial that it was unaware Smith was breaching his duties. However Justice Gordon dismissed this argument and found that Omnilab had played a knowing and deliberate role in Smith.s fraudulent and dishonest conduct. Despite Omnilab maintaining that its conduct was effectively inadvertent, her Honour found that „[Omnilab] planned it and then executed it..

DCN.s Managing Director Martin Gardiner said, “Justice Gordon has sent a clear message - corporate piracy is unacceptable”. DCN.s business has suffered significant loss and damage as a result of Omnilab (and its partner the Independent Cinemas Association of Australia (ICAA)) continuing to deny that DCN was negotiating the VPF contracts. Further, Gardiner said, „Justice Gordon has now put to bed any misguided view about the contracts – they were being negotiated by DCN, with ICAA’s support. DCN now has every right to seek redress.. According to Gardiner, the VPFs being negotiated by DCN were almost ready to sign last July when those negotiations were derailed by the collective actions of Smith and Omnilab . He said, „Independent cinema owners should be outraged at the actions of those involved in this debacle, as it has put at risk a crucial opportunity for the independent cinema industry.. Further, Gardener said „It appears unfortunately, that some keys players in the industry have decided to put their personal and/or corporate interests before all else..

DCN is currently considering its position after the judgment, including the forms of relief it will be seeking. It will also be requesting that Justice Gordon refer the entire matter to the Australian Securities and Investments Commission for further investigation.

Says Gardiner, „DCN is now looking to the future and the ways in which it can continue to support cinema owners.. What that future holds is yet to be seen. However Gardiner expressed relief that the conduct of the key players was now the subject of a Federal Court judgment. „These were serious contraventions of the Corporations Act. DCN has stood its ground and it is hoped that others won’t become victims of questionable practices like these in the future..

Background Notes:

Digital Cinema Network (DCN) was founded in 2008 and provides important digital installation and support services for the cinema industry. The company is owned and directed by Martin and James Gardiner.

Link to Verdict. (http://www.austlii.edu.au/au/cases/cth/FCA/2011/509.html)

DCN

1 Kings Place

South Melbourne VIC

Australia