• by Karlene Lukovitz  @KLmarketdaily, July 15, 2020

Quibi has won an important first round in defending itself against a patent lawsuit brought by New York-based video company Eko, in the form of a judge denying an injunction that would have forced the new video streaming service to cease using Turnstyle, one of its key tech features.

Eko — whose suit is reportedly being financed by activist investor hedge fund Elliott Management Corp. — alleges that Quibi infringed one of Eko’s patents and stole trade secrets in relation to Turnstyle feature, which automatically shifts video content on phones to horizontal or vertical mode for optimal viewing.

On April 1, Eko filed a motion in U.S. District Court for the Central District of California seeking a preliminary injunction that would have enjoined Quibi from using Turnstyle based on its claim that the feature misappropriates Eko proprietary technology for mobile device optimized ‘Real Time Switching.'”

On Monday, Judge Christina Snyder ruled that Eko had failed to demonstrate its contention that Quibi’s continued use of Turnstyle would cause “irreparable harm” to Eko. Snyder did not rule on the case’s merits.

“We are extremely pleased the Court ruled today that Eko has not presented a credible case for a preliminary injunction,” Quibi said in a statement. “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 issued this statement, from its lead attorney, Neel Chatterjee: “We look forward to presenting the merits of the case at trial, including our request for substantial damages.”

Quibi maintains that it started developing Turnstyle back in September 2018, and the company was recently granted a patent for some aspects of the feature. “Our Turnstyle technology was developed internally at Quibi by our talented engineers and we have, in fact, received a patent for it,” the company has stated. “These claims have absolutely no merit and we will vigorously defend ourselves against them in court.”

Eko filed the actual patent suit in March, a day after Quibi had filed a federal suit seeking to preempt Eko’s claims by getting a court to rule that Quibi had not infringed Eko’s patent. 

Judge Snyder noted that Eko had waited two months after Quibi’s presentation of the Turnstyle feature at this year’s CES event in January as an indication that Eko did not actually view Turnstyle as threatening it with irreparable harm.

The initial win is a bright spot amid a series of challenges for Quibi, most notably its launch at the outset of the pandemic.

With Americans sheltering at home, Quibi’s originally mobile-only short-form video concept, designed for on-the-go media consumption, was immediately made less relevant, as Quibi co-founder Jeffrey Katzenberg has acknowledged.

Last week, Quibi — which reportedly projected that it could secure more than 7 million paid subscribers in its first year and 16 million within three years — disputed reports that it had lost 92% of its paying subscribers after the free trial offered during its launch expired.

Quibi said that 5.6 million people downloaded its app, and that it has enjoyed “excellent conversion to paid subscribers.”

As of early June, Quibi has generated about 4.2 million downloads, only 30% of whom were daily active users, according to app tracker Apptopia.

At that time, a Wall Street Journal source reported that the streamer had signed up 1.5 million users through its free 90-day trial offer. By their nature, free-trial offers for all kinds of products and services routinely result in high percentages of cancellations.

The venture has more than $1.7 billion in funding. However, due to pandemic-related ad budget reductions and concerns about Quibi’s viewership performance, Quibi reportedly received requests from some advertisers to defer payments.

Major advertisers including PepsiCo, Yum Brands, Taco Bell, Anheuser-Busch and Walmart committed a combined $150 million to Quibi’s launch.