Case 2:20-cv-02299-JAK-SK REDACTEDDocument 23-2 VERSION Filed 04/01/20 OF DOCUMENT Page 1 of 30 Page ID #:216 PROPOSED TO BE FILED UNDER SEAL
1 GOODWIN PROCTER LLP I. Neel Chatterjee (SBN 173985) 2 [email protected] 601 Marshall Street 3 Redwood City, California 94063 Telephone: (650) 752-3100 4 Facsimile: (650) 853-1038
5 GOODWIN PROCTER LLP Darryl M. Woo (SBN 100513) 6 [email protected] Three Embarcadero Center 7 San Francisco, California 94111 Telephone: (415) 733-6000 8 Facsimile: (415) 677-9041
9 ADDITIONAL COUNSEL LISTED ON SIGNATURE PAGE 10 Attorneys for Plaintiff 11 JBF Interlude 2009 Ltd. – Israel 12 UNITED STATES DISTRICT COURT 13 CENTRAL DISTRICT OF CALIFORNIA 14 WESTERN DIVISION 15 16 JBF INTERLUDE 2009 LTD – Case No. 2:20-cv-2299-JAK(SKx) ISRAEL, 17 MEMORANDUM OF POINTS Plaintiff, AND AUTHORITIES IN 18 SUPPORT OF PLAINTIFF’S v. MOTION FOR PRELIMINARY 19 INJUNCTION QUIBI HOLDINGS LLC, 20 Judge: Hon. John A. Defendant.Deadline Kronstadt 21 Courtroom: 7C
22 Filed/Concurrently Lodged With: 23 1. Notice of Motion; 2. Declaration of Yoni Bloch; 24 3. Declaration of Ivy Sheibar; 25 4. Declaration of Tal Zubalsky; 5. Declaration of Sandeep Chatterjee; 26 6. Declaration of Richard Eichmann; 27 7. Declaration of Neel Chatterjee; and 28 8. [Proposed] Order
MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 2 of 30 Page ID #:217
1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION ...... 1 4 II. BACKGROUND ...... 2 5 A. The Parties and Key Players ...... 3 B. Eko’s Trade Secrets ...... 5 6 C. Eko’s Discussions with Snapchat, Inc...... 7 7 D. Quibi Learns of Eko’s Technology ...... 11 8 E. Quibi Steals Eko’s Technology and Claims It as Its Own ...... 13 9 F. Quibi Causes Eko to Suffer Irreparable Harm ...... 14 10 G. Quibi Refuses to Honor its Confidentiality Obligations ...... 15 11 III. LEGAL STANDARD ...... 15 12 IV. ARGUMENT ...... 16 13 A. Eko Is Likely to Succeed on the Merits of its Trade Secret 14 Misappropriation Claim...... 17 15 B. Eko Is Suffering, and Will Continue to Suffer, Irreparable Harm. .... 20 16 C. The Balance of Equities Weighs in Eko’s Favor...... 23 D. A Preliminary Injunction Serves the Public Interest...... 24 17 E. Only a Minimum Bond Should be Required...... 25 18 19 V. CONCLUSION ...... 25 20 Deadline 21 22 23 24 25 26 27 28
i MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 3 of 30 Page ID #:218
1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Alliance for the Wild Rockies v. Cottrell, 5 632 F.3d 1127 (9th Cir. 2011) ...... 16 6 Alta Devices, Inc. v. LG Elecs., Inc., 7 343 F. Supp. 3d 868 (N.D. Cal. 2018)...... 18 8 Am. Trucking Ass’ns, Inc. v. City of L.A., 9 559 F.3d 1046 (9th Cir. 2009) ...... 15 10 Bal Seal Eng’g, Inc. v. Nelson Prods., Inc., 11 Case No. 13-cv-01880-JLS-KESx, 2018 WL 4697255 (C.D. Cal. Aug. 3, 2018) ...... 18 12 Chalk v. U.S. Dist. Court, 13 840 F.2d 701 (9th Cir. 1988) ...... 16 14 Chartwell Staffing Serv., Inc. v. Atl. Sols. Grp., Inc., 15 Case No. 19-cv-00642-JLS-JDE, 2019 WL 2177262 (C.D. Cal. 16 May 20, 2019) ...... 19 17 Dep’t of Parks & Recreation for the State of Cal. v. Bazaar Del Mundo 18 Inc., 448 F.3d 1118 (9th Cir. 2006) ...... 16 19 Diaz v. Brewer, 20 656 F.3d 1008 Deadline(9th Cir. 2011) ...... 25 21 Dish Network L.L.C. v. Ramirez, 22 No. 15-CV-04712-BLF, 2016 WL 3092184 (N.D. Cal. June 2, 23 2016) ...... 24 24 Droeger v. Welsh Sporting Goods Corp., 541 F.2d 790 (9th Cir. 1976) ...... 18, 19 25 26 Friedman v. Quest Int’l Fragrances Co., 58 F. App’x 359 (9th Cir. 2003) ...... 18 27 28
ii MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 4 of 30 Page ID #:219
1 Hill Phoenix, Inc. v. Classic Refrigeration Socal, Inc., 2 No. 19-cv-00695-DOC-JDE, 2020 WL 1244354 (C.D. Cal. Mar. 15, 2020) ...... 17 3 League of Wilderness Defenders/Blue Mountains Biodiversity Project 4 v. Connaughton, 5 752 F.3d 755 (9th Cir. 2014) ...... 23
6 Quibi Holdings, LLC v. Interlude US, Inc. d/b/a Eko, 7 Case No. 2:20-cv-02250 (C.D. Cal. Mar. 9, 2020) ...... 15 8 Stanley v. Columbia Broadcasting Sys., 35 Cal. 2d 653 (1950) ...... 19 9 10 Teich v. Gen. Mills, Inc., 170. Cal. App. 791 (1959) ...... 18 11 Waymo LLC v. Uber Techs., Inc., 12 No. C 17-00939 WHA, 2017 WL 2123560 (N.D. Cal. May 15, 13 2017) ...... 24 14 WeRide Corp. v. Kun Huang, 15 379 F. Supp. 3d 834 (N.D. Cal. 2019)...... 24 16 Winter v. Nat. Res. Def. Council, Inc., 17 555 U.S. 7 (2008) ...... 15, 20, 23, 24 18 Statutes 19 18 U.S.C. § 1836(b)(3)(B)(i) ...... 16 20 18 U.S.C. § 1839(5)(A)Deadline-(B) ...... 18 21 18 U.S.C. § 1839(6)(A)-(B) ...... 18 22 Other Authorities 23 24 Fed. R. Civ. P. 65(c) ...... 25 25 26 27 28
iii MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 5 of 30 Page ID #:220
1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I. INTRODUCTION 3 Plaintiff JBF Interlude 2009 Ltd. – Israel (“Eko”) seeks a preliminary 4 injunction enjoining Defendant Quibi Holdings LLC (“Quibi”) from 5 misappropriating Eko’s proprietary technology for mobile device optimized “Real 6 Time Switching” (“mobile device optimized RTS”). This trade secret technology, 7 which is a critical part of Eko’s technology platform, had been shared with Quibi 8 employees under multiple non-disclosure agreements (“NDAs”). In fact, when Quibi 9 showed Eko a simulation that appeared to use Eko’s technology, Eko warned the 10 Quibi employees that Eko’s technology platform, including its mobile device 11 optimized RTS technology, was proprietary to Eko and could not be used without 12 Eko’s authorization. 13 Quibi ignored Eko’s warnings and Quibi secretly misappropriated Eko’s 14 proprietary technology. Ithid its theft until making a massive public splash in a 15 keynote address at the January 2020 Consumer Electronics Show (“CES”), 16 proclaiming it as Quibi’s own “Turnstyle” technology. In reality, Eko owns the 17 technology and promptly asked Quibi to cease and desist. In response, Quibi sent an 18 untruthful letter and then filed a declaratory judgment action. When the coronavirus 19 pandemic hit, Quibi exploited the “stay-at-home” orders as a marketing tool to 20 encourage people toDeadline sign up for its Turnstyle platform based on the misappropriated 21 Eko technology. 22 Quibi, having raised $2 billion, and under enormous pressure to deliver on the 23 media hype it generated, was desperate to find a way to deliver content. Not having 24 the technology to do so, it misappropriated Eko’s trade secrets, claiming them as its 25 own. Quibi’s actions have had a devastating effect on Eko’s goodwill in the 26 marketplace, causing it significant harm which cannot be quantified. Previously 27 viewed as having ground-breaking, unique and proprietary technology, Eko has 28 suffered reputational harm, and now needs to explain its ownership of technology
1 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 6 of 30 Page ID #:221
