On Monday, DreamWorks co-founder Jeffrey Katzenberg and former HP head Meg Whitman formally launched Quibi. Three years win the making, with more than $1 billion in backing from the likes of Walt Disney Company, NBCUniversal, Sony Pictures, ViacomCBS and Alibaba, among big names, and a roster of ultra-famous partners that range from Jennifer Lopez and Lebron James to Stephen Spielberg and Steven Soderbergh, Quibi – short for “quick bites” – is a subscription service aimed at delivering short-but-premium content right to your phone.
With “every show meant to be watched only on a phone, and all episodes [that] are 10 minutes or less,” per Rolling Stone, Quibi has been slated – since Katzenberg and Whitman first began enlisting A-list talent for their venture in 2017 – as standing to revolutionize TV for smartphones. Before it was even in public-facing existence, though, Quibi was already the subject of a pair of strongly-worded lawsuits.
Yes, Quibi’s unfortunately-timed debut, one that coincided with the spread of the Coronavirus in the U.S. (a time when home-bound consumers are hardly in need of truncated media), was preceded by the filing of a lawsuit. In a complaint dated March 9, counsel for Quibi asked a federal court in California to formally declare that it was not on the wrong side of the law. As it turns out, leading up to the formal launch of the Quibi service, the company had been threatened with litigation by an interactive video technology platform, a Tel Aviv-based company named JBF Interlude (“JBF”).
On the heels of receiving a cease and desist demand from JBF in January 2020, in which the Israeli company demanded that Quibi cease its “unauthorized use of the proprietary technology” of Eko, a video technology company that JBF owns. The technology at issue, for which JBF maintains a patent with the U.S. Patent and Trademark Office, consists of a complex combination of “systems and methods for providing adaptive and responsive media.” In order to avoid landing on the receiving end of a lawsuit in light of JBF’s threats, Quibi proactively filed a declaratory judgment action against JBF.
But Quibi’s suit would swiftly prove to be only one part of the equation, as one day later, JBF filed a lawsuit of its own.
In the complaint it filed in the same California federal court on March 10, less than a month before Quibi’s highly-anticipated launch, JBF asserted that Quibi has engaged in a scheme of trade secret misappropriation and utility patent infringement in connection with one of the primary elements of Quibi’s then-unreleased service, a feature called “Turnstyle.”
JBF asserted that Yoni Bloch, the CEO and co-founder of New York-based Eko had met with Jeffrey Katzenberg in March 2017. During that meeting, Bloch “presented Eko’s technology to Mr. Katzenberg, including details regarding technology that Quibi now uses in its touted Turnstyle feature.”
Katzenberg allegedly “expressed interest in investing and owning a majority stake in Eko,” but ultimately “went silent,” per JBF, after Bloch shared additional materials, “including a ‘sizzle’ and APIs/SDKs that embodied the functionality Quibi now calls ‘Turnstyle.’” (In its complaint, Quibi claims that Katzenberg “barely remembers” the meeting with Bloch, and said that the executive, who maintains a media and technology-centric investment and holding company called WnderCo Holdings LLC, simply decided not to invest in the venture).
Around the same time, Eko was also presenting its patent-protected technology to Snapchat in furtherance of “negotiations with Snapchat regarding integrating Eko technology with Snapchat’s platform, where Eko would work with Snapchat to distribute interactive shows.” Among the individuals who were “provided [with] access to Eko’s confidential and proprietary technology in the course of their employment at Snapchat” on the basis that the information be kept completely confidential (in accordance with a non-disclosure agreement entered into by Snapchat) were Clifton Smith and Joseph Burfitt.
It is with these two employees where “Quibi’s theft began,” JBF asserts, as Smith and Burfitt – who are not named as defendants in the suit – jumped ship from Snapchat to join Quibi “in or around October 2018,” and allegedly took all of the proprietary information that they learned about Eko’s technology with them. This was made obvious, JBF claims, when Quibi “secretly” filed for – and ultimately received – a patent for “a method of presenting media content is disclosed.”
The problem with the patent, which Quibi filed for in May 2019 and received in early February 2020, according to JBF? It is for “the same technology that Eko had previously disclosed to Snapchat, and to both Burfitt and Smith.”
The two former Snap employees were among those included in the list of inventors on that patent.
“Despite the stunning similarity between Quibi’s patent and Eko’s earlier-filed patent, Quibi did not refer anywhere to Eko’s patented technologies,” JBF asserts in connection with the technology, which Quibi describes as “allowing users to move at will between full screen portrait and full screen landscape modes and experience the same scenes in different perspectives in those two modes.” With the foregoing in mind, JBF set forth claims of patent infringement and trade secret misappropriation, and is seeking damages and “permanent injunctive relief to recover and protect its trade secrets and other legitimate business interests.”
In its own complaint and in a subsequent statement, Quibi denies JBF’s assertions, arguing that its “Turnstyle technology was developed internally at Quibi by our talented engineers, and we have, in fact, received a patent for it.” As such, JBF’s “claims have absolutely no merit and we will vigorously defend ourselves against them in court.”
UPDATED (July 27, 2020): In a decision on July 27, Judge Christina A. Snyder of the U.S. District Court for the Central District of California handed down a mixed response to Quibi’s motion to dismiss, tossing out Eko’s breach-of-contract and unfair competition claims against Quibi, but requiring that its trade secret misappropriation and patent infringement claims go to trial. At the same time, Judge Snyder refused to toss out the case that Quibi filed against Eko, while holding that the two cases should be handled together for the duration of the pre-trial process.
Earlier in July, the court refused to grant Eko the preliminary injunction it was seeking, a move that would have required Quibi to immediately and for the duration of the legal proceedings disable the allegedly infringing Turnstye technology. According to the court, Eko failed to “make a sufficient showing for irreparable harm.”
*The cases are JBF Interlude 2009 Ltd – Israel v. Quibi Holdings, LLC, 2:20-cv-02299 (C.D.Cal.), and Quibi Holdings, LLC v. Interlude US, Inc. d/b/a Eko, 2:20-cv-02250 (C.D.Cal.).