Hollywood mogul Jeffrey Katzenberg is under attack from billionaire Paul Singer, whose activist hedge fund has accused his mobile-streaming startup Quibi of patent infringement and theft of trade secrets.
Singer’s fund Elliott Management, which manages more than $40 billion in assets, has made a “substantial” investment in rival interactive-video company Eko to fund its litigation against Quibi, the Wall Street Journal reported on Sunday (paywall). As part of the financing, Elliott would end up with an equity stake, but the size of the stake couldn’t be learned.
Reps for Eko and Elliott Management did not respond to requests for comment.
The legal fight concerns a Quibi feature called “turnstyle,” which the company has touted in the press as a “groundbreaking technology.” The feature allows users to play different videos depending on how they are holding their phone—vertically or horizontally. The video switches in real time between the horizontal and vertical versions.
New York-based Eko, whose official corporate name is Interlude US Inc., has demanded that Quibi stop using its technology or license it. It is suing for a preliminary injunction and damages.
Eko filed its lawsuit in Los Angeles federal court in March. A hearing on its request for a preliminary injunction is expected as soon as this week.
In a statement to The Journal, a Quibi spokeswoman denied that the company infringed on Eko’s patent, calling Eko’s lawsuit “meritless.”
Elliott Management has dabbled in litigation financing in the past, but its involvement with a lawsuit against Quibi is still fairly unusual, the report said.
The activist fund has grabbed stakes in public companies to push for changes and has clashed with big name companies. Last fall it won several concessions from AT&T, including making the telecom agree to refrain from major acquisitions. More recently, Elliott was party to a deal to add three new directors to the board of Twitter.
The lawsuit adds a new challenge for Quibi, which specializes in short-form TV and movies for mobile phones. Katzenberg admitted that when he launched Quibi on April 6 in the middle of a pandemic, he would face hurdles as many people were at home watching TV instead of checking their phones on the go.