1 that Quibi took from it. Quibi appears to believe that because of its star power and 2 its efforts to attract Hollywood talent, it is above the law. 3 This motion seeks to stop Quibi from capitalizing on its theft of Eko’s 4 proprietary mobile device optimized RTS technology and to preserve the status quo.1 5 II. BACKGROUND 6 This case concerns Eko’s attempts to market its novel and proprietary mobile 7 device optimized RTS technology, only to have it misappropriated by the same entity 8 that reached out to Eko to explore a potential partnership. Two sets of business 9 discussions are relevant here. The first set of business discussions were between Eko 10 and Snapchat, Inc. (“Snap”). Snap, ultimately, was not interested in licensing Eko’s 11 technology, as it believed its users were more interested in viewing videos in 12 “vertical” mode. The discussions with Snap ended in May or June 2018, but not 13 before Eko disclosed, under NDA, its proprietary technology to Snap employees, 14 including CJ Smith, Joseph Burfitt and David Szeto. 15 The second set of discussions took place between Eko and Quibi. In March 16 2017, Eko presented its mobile device optimized RTS technology and patented 17 technologies to Jeffery Katzenberg, Quibi’s founder. However, the negotiations 18 ceased because Mr. Katzenberg wanted, and Eko was unwilling to give up, a majority 19 ownership stake in Eko. Thereafter, a number of Snap employees who had been 20 taught Eko’s technologiesDeadline in collaborative workshops while employed at Snap, 21 including Messrs. Smith, Burfitt and Szeto, left Snap for Quibi. 22 To Eko’s surprise, Quibi announced Eko’s mobile device optimized RTS 23 technology as its own at the January 2020 Consumer Electronics Show (“CES”), 24 calling it “Turnstyle.” To make matters worse, Eko and Quibi had been in 25 discussions—on Quibi’s initiative—about forming a partnership up until the day 26 1 Eko is mindful of the fact that it is seeking relief during a challenging time. But 27 given Quibi’s promotion of its product during this health crisis and refusal to wait 28 until the time has passed, Eko is left with no other option but to seek judicial intervention. 2 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 7 of 30 Page ID #:222
1 before Quibi’s CES presentation about Eko’s mobile device optimized RTS 2 technology. Not once did Quibi inform—and in fact it refused to tell—Eko about the 3 subject of its CES presentation. 4 And, as explained in detail below, the similarities between Eko’s mobile 5 device optimized RTS and Quibi’s Turnstyle technology are uncanny. Not only did 6 Quibi highlight the same features of its Turnstyle technology that are also key to 7 Eko’s mobile device optimized RTS, but Quibi’s patent also contains nearly identical 8 language to Eko’s earlier-issued patent directed to the same technology. 9 A. The Parties and Key Players 10 1. Eko 11 Eko is a small, investor-funded innovative media and technology startup 12 company founded in 2010. Declaration of Yoni Bloch (“Bloch Decl.”) ¶ 27. Eko is 13 a groundbreaking technology company that provides “interactive storytelling” 14 through video streaming, especially for mobile applications. Id. ¶¶ 5, 8. Among 15 other things, Eko builds new platforms and a new medium for new creative authors. 16 Declaration of Tal Zubalsky (“Zubalsky Decl.”) ¶ 5. Eko’s technology is protected 17 by patents and as trade secrets. Bloch Decl. ¶ 9. 18 Eko has invested heavily in protection of its intellectual property. It owns a 19 number of patents, one of which is at issue in this case. Bloch Decl. ¶ 9. Eko also 20 aggressively protectsDeadline its confidential information, and has taken reasonable measures 21 to safeguard the confidentiality of its mobile device optimized RTS technology. Id. 22 ¶ 10; Zubalsky Decl. ¶ 11. Eko stores its source code on password-protected servers 23 and discloses it only on a need-to-know basis or under the protection of an NDA. Id. 24 (both). Eko requires all employees and third parties with access to Eko’s proprietary 25 information to execute NDAs before being granted access to the source code. Bloch 26 Decl. ¶ 10. Eko also trains its employees not to use or disclose confidential, 27 commercially valuable information. Id. 28
3 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 8 of 30 Page ID #:223
1 Below is a description of several of the key Eko employees involved in the 2 facts related to this matter. 3 Yoni Bloch. Mr. Bloch is Eko’s Co-Founder and Chief Executive Officer. 4 Mr. Bloch is a well-known musician in Israel and is also a computer programmer. 5 Since before the founding of Eko, Mr. Bloch has been fascinated with the concept of 6 “interactive storytelling,” which allows users participate in the story and can affect 7 the experience of the story through electronic activity, such as pushing a button or 8 choosing a storyline. At Eko, Mr. Bloch is involved in technology development, 9 discussions with investors, and business development. Mr. Bloch initiated and 10 participated in the confidential discussions with Snap that eventually led to the theft 11 of Eko’s trade secrets. 12 Tal Zubalsky. Mr. Zubalsky is Eko’s Co-Founder and Chief Product Officer. 13 He was instrumental in developing the trade secrets and shared the mobile device 14 optimized RTS with the Quibi employees under the terms of an NDA. 15 Alon Benari. Mr. Benari is Eko’s Chief Creative Officer who developed the 16 trade secrets at issue here. Mr. Benari also led creative workshops with the Quibi 17 employees and explained how the trade secrets functioned. 18 Ivy Sheibar. Ms. Sheibar is Eko’s Chief Business Officer who led the business 19 development and licensing efforts with Snap and Quibi. 20 2. DeadlineQuibi 21 Quibi describes itself as a provider of “fresh content from today’s top talent— 22 one quick bite at a time.” 2 Quibi heavily promotes that its technology is designed 23 for mobile devices and differentiates its technology through the promotion of the 24 “Turnstyle” feature. Quibi is scheduled to launch its service, including its stolen 25 “Turnstyle” technology, in April 2020. Below are some of the key people at Quibi 26 related to this matter.3 27 2 https://quibi.com/our-story/ 28 3 For convenience, the employees who left Snap and joined Quibi will be referred to as the “Quibi employees.” 4 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 9 of 30 Page ID #:224
