Jeffrey Katzenberg is dealing with an enormous new foe — infamous activist hedge fund Elliott Management — in a authorized combat accusing his mobile-streaming startup Quibi of patent infringement and theft of commerce secrets and techniques, Variety has confirmed.
Elliott Management, which claims to have some $40 billion in property beneath administration, has made an funding in interactive-video firm Eko to fund its litigation towards Quibi, as first reported Sunday by the Wall Avenue Journal.
With the funding, Elliott Management will obtain a minority fairness stake in Eko, sources confirmed, including that Eko’s shareholders haven’t but authorized the deal. Traders in Eko additionally embrace Walmart, which invested $250 million within the firm as a part of a content-development pact.
A rep for Eko declined to remark; Elliott Management didn’t reply to requests for remark.
Eko in March sued Quibi for allegedly infringing one in all Eko’s patents and misappropriating commerce secrets and techniques. The dispute facilities on Quibi’s Turnstyle function, which determines the orientation of a viewer’s cellphone (both horizontal or vertical) and presents content material within the applicable mode.
Quibi has argued that Eko’s authorized claims are baseless. “Our Turnstyle know-how was developed internally at Quibi by our gifted engineers and now we have, in reality, obtained a patent for it,” an organization rep mentioned in a press release final month. “These claims have completely no advantage and we are going to vigorously defend ourselves towards them in court docket.”
On April 1, Eko filed a movement in search of a preliminary injunction April 1 enjoining Quibi from “misappropriating Eko’s proprietary know-how for cell gadget optimized ‘Actual Time Switching.’” On April 21, Quibi filed a movement to dismiss Eko’s claims. The court docket has scheduled a listening to on Eko’s movement for a preliminary injunction on Thursday, Could 7, by phone. If the court docket grants Eko’s request for an injunction, it might power Quibi to revamp the app.
Elliott Management has a historical past of shopping for shares in firms it believes are undervalued and agitating for adjustments to their companies. Final fall it received a number of concessions from AT&T together with a dedication by the telco to chorus from main acquisitions. Extra just lately, Elliott was get together to a deal so as to add three new administrators to Twitter’s board.
In court docket filings, Quibi claims it started creating Turnstyle in September 2018 and notes that in February 2020 it was granted a patent protecting varied elements of the know-how. Quibi additionally asserts that Eko has tried to “coerce” funds from Quibi associated to Eko’s personal patent.
In line with the Eko lawsuit, Eko’s patented know-how was shared with Quibi staff beneath a number of non-disclosure agreements. After being contacted by Eko concerning the concern, “Quibi ignored Eko’s warnings and Quibi secretly misappropriated Eko’s proprietary know-how,” the Eko go well with claims. “It hid its theft till making a large public splash in a keynote handle on the January 2020 Shopper Electronics Present… proclaiming it as Quibi’s personal ‘Turnstyle’ know-how.”
Quibi launched April 6 with a slate of 50 short-form exhibits that includes a spread of notable expertise together with Jennifer Lopez, Probability the Rapper, Chrissy Teigen, Liam Hemsworth, Sophie Turner, Lena Waithe, Nicole Richie and Reese Witherspoon. The corporate’s service — because the combat over Turnstyle underscores — is constructed for on-the-go cell viewing. However with tens of millions of People quarantined, Quibi has accelerated improvement of a streaming-to-the-TV choice, promised later in Could.
Final week, Quibi mentioned its app had been downloaded greater than 3.1 million instances because the April 6 launch. How that interprets into variety of energetic viewers is unclear, and it stays to be seen what number of of those that opted to pattern Quibi beneath the 90-day free trial interval will convert into paying subs after the promo interval expires.
In its authorized submitting Eko claimed it has “suffered reputational hurt” and mentioned it filed the movement for a preliminary injunction “to cease Quibi from capitalizing on its theft of Eko’s proprietary cell gadget optimized RTS know-how and to protect the established order.”
Previous to Eko’s authentic lawsuit, Quibi proactively filed a federal lawsuit in search of a judgment that its Turnstyle mobile-video know-how doesn’t infringe Eko’s patent and that Quibi didn’t steal commerce secrets and techniques.
(Pictured above: Jeffrey Katzenberg speaks at Quibi’s press convention on the 2020 CES in Las Vegas in January.)