7:08pm PT by Ashley Cullins, Natalie Jarvey
Quibi Outplays Eko in First Round of Dispute Over Turnstyle Technology
Quibi has convinced a California federal judge that it should be allowed to keep using its Turnstyle feature while a dispute over that technology's origin plays out.
Quibi in March sued interactive media company Eko for allegedly engaging in "a campaign of threats and harassment" that involved accusing the mobile startup of patent infringement and stealing trade secrets. Quibi's Turnstyle feature, which detects the orientation of a user's smartphone to determine whether they see a video in landscape or portrait mode, is the tech the company is accused of ripping off.
Eko filed its own suit the same day. Quibi wants a declaration that it doesn't infringe Eko's patent and that it hasn't misappropriated any trade secrets and is seeking an injunction barring Eko from continuing to make such allegations. Meanwhile, Eko wants the court to give it ownership of Quibi's patent and bar the company from using the trade secrets it's accused of stealing.
During a May 7 hearing conducted over the phone before U.S. District Judge John A. Kronstadt, Quibi lawyer Michael Jacobs of Morrison Foerster ripped Eko's claims of irreparable harm — especially that its reputation as an innovator would be injured if its injunction request were denied.
"There's no corroboration that they have a reputation as an innovator," Jacobs said. Meanwhile, he argued, the damage to Quibi if it were barred from using Turnstyle would be concrete.
"We would have to rip out a function, and try to figure out how to deliver content to our users in a turbulent time in the world," Jacobs argued. "There would be real reputational harm. Content comes first, but Quibi's idea is to marry technology with content."
More than two months later, and after a transfer to a new judicial officer, U.S. District Judge Christina A. Snyder on Monday denied the motion for a preliminary injunction, finding Eko hadn’t sufficiently proven it would be irreparably harmed without such relief.
After reviewing the transcript of the May 7 hearing before Kronstadt as well as the related filings, Snyder first found that amendments to the operative complaint made after that hearing didn't materially affect the likelihood of success on the merits and therefore didn't render the injunction motion moot.
"Eko's evidence of alleged confusion among distributors and partners is unpersuasive," Snyder finds. "Moreover, setting aside the evidentiary issues, the evidence offered also fails to present a clear showing of a sufficient causal connection between the Turnstyle feature and the alleged confusion."
Snyder notes that while Quibi's CES presentation featuring the Turnstyle technology was well received, it's not necessarily true that said gain came at the expense of Eko's reputation. She notes, in a redacted paragraph, that Quibi "invested heavily in marketing and original content" — the exact figure is in the millions, but remains confidential.
She was also unswayed by Eko's claims that its relationship with Walmart was harmed because of the tech; its allegation that there's any confusion among those applying for jobs at Eko; and that there's a likelihood of irreparable harm to Eko's access to funding. Snyder also notes that Eko appears to have not done "any significant investigation" into Quibi's product after it initially suspected its trade secrets had been misappropriated and that its delay in filing this motion "undercuts the request for injunctive relief."
Because Eko failed to show irreparable harm, Snyder didn't address the likelihood of success on the merits. (Quibi's motion to dismiss is still pending.)
A spokesperson for Quibi on Monday sent The Hollywood Reporter this statement in response to the decision: "We are extremely pleased the Court ruled today that Eko has not presented a credible case for a preliminary injunction. Eko has no case against Quibi — this is a frivolous lawsuit brought by a company and CEO looking for a payday. We will continue to aggressively defend ourselves."
Eko's lawyer Neel Chatterjee also sent THR a statement, saying, "We look forward to presenting the merits of the case at trial, including our request for substantial damages."
Quibi, which launched April 6, has raised nearly $2 billion to bring premium video programming to mobile phones. The venture, led by Jeffrey Katzenberg and former HP CEO Meg Whitman, has backing from every major Hollywood studio and has inked deals for more than 175 shows — including high-profile projects from Antoine Fuqua, Sam Raimi, Jennifer Lopez and more — in its first year. But the app, which was conceived for on-the-go viewing, has struggled to take off with consumers. The company says more than 5.6 million people have downloaded the app, but third-party analytics firm Sensor Tower estimates that only 910,000 users signed up for its 90-day free trial during first three days after the app launched.