1 Jeffrey Katzenberg. Mr. Katzenberg describes himself as “a leader of 2 American media for more than 40 years.” Decl. of N. Chatterjee (“N. Chatterjee 3 Decl.”) ¶ 2 & Ex. 1 at 1. Mr. Katzenberg is the former President of Paramount 4 Pictures, former Chairman of The Walt Disney Studios,4 former Co-Founder and 5 Chairman of DreamWorks SKG, and former Co-Founder and CEO of DreamWorks 6 Animation. N. Chatterjee Decl., Ex. 1 at 1-2. Currently, Mr. Katzenberg is the 7 Managing Partner of WCI One, LLC (“WCI”), which he founded on October 18, 8 2017 as a Delaware limited liability corporation. N. Chatterjee Decl., Ex. 1 at 1; id., 9 Ex. 2. WCI later changed its name to “Quibi Holdings, LLC.” Id., Ex. 3. 10 Clifton “CJ” Smith and Joseph Burfitt. Messrs. Smith and Burfitt are 11 employees at Quibi. Both individuals previously worked at Snap, where they were 12 provided access to Eko’s proprietary and confidential technology pursuant to 13 multiple NDAs while they worked at Snap and Quibi. Messrs. Smith and Burfitt 14 signed NDAs with Eko again when they joined Quibi. 15 Daniel Szeto. Mr. Szeto was the Head of Post Production and Content 16 Innovation, and Eko’s main tech integration contact, at Snap. In April 2019, Mr. 17 Szeto left Snap and joined Quibi. 18 B. Eko’s Trade Secrets 19 One of the technologies developed by Eko is near-instantaneous switching 20 between videos in landscape and portrait modes of a smartphone, called “mobile Deadline 5 21 device optimized real time switching” (“mobile device optimized RTS”). The seeds 22 of Eko’s trade secret were planted in February 2012, when Alon Benari conceived 23 the idea for . 24
25 4 Paul Farhi, Jeffrey Katzenberg Is Out At Disney, The Washington Post, Aug. 25, 26 1994, https://www.washingtonpost.com/archive/lifestyle/1994/08/25/jeffrey- katzenberg-is-out-at-disney/b23fb461-71d6-490e-b4b5-1585a51676a1/. 27 5 Landscape mode is when a device is horizontally positioned, whereas the device is 28 in portrait mode when it is positioned vertically. Zubalsky Decl. ¶ 12; Bloch Decl. ¶ 14. 5 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 10 of 30 Page ID #:225
1 Zubalsky Decl. ¶ 8. 2 3 Declaration of Sandeep Chatterjee (“S. Chatterjee Decl.”) 4 ¶ 17; Zubalsky Decl. ¶ 10. 5 6 . Zubalsky Decl. ¶ 8. 7 8 9 .’” S. Chatterjee Decl. ¶ 18 10 (emphasis in the original). 11 12 Id. 13 To prove that Mr. Benari’s method could work, Mr. Zubalsky developed a 14 proof of concept video file 15 Zubalsky Decl. ¶ 9. 16 17 Id. 18 19 Id. This proof-of-concept 20 video was only sharedDeadline internally at Eko as Google Drive documents that are 21 accessible only within the Eko organization. Id. 22 23 24 . Zubalsky Decl. ¶ 10. Because the capabilities of the Internet and mobile 25 applications in 2012 were not compatible 26 Eko did not attempt to develop a product incorporating this 27 method at that time. Id. 28
6 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 11 of 30 Page ID #:226
1 C. Eko’s Discussions with Snapchat, Inc. 2 In 2014, Eko Co-Founder and CEO Yoni Bloch was introduced to Evan 3 Spiegel, the CEO of Snap.6 Bloch Decl. ¶ 11. Mr. Spiegel in turn introduced Mr. 4 Bloch to Clifton “CJ” Smith, who was then part of Snap’s creative team. Id. 5 In 2015, Eko began discussions with Snap—including Mr. Smith and Daniel 6 Szeto—to discuss a creative collaboration between Snap and Eko to develop 7 original, short-form narrative content for Snap’s platform. Bloch Decl. ¶ 12; 8 Zubalsky Decl. ¶ 12. Eko’s shows were originally produced and formatted for 9 landscape view, but Snap’s users mainly accessed Snap’s content with mobile 10 devices held in portrait orientation. Zubalsky Decl. ¶ 13. Snap was interested in Eko 11 providing a “vertical” version of Eko’s content so that it could be viewed on Snap’s 12 platform. Id. 13 On or about December 9, 2015, Eko and Snap entered into a mutual NDA (the 14 “Snap NDA”) in order to facilitate further discussions. Bloch Decl. ¶ 13 & Ex. 1; 15 Zubalsky Decl. ¶ 13. Only after executing the Snap NDA did Eko share any 16 confidential proprietary technical information with Snap. Bloch Decl. ¶ 13; Zubalsky 17 Decl. ¶ 15 & Exs. 2, 3. The Snap NDA provided that 18 19 20 Deadline 21 22 .” Bloch Decl., Ex. 1 § 2. 23 24 Id. § 1. The Snap NDA further provides that 25 26 . Id § 7. And “ 27 ,” the NDA recognizes that 28 6 Snapchat later changed its name to “Snap, Inc.” 7 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 12 of 30 Page ID #:227
1 2
3 4
5 6
7 8 Id. § 12 (emphasis added). 9 Snap initially suggested it was interested in a vertical-only orientation format 10 for distribution of Eko’s content. Zubalsky Decl. ¶ 16. At the time, when a video 11 originally formatted for horizontal display was viewed vertically, the video only 12 would occupy a narrow band in the middle of the phone screen. Id.; Bloch Decl. 13 ¶ 14. This would result in a poor user experience because the video is hard to view 14 and much of the space of the phone screen is unused. Id. (both). 15 Eko believed Snap’s solution to the problem—simply converting landscape 16 videos to portrait orientation—was limited. Bloch Decl. ¶ 15; Zubalsky Decl. 16. 17 Eko instead believed it could 18 , and decided that to develop a different and broader solution than 19 what Snap had suggested. Bloch Decl. ¶ 15. Eko thus developed 20 Deadline 21 22 . Id. ¶ 17; 23 Zubalsky Decl. ¶ 17. Eko’s invention allows a user to view the same story from 24 different perspectives when switching from portrait or landscape orientation, without 25 wasting any screen space. Id. (both). 26 27 28
8 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 13 of 30 Page ID #:228
1 This led to the patent application for the patent that issued on October 29, 2019 2 as U.S. Patent No. 10,460,765 (“the ’765 Patent”), entitled “Systems and Methods 3 for Adaptive and Responsive Video.” Bloch Decl. ¶ 15; Zubalsky Decl. ¶¶ 7, 17 & 4 Ex. 1. The ’765 Patent is directed to method and system for viewing a horizontally- 5 filmed video so that it could be viewed in either portrait or landscape orientation, 6 using substantially all of the screen viewing area in each, and allowing for seamless 7 transitioning between the two orientations. Bloch Decl. ¶ 9; Zubalsky Decl. ¶ 17. 8 For example, Figure 2 of the ’765 Patent shows how changing the orientation from 9 landscape to portrait mode changes a user’s perspective of the video: 10 11 12 13 14 15 16 On or around March 2017, Mr. Bloch told Mr. Smith that Eko had been 17 inspired to create the invention claimed by the ’765 Patent after being confronted by 18 the problem Snap and Eko discussed—namely, how to distribute horizontally-filmed 19 video on a mobile device that can be viewed in either portrait or landscape modes. 20 Bloch Decl. ¶ 16. But separatelyDeadline from the invention of the ’765 Patent, Eko understood that it 21 22 could combine its trade secret first developed by Messrs. Benari 23 and Zubalsky—the mobile device optimization RTS technology—with the method 24 taught by the ’765 Patent, 25 . Bloch Decl. ¶ 17; Zubalsky Decl. ¶ 18. 26 Eko has maintained this mobile device optimized RTS as a trade secret. Zubalsky 27 Decl. ¶ 11. Indeed, the ’765 Patent “ 28 .”
