Even though Quibi announced last week it has sold its library of content to Roku, its 2020 turmoil is still far from over.
Left out of the deal with Roku is Quibi’s Turnstyle technology, the core behind the streaming company’s mobile-first approach and the focus of a fierce legal battle with the interactive video firm Eko.
The New York based company filed the lawsuit against Quibi in Los Angeles federal court alleging misappropriation of trade secrets and infringement of Eko's own U.S. patent which covers the "turnstyle" technology in March 2020.
According to Eko, it disclosed trade secrets to Snapchat during negotiations to integrate Eko's patented technology into Snapchat's platform in 2015. Five years later the contentious technology was unveiled by Quibi as Turnstyle, courtesy of two Snapchat employees who later moved to Quibi in October 2018.
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After Quibi announced it was “winding down” operations, Eko filed an ex parte application to freeze Quibi’s assets to assure Quibi would not sell the "Turnstyle" software, related patents and funds sufficient to remedy the purported harm, which Eko has determined to be at least $96.5 million.
Quibi has denied all allegations and argued Eko’s patents are invalid.
"Our Turnstyle technology was developed internally at Quibi by our talented engineers and we have, in fact, received a patent for it," Quibi said in a statement. "These claims have absolutely no merit and we will vigorously defend ourselves against them in court."
In two separate rulings, U.S. District Judge Christina A. Snyder has denied Eko’s motion for a preliminary injunction to disable Turnstyle while dismissing three of Eko’s nine original claims, and on the same day Roku acquired Quibi’s library, rejected Eko’s request to freeze Quibi’s assets.
But Quibi still isn’t in the clear.
In the most recent ruling, Judge Snyder rejected Quibi’s invalidity theory, and according to Variety, has ordered Quibi to inform the court and Eko of any sale or transfer of technology or intellectual property assets within 48 hours of determining to take such an action. Quibi is also required to notify both the court and Eko at least 60 days in advance of any distribution of funds or assets to Quibi’s investors.
"Considering that Quibi has or will file IPR proceedings against at least two of the patents, Quibi should have crystallized its invalidity theories by now," Judge Snyder said. "If Quibi wanted the court to consider its invalidity contentions, it should have explained those theories, and the underlying factual bases, to the court."
Fortunately for Quibi, the ruling did not prevent its deal with Roku.
Nonetheless, the heart of Eko’s allegations remain as Judge Snyder has acknowledged that serious questions concerning the misappropriation by the Snapchat employees still remain.