Quibi is facing a patent infringement complaint from Eko, an interactive video company, and that suit may now have financial backing from activist fund Elliott Management.
According to the Wall Street Journal, Elliott will fund Eko’s lawsuit with a “substantial investment” in exchange for an equity stake. The report said Elliott believes Eko’s case has merit. The suit was filed in March, about one month before Quibi officially launched, and a hearing on a request for a preliminary injunction could happen this week.
At the heart of the complaint is Quibi’s “Turnstyle” format technology, which shifts content framing from vertical to horizontal depending on how the user is holding their device. The company denied accusations that it stole Turnstyle and said the technology was developed and built in-house.
Eko claims that current Quibi employees who previously worked at Snap may have been given access to sensitive information regarding the technology. The company is demanding Quibi either license the technology or stop using it.
Now, with Elliott reportedly financially backing the lawsuit, Eko’s complaint could become a much bigger thorn in Quibi founder Jeffrey Katzenberg’s side. For Elliott, it represents another high-profile action against a major media company. Last year, the investment firm sent a letter to the AT&T’s board asking, among other things, that satellite TV provider DirecTV be sold off. The hedge fund suggested that the company shift its focus away from M&A and toward execution.
For Quibi, the lawsuit adds to some early troubles. The company last year had tagged April 2020 as its timeframe for launch but the ensuing coronavirus pandemic and subsequent lockdown has made Quibi’s mobile-only and short episodes strategy less than ideal in the current environment where many Americans are staying and working from home. The company has said that it’s fast tracking a feature that will allow Quibi content to be watched on larger TV screens.