9 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 14 of 30 Page ID #:229
1 S. Chatterjee Decl. ¶ 20 (emphasis in original); see id. ¶ 37. Mr. Zubalsky and others 2 disclosed this technology under an NDA to personnel at Snap, including Messrs. 3 Szeto, Burfitt, and Smith. Bloch Decl. ¶¶ 13, 17. 4 Eko also hosted creative workshops for Snap and Eko employees where Eko 5 explained how to make the vertical videos for their platform. Zubalsky Decl. ¶ 15. 6 In these workshops, Eko explained its technology and the implementation. Id. One 7 of the features Eko explained to Snap, including to Messrs. Smith and Szeto, was the 8 RTS trade secret that Eko had initially developed and had since optimized for mobile 9 phone use. Id. 10 On or about October 16, 2017, Eko 11 . Id. ¶ 18. 12 Eko discussed 13 14 . Id. A 15 Id. ¶¶ 18-19; 16 Bloch Decl. ¶ 17. 17 Eko shared a link to to Snap via email. Zubalsky Decl. 18 ¶¶ 19-20 & Ex. 4. 19 20 Deadline 21 22 . Id. ¶ 20. By viewing that file, Snap personnel could see, for instance, 23 24 25 . Id. The Snap 26 personnel could also 27 Id. 28
10 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 15 of 30 Page ID #:230
1 Snap did not follow up after Eko emailed on May 3, 2 2019, and discussions thereafter waned. Id. ¶ 21. On or around May or June 2018, 3 the discussions between Eko and Snap ended. Decl. of Ivy Sheibar (“Sheibar Decl.”) 4 ¶ 8. 5 On or about October 8, 2018, Mr. Smith notified Eko that he was leaving Snap 6 to join Quibi. Zubalsky Decl. ¶ 21 & Ex. 5. 7 D. Quibi Learns of Eko’s Technology 8 On or about October 18, 2017, Mr. Katzenberg founded WCI One, LLC 9 (“WCI”). See N. Chatterjee Decl. ¶ 3 & Ex. 2 (Articles of Incorporation). On May 10 16, 2019, WCI filed a Certificate of Amendment with the Delaware Secretary of 11 State, changing its name to Quibi Holdings, LLC. N. Chatterjee Decl. ¶ 4 & Ex. 3. 12 On or about March 23, 2017—at the same time that Quibi was talking to 13 Snap—Mr. Bloch met in Los Angeles with Jeffrey Katzenberg, co-founder of 14 investment and holding company WndrCo Holdings LLC (“WndrCo”), to explore 15 Mr. Katzenberg’s interest in a potential investment in Eko. Bloch Decl. ¶ 18. Mr. 16 Bloch generally described Eko’s technology and company to Mr. Katzenberg That 17 same day, Mr. Bloch followed up by email and provided Mr. Katzenberg with other 18 materials about the platform. Id. ¶ 18 & Ex. 2. Mr. Bloch’s email provided a link to 19 Eko experiences, including a demonstration of Eko’s switching feature, a demo 20 showing what EkoDeadline was doing in partnerships with MGM and Sony, Eko’s authoring 21 and development tools, and a New Yorker piece highlighting Eko’s story and 22 offerings. Id. ¶ 18. Mr. Katzenberg expressed interest in investing, but only if he 23 could own a majority stake. Id. 24 On February 27, 2019, Mr. Bloch, Jennifer Cron, Daniel Laikind, and Ivy 25 Sheibar held a breakfast meeting in Los Angeles with Mr. Smith and Brian 26 Tannenbaum of Quibi. Bloch Decl. ¶ 20; Sheibar Decl. ¶ 9. The purpose of this 27 meeting was to develop relationships with people at Quibi for potential partnerships 28 down the road. Bloch Decl. ¶ 21. At the meeting, Quibi represented to Eko that
11 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 16 of 30 Page ID #:231
1 Quibi intended to develop a mobile platform for a streaming service focused on short 2 form (“quick bites”). Id. Since a large focus of Eko’s content development revolved 3 around interactive storytelling, Eko inquired whether Quibi had any interest in 4 hosting interactive storytelling on their platform. Id.; Sheibar Decl. ¶ 10. At that 5 time, Quibi stated it had not yet developed its own platform. Bloch Decl. ¶ 21. 6 Approximately one month later, Quibi employees—including Messrs. Smith 7 and Burfitt—reached out to Eko, said they would be in New York, and asked for a 8 meeting. Bloch Decl. ¶ 22; Sheibar Decl. ¶ 11. Messrs. Smith and Burfitt met with 9 Mr. Bloch, Ms. Sheibar, and Daniel Laikind at Eko’s offices in or around March 10 2019. Id. (both). 11 During this meeting, Eko and Quibi continued their discussing a potential 12 partnership, including on the possibility of Quibi’s licensing of Eko’s proprietary 13 technology, both patented and trade secret, along with Eko’s platform and creation 14 tools. Bloch Decl. ¶ 23; Sheibar Decl. ¶ 11. But Messrs. Smith and Burfitt also 15 showed Eko a demo of Quibi’s application feature, where one show could be viewed 16 in both horizontal and vertical perspectives—the feature that Quibi now refers to as 17 “Turnstyle.” Bloch Decl. ¶ 23. Messrs. Smith and Burfitt told Eko that Mr. 18 Katzenberg used this nonoperable demo to “wow” investors to get them excited. Id. 19 Although it is not possible could not tell from the simulation whether Quibi was using 20 Eko’s mobile deviceDeadline optimized RTS technology, Mr. Bloch immediately informed 21 Smith and Burfitt during that meeting that the horizontal to vertical switching feature 22 was Eko’s proprietary technology, and they would need Eko’s permission to use this 23 technology. Id. 24 Quibi and Eko then began discussing a partnership to deliver Eko’s content on 25 Quibi’s forthcoming platform. Bloch Decl. ¶ 24. Messrs. Smith and Burfitt signed 26 NDAs so that Eko and Quibi could continue these discussions. Bloch Decl. ¶ 24 & 27 Exs. 4, 5. Both NDAs provide for injunctive relief in the event of a breach: 28
12 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 17 of 30 Page ID #:232
1 acknowledge[] that a breach of this Agreement would cause the 2 Discloser irreparable harm which monetary damages will be insufficient to remedy. Accordingly, the Discloser, , [sic] in addition to 3 any other remedies available at law, shall be entitled to specific 4 performance, injunctive or other equitable relief as a remedy for any such breach. 5 Bloch Decl., Exs. 4 & 5 § 3.9. (emphasis added). 6 Eko and Quibi continued their discussions through 2019. Sheibar Decl. ¶ 12. 7 Eko’s final conversation with Quibi regarding a partnership was on January 7, 2020 8 – the day before the January 2020 CES – when Ms. Sheibar and Jocelyn Michels, 9 another Eko employee, met Mr. Smith. Id. Eko expressed continued interest in a 10 partnership with Quibi, and asked what Quibi intended to discuss during its keynote 11 at CES. Id. None of Quibi’s employees, however, said anything about what they 12 intended to disclose at CES. Id. 13 E. Quibi Steals Eko’s Technology and Claims It as Its Own 14 Then, without any notice to or consent from Eko, Quibi introduced a new 15 platform which it claimed to be its own at the January 2020 CES. Bloch Decl. ¶ 25; 16 Zubalsky Decl. ¶ 23. Specifically, Quibi announced a feature it called “Turnstyle.” 17 Id. Quibi’s CES keynote presentation showed that Turnstyle was strikingly similar to 18 Eko’s proprietary mobile device optimized RTS technology. 19 Not only did Quibi copy and debut Eko’s mobile device optimized RTS, but 20 Quibi also secretlyDeadline sought to patent much of the technology that Eko had already 21 patented and shared with Quibi. At the same time that Messrs. Smith and Burfitt, on 22 behalf of Quibi, reached out to meet with Eko in New York and discuss a potential 23 partnership regarding the mobile device optimized RTS, Quibi unbeknownst to Eko 24 began to seek patents related to the same technology. On March 11, 2019, Quibi 25 filed a provisional application; two months later, on May 17, 2019, Quibi filed a 26 nonprovisional application, which resulted in the issuance ofU.S. Patent No. 27 10,554,926 (the “’926 Patent”) on February 4, 2020. N. Chatterjee Decl. ¶ 5 & Ex. 28
13 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 18 of 30 Page ID #:233
1 4. The ’926 Patent is entitled “Media Content Presentation” and is directed to the 2 same technology Eko had previously disclosed to Snapchat and Quibi under NDAs, 3 and to both Messrs. Burfitt and Smith, who by now worked for Quibi. To Eko’s great 4 surprise, Burfitt and Smith both claimed that they, not Eko, were the inventors of the 5 technology claimed in the ’926 Patent and did not even disclose anything to the 6 USPTO related to their knowledge of Eko’s patents. 7 F. Quibi Causes Eko to Suffer Irreparable Harm 8 Eko has suffered irreparable harm as a result of Quibi’s theft. N. Chatterjee 9 Decl., Ex. 8 (Decl. of Richard Eichmann (“Eichmann Decl.”)) ¶ 25. Quibi’s January 10 2020 CES presentation has had a profoundly negative effect on Eko’s reputation as 11 a technology innovator. Bloch Decl. ¶ 26; Sheibar Decl. ¶ 13. The high degree of 12 similarity between Quibi’s advertised technology and Eko’s own technology has 13 created confusion in the industry with respect to Eko’s reputation, causing an adverse 14 impact to Eko with advertisers, distributors, and investors. Bloch Decl. ¶ 26. 15 Prior to CES, Ms. Sheibar sold Eko’s products and licenses by 16 17 . Sheibar Decl. ¶ 13. Since CES, Eko has seen confusion by 18 distributors and partners saying they saw Quibi’s offerings and asking if Eko is 19 powering them. Id. Eko has also fielded questions and pushback from distributors 20 on whether Eko is Deadlineoffering the same or similar features as Quibi is offering. Id. As 21 a result, Eko has been forced to divert significant resources away from its efforts to 22 promote Eko’s technology leadership in order to rehabilitate Eko’s reputation as a 23 technology innovator and as a superior solution to Quibi. Id. ¶ 14. 24 For instance, 25 26 Id. ¶ 15. 27 28 Id.
14 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 19 of 30 Page ID #:234
1 2 3 Id. 4 Eko had also 5 . Id. ¶ 16. 6 Id. 7 Id. 8 These harms are irreparable, ongoing, increasing, and unquantifiable. 9 G. Quibi Refuses to Honor its Confidentiality Obligations 10 Eko has repeatedly attempted to engage with Quibi to resolve this dispute. See 11 Declaration of Neel Chatterjee (“N. Chatterjee Decl.”) ¶¶ 2-6 & Exs. 5-7 12 (correspondence between Eko’s and Quibi’s counsel). Following Quibi’s January 13 2020 CES presentation, Eko and its counsel have made numerous requests that Quibi 14 remind its employees hired by Snap to abide by the confidentiality obligations they 15 agreed to while at Snap and Quibi, and for Quibi to cease and desist using Eko’s 16 technology. Id. ¶¶ 6-8 & Exs. 5, 7. Quibi has refused to engage in any meaningful 17 discussions, claiming that Messrs. Burfitt and Smith were not technologists at all 18 while ignoring the fact that they are named inventors of the ’926 Patent. Id. ¶ 9 & 19 Ex. 6. Rather than ceasing and desisting from its unlawful activity, on March 9, 2020, 20 Quibi filed a declaratoryDeadline judgment action in this Court, in a case styled Quibi 21 Holdings, LLC v. Interlude US, Inc. d/b/a Eko, Case No. 2:20-cv-02250 (C.D. Cal.). 22 III. LEGAL STANDARD 23 A plaintiff seeking a preliminary injunction “must establish that [it] is likely 24 to succeed on the merits [of its claims], that [it] is likely to suffer irreparable harm in 25 the absence of preliminary relief, that the balance of equities tips in its favor, and that 26 an injunction is in the public interest.” Am. Trucking Ass’ns, Inc. v. City of L.A., 559 27 F.3d 1046, 1052 (9th Cir. 2009) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 28 U.S. 7, 20 (2008)). Even if the plaintiff can only show that there are “serious
15 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 20 of 30 Page ID #:235
1 questions” as to the merits of its claims, a preliminary injunction should still issue if 2 “the balance of hardships tips sharply in the plaintiff’s favor.” Alliance for the Wild 3 Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011). 4 Courts in the Ninth Circuit take a “sliding scale” approach to these four factors, 5 balancing them “so that a stronger showing of one element may offset a weaker 6 showing of another.” Id. at 1131. For example, “serious questions going to the merits 7 and a balance of hardships that tips sharply towards the plaintiff can support issuance 8 of a preliminary injunction, so long as the plaintiff also shows that there is a 9 likelihood of irreparable injury and that the injunction is in the public interest.” Id. 10 at 1135 (internal quotation marks omitted). “While the basic function of a 11 preliminary injunction is to preserve the status quo pending a determination of the 12 action on the merits, the status quo is not simply any situation before the filing of the 13 lawsuit, but rather the last uncontested status that preceded the parties’ controversy.” 14 Dep’t of Parks & Recreation for the State of Cal. v. Bazaar Del Mundo Inc., 448 F.3d 15 1118, 1124 (9th Cir. 2006) (citing Chalk v. U.S. Dist. Court, 840 F.2d 701, 704 (9th 16 Cir. 1988)). 17 IV. ARGUMENT 18 Eko’s Complaint asserts a claim against Quibi under the Defend Trade Secrets 19 Act (“DTSA”), which provides for injunctive relief.7 Dkt. No. 1 ¶¶ 51-61; 18 U.S.C. 20 § 1836(b)(3)(B)(i)Deadline (“In a civil action brought . . . with respect to the misappropriation 21 of a trade secret, a court may . . . grant an injunction . . . to prevent any actual or 22 threatened misappropriation . . . on such terms as the court deems reasonable . . .”). 23 A preliminary injunction should issue to prevent the irreparable harm from 24 Quibi’s imminent launch of its Turnstyle service incorporating Eko’s proprietary 25 technology. Once that happens, Quibi will seize market share and not only create a 26 head-to-head competitor using Eko’s technology, but will also cement consumer and 27 market perception as the owner of technology that rightfully is Eko’s. Such a 28 7 Eko’s second claim for patent infringement is not at issue in this motion. 16 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 21 of 30 Page ID #:236
1 preliminary injunction will preserve the existing status quo and allow Eko to maintain 2 its intellectual property rights over its trade secrets. 3 A. Eko Is Likely to Succeed on the Merits of its Trade Secret 4 Misappropriation Claim. 5 There is little doubt that Eko will prevail on the merits of its misappropriation 6 claim. To succeed on its DTSA claim, Eko must prove “[its] ownership of the trade 7 secret; [Quibi]’s misappropriation of the trade secret; and damage to [Eko] caused by 8 the misappropriation.” Hill Phoenix, Inc. v. Classic Refrigeration Socal, Inc., No. 9 19-cv-00695-DOC-JDE, 2020 WL 1244354, at *3 (C.D. Cal. Mar. 15, 2020) 10 (internal quotation marks and citation omitted). That standard is easily met here. 11 1. Eko’s Mobile Device Optimized RTS Technology 12 Constitutes a Trade Secret. 13 The mobile device optimized RTS technology is a trade secret. The DTSA 14 defines a “trade secret” as information that is subject to reasonable measures to keep 15 secret, and derives independent economic value from not generally being known. 16 Eko has kept its mobile device optimized RTS technology confidential, 17 including by limiting access to such information, storing the source code on 18 password-protected servers, and requiring employees and third parties to sign NDAs 19 and observe Eko’s policy on protecting its proprietary and confidential information. 20 Bloch Decl. ¶ 10. Deadline Eko only disclosed this technology pursuant to non-disclosure 21 obligations and even went so far as to remind Quibi that the information was Eko’s 22 proprietary technology when it was concerned that Quibi might be using Eko’s 23 technology without authorization. Id. ¶¶ 13, 23; Zubalsky Decl. ¶ 15. 24 Eko’s mobile device “‘derives independent economic value, actual or 25 potential, from not being generally known to, and not being readily ascertainable 26 through proper means by, another person who can obtain economic value from the 27 disclosure or use of the information” because 28
17 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 22 of 30 Page ID #:237
1 2 .” S. Chatterjee Decl. ¶ 3 29; Zubalsky Decl. ¶ 11 4 5 6 7 2. Quibi Misappropriated Eko’s Trade Secrets. 8 Quibi misappropriated Eko’s mobile device optimized RTS technology. 9 “Misappropriation” occurs when “a person . . . knows or has reason to know that the 10 trade secret was acquired by improper means” or when a person “disclos[es] or use[s] 11 . . . a trade secret . . . without express or implied consent[.]” 18 U.S.C. § 1839(5)(A)- 12 (B). “‘[I]mproper means’ . . . includes theft, bribery, misrepresentation, breach or 13 inducement of a breach of a duty to maintain secrecy, or espionage through electronic 14 or other means” but excludes “reverse engineering, independent derivation, or any 15 other lawful means of acquisition[.]” 18 U.S.C. § 1839(6)(A)-(B). 16 California trade secret law has long recognized that a showing of access and 17 similarity gives rise to an inference of copying. Teich v. Gen. Mills, Inc., 170. Cal. 18 App. 791, 797-98 (1959). In a trade secret case, “‘disclosure of the secret to the 19 defendant, followed by manufacture of a closely similar device by the defendant, 20 shifts to the defendantDeadline the burden of going forward with evidence to prove, if it can, 21 that it arrived at the process by independent invention.’” Bal Seal Eng’g, Inc. v. 22 Nelson Prods., Inc., Case No. 13-cv-01880-JLS-KESx, 2018 WL 4697255, at *7 23 (C.D. Cal. Aug. 3, 2018) (quoting Droeger v. Welsh Sporting Goods Corp., 541 F.2d 24 790, 793 (9th Cir. 1976))8; Friedman v. Quest Int’l Fragrances Co., 58 F. App’x 359, 25 360 (9th Cir. 2003) (plaintiff’s evidence that defendant met with her customers to 26 8 Although Bal Seal concerned a claim brought under the California Uniform Trade 27 Secret Act (“CUTSA”), it is nevertheless instructive, as the elements for a DTSA 28 claim are similar to those under the CUTSA. Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 877 (N.D. Cal. 2018). 18 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 23 of 30 Page ID #:238
1 discuss plaintiff’s proposals and employed “strikingly similar” ideas in its marketing 2 of products was sufficient to defeat summary judgment of trade secret claim); 3 Chartwell Staffing Serv., Inc. v. Atl. Sols. Grp., Inc., Case No. 19-cv-00642-JLS-JDE, 4 2019 WL 2177262, at *9 (C.D. Cal. May 20, 2019). The standard for determining 5 similarity is “the common knowledge of the average reader, observer, spectator or 6 listener.” Stanley v. Columbia Broadcasting Sys., 35 Cal. 2d 653, 662 (1950). 7 Quibi’s Turnstyle technology is strikingly similar to Eko’s mobile device 8 optimized RTS technology, which gives rise to an inference of copying. S. Chatterjee 9 Decl. ¶ 42 (“Quibi’s Turnstyle technology appears to use the same key features of 10 Eko’s trade secrets that were shared by Eko to certain members Quibi’s technical 11 team under non-disclosure agreements.”). Specifically, “ 12 13 14 ” Id. ¶ 43. Additionally, Eko’s optimized RTS technology 15 “ 16 .” Id. These are the very technologies that Eko disclosed to Quibi—including 17 Messrs. Smith and Burfitt—under the NDAs. Id. ¶ 44; Zubalsky Decl. ¶¶ 19-20. 18 19 20 Deadline 21 ) that Quibi is asserting are key features of its 22 Turnstyle technology.” S. Chatterjee Decl. ¶ 44. 23 Quibi cannot show that it independently developed its Turnstyle technology. 24 In a trade secret case such as this one, “disclosure of the secret to the defendant, 25 followed by manufacture of a closely similar device by the defendant, shifts to the 26 defendant the burden of going forward with evidence to prove, if it can, that it arrived 27 at the process by independent invention.” Droeger, 541 F.2d at 793. It is 28 undisputable that Eko disclosed its mobile device optimized RTS technology to
19 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 24 of 30 Page ID #:239
1 Messrs. Burfitt and Smith pursuant to an NDA while they were employed at Snap. It 2 is also indisputable that Messrs. Burfitt and Smith then left Snap to join Quibi. Nor 3 can Quibi deny that Eko shared its mobile device optimized RTS technology to Quibi, 4 again pursuant to multiple NDAs. And Quibi’s rapid development of its TurnStyle 5 feature after these repeated confidential disclosures cannot credibly be explained as 6 “independent development.” And it is a fact that Quibi then pursued a patent on 7 behalf of Messrs. Burfitt and Smith, and did not even include Eko’s technology as 8 prior art. 9 B. Eko Is Suffering, and Will Continue to Suffer, Irreparable Harm. 10 A preliminary injunction should issue where the moving party has 11 demonstrated that irreparable injury is likely in the absence of the preliminary 12 injunction. Winter, 555 U.S. at 22. The NDAs that Eko entered into with Snap and 13 Messrs. Smith and Burfitt acknowledge that 14 15 . Bloch Decl., Ex. 1 § 12; id., Exs. 4 & 5 § 3.9. Indeed, as set 16 forth in the Declaration of Richard Eichmann, Eko has suffered, and will continue to 17 suffer, from the following types of harm. 18 1. Quibi Has Caused Eko to Suffer Reputational Harm and a 19 Loss of Goodwill. 20 As an awardDeadline-winning, innovative media and technology company, Eko has 21 “spent years cultivating valuable goodwill as part of its reputation as an innovator.” 22 Eichmann Decl. ¶ 30. “Being known as an innovator creates economic value, 23 increases sales, increases profitability, and allows firms to charge a premium for their 24 innovative products and services.” Id. ¶ 29. “This premium is known as a company’s 25 ‘goodwill’ and it represents an otherwise undefinable intangible asset.” Id. But 26 “company goodwill clearly has economic value and this value can be impaired 27 through reputational harm.” Id. 28
20 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 25 of 30 Page ID #:240
1 There is already evidence that Eko has suffered from reputational harm and a 2 loss of goodwill. The high degree of similarity between Quibi’s Turnstyle feature 3 and Eko’s own technology has created confusion in the industry with respect to Eko’s 4 reputation and has caused Eko’s distributors and partners to ask if Eko is powering 5 Quibi’s offerings or if Eko is offering the same or similar features as Quibi. Bloch 6 Decl. ¶ 26; Sheibar Decl. ¶¶ 13-14. Eko has been forced to expend significant 7 resources away from its efforts to promote Eko’s technology leadership in order to 8 rehabilitate Eko’s reputation as a technology innovator and as a superior solution to 9 Quibi. Sheibar Decl. ¶ 14. 10 Indeed, 11 12 Sheibar Decl. ¶¶ 15-16. 13 Quibi has unlawfully benefitted from Eko’s reputation and goodwill to the 14 Eko’s detriment. “[S]ome portion of the ‘goodwill’ generated by Eko’s innovation 15 has already been transferred to Quibi due to Quibi’s CES announcement around its 16 TurnStyle technology and subsequent advertising campaigns.” Eichmann Decl. ¶ 31. 17 Quibi has garnered substantial positive press surrounding the Turnstyle technology 18 from media sources such as Engadget, The Verge, and Techcrunch. Id. In reality, 19 this press is predicated on Eko’s mobile device optimized RTS technology and should 20 have been properlyDeadline attributed to Eko. Id. ¶ 32. Instead of being seen as the 21 undisputed creator of new original technology, Eko now must fight through the 22 publicity Quibi has received and appear as the secondary competitor and later to the 23 technology than Quibi. 24 2. Eko Is Likely to Suffer Intangible Harm 25 In addition to the foregoing damage, Quibi’s misappropriation subjects Eko to 26 harms that are real, yet difficult to quantify. For instance, if Quibi were able to 27 continue its allegedly unlawful product launch as scheduled, but then be subsequently 28 forced to exit the market due to Eko’s enforcement of its intellectual property rights,
21 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 26 of 30 Page ID #:241
1 this could cause confusion for customers, which Quibi could portray as Eko’s fault, 2 further damaging Eko’s reputation. Id. ¶ 35. Eko’s reputation could be further 3 tarnished by Quibi’s artificially accelerated entry into the marketplace [which] may 4 also make Eko’s technology and products appear less innovative. Id. This tarnished 5 reputation could also cause Eko to have “difficulty recruiting and keeping key 6 employees, which causes further harm to Eko’s current and future profitability.” Id. 7 ¶ 36. In fact, 8 9 . Id.
10 3. Eko Will Suffer from Price Erosion and Deteriorating 11 Customer Relationships. 12 Quibi’s actions on Eko’s customer relationships are not measurable, even 13 though such harm clearly exists. Id. ¶ 41. Innovators can charge a price premium 14 for their research and development investment that led to the technology. Id. ¶ 38. 15 If customers are able to obtain the same technology from another company, they may 16 not consider the technology as innovative and instead consider it as an easily- 17 substituted commodity. Id. 18 Eko’s success in the commercial market is highly dependent on its established 19 relationships with customers, who often provide Eko with proprietary and 20 confidential informationDeadline such as consumer activity data, pricing information, 21 business and marketing plans, and strategies. Id. ¶ 41. Thus, the nature of Eko’s 22 work requires trust and mutual respect between each party, which can translate into 23 customer loyalty. Id. Once Eko loses a customer (or has its reputation tarnished) 24 due to it no longer being perceived as an innovator, the likelihood that a customer 25 will switch back to Eko is influenced by this psychological switching cost, which 26 cannot be adequately captured or controlled for a damages model. Id. This renders 27 the impact of Quibi’s actions on Eko’s customer relationships immeasurable, even 28 though such harm clearly exists. Id.
22 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 27 of 30 Page ID #:242
1 4. Harm to Access to Funding 2 Mr. Eichmann opines that Quibi’s allegedly unlawful use of Eko’s trade 3 secrets will likely cause long-lasting economic harm to Eko through reduced access 4 to funding and increased costs of capital. Id. ¶ 46. If Quibi continues its unlawful 5 use of Eko’s trade secrets, industry analysts and investors would likely reduce their 6 expectations for Eko’s future revenues and profits. Eichmann Decl. ¶ 44. 7 There is also evidence that Quibi was able to raise a substantial amount of 8 funding as of result of its theft. On March 4, 2020, Quibi closed on $750 million in 9 funding, which represents approximately 42.8% of their total funding raised to date 10 ($1.75 billion). Id. ¶ 45. Roughly $350 million of this funding came after Quibi’s 11 CES keynote presentation. Id. In contrast, 12 . Id. ¶ 46. 13 Eko will not only have to compete against Quibi while Quibi gets to use Eko’s 14 technology, but the two companies are also competing for the same venture capital 15 funding to some extent. Id. ¶ 45. 16 17 . Id. ¶ 48. 18 C. The Balance of Equities Weighs in Eko’s Favor. 19 The balance of hardships also favors granting a preliminary injunction. In 20 deciding whether toDeadline issue a preliminary injunction, the court must consider the impact 21 the injunction may have on each party. A preliminary injunction should issue where 22 the harm likely to be suffered by the plaintiff outweighs the likely harm to the 23 defendant as a result of the injunction. Winter, 555 U.S. at 24. The balance of 24 hardships tips in the moving party’s favor where the harm the moving party would 25 suffer absent the injunction would be permanent while the harm to the nonmoving 26 party would be merely temporary. League of Wilderness Defenders/Blue Mountains 27 Biodiversity Project v. Connaughton, 752 F.3d 755, 765 (9th Cir. 2014). 28
23 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 28 of 30 Page ID #:243
1 As discussed above, Eko has suffered, and will continue to suffer, irreparable 2 harm if an injunction is not granted and Quibi is permitted to continue using Quibi’s 3 Turnstyle feature that was stolen from Eko. Eichmann Decl. ¶¶ 27-57. But Quibi 4 does not face the same risk of injury, if any. By stealing Eko’s trade secrets, “Quibi 5 has already gained already gained substantial reputational benefit and funding[.]” Id. 6 ¶ 59. For instance, just this month, Quibi closed $750 million in funding. Id. 7 Moreover, refraining from using Eko’s mobile device optimized RTS 8 technology would do no more than require Quibi and its former Snap employees 9 comply with the NDA to which these employees agreed while employed at Snap, as 10 well as require Quibi to comply with federal trade secret law. Dish Network L.L.C. 11 v. Ramirez, No. 15-CV-04712-BLF, 2016 WL 3092184, at *7 (N.D. Cal. June 2, 12 2016) (balance of equities favor an injunction where the “injunction would ‘do no 13 more than require Defendant to comply with federal and state . . . laws’”). Further, 14 Quibi could still offer short videos through its network which were in portrait mode 15 or landscape mode, but not videos that used the misappropriated technology. 16 D. A Preliminary Injunction Serves the Public Interest. 17 Where applicable, courts should consider the public consequences of issuing 18 an injunction. Winter, 555 U.S. at 24. Courts have routinely found that that the 19 public interest is served by protecting a company’s right to proprietary information, 20 business operations,Deadline and contractual rights. WeRide Corp. v. Kun Huang, 379 F. 21 Supp. 3d 834, 854 (N.D. Cal. 2019) (“Courts often find that the public has a strong 22 interest in protecting intellectual property rights.”); Waymo LLC v. Uber Techs., Inc., 23 No. C 17-00939 WHA, 2017 WL 2123560, at *11 (N.D. Cal. May 15, 2017) (“the 24 public has an interest in vindicating [trade secret] rights”). Indeed, Quibi has no 25 legitimate right to use Eko’s trade secrets. 26 There is also a strong public interest to ensure that the former Snap 27 employees—including but not limited to Messrs. Smith, Burfitt, and Szeto—abide 28 by their contractual obligations under the Snap NDA with Eko.
24 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 29 of 30 Page ID #:244
1 E. Only a Minimum Bond Should be Required. 2 A minimum bond is appropriate here. Under Federal Rule of Civil Procedure 3 65(c), “[t]he court may issue a preliminary injunction or a temporary restraining order 4 only if the movant gives security in an amount that the court considers proper to pay 5 the costs and damages sustained by any party found to have been wrongfully enjoined 6 or restrained.” “The district court retains discretion as to the amount of security 7 required, if any.” Diaz v. Brewer, 656 F.3d 1008, 1015 (9th Cir. 2011) (emphasis in 8 the original; internal quotation marks and citation omitted). 9 As explained above, there is a strong likelihood that Eko will prevail on the 10 merits of its DTSA claim. It unlikely that Quibi will be able to produce evidence that 11 it did not steal Eko’s trade secrets after the technology had been disclosed to Messrs. 12 Smith and Burfitt while they were employees at Snap and to Mr. Katzenberg. 13 Moreover, Quibi will suffer minimal damage if the requested relief is granted because 14 it can still offer a service, just not a service using the misappropriated technology. 15 V. CONCLUSION 16 For the foregoing reasons, Eko respectfully requests that the Court grant Eko’s 17 Motion for Preliminary Injunction and enjoin Quibi from using Eko’s trade secret 18 information and from selling, offering for sale, marketing, or using the Turnstyle 19 feature.
20 Dated: April 1, 2020 Respectfully submitted, Deadline 21 GOODWIN PROCTER LLP 22 23 By: /s/ I. Neel Chatterjee 24 I. Neel Chatterjee 25 Attorneys for Plaintiff JBF Interlude 2009 Ltd. – Israel 26 OF COUNSEL: 27 28 GOODWIN PROCTER LLP
25 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION Case 2:20-cv-02299-JAK-SK Document 23-2 Filed 04/01/20 Page 30 of 30 Page ID #:245
1 Cindy Chang (pro hac vice) 2 620 8th Avenue New York, New York 10018 3 Telephone: (212) 813-8800 4 Facsimile: (212) 355-3333 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Deadline 21 22 23 24 25 26 27 28
26 MEMORANDUM OF POINTS AND AUTHORITIES ISO MOTION FOR PRELIMINARY INJUNCTION