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Lieberfarb Spars With MOD

21 Jan, 2009 By: Chris Tribbey

MOD Systems

Warren Lieberfarb and digital technology company MOD Systems are in a legal tussle over how much money MOD owes the “father of DVD” for his services as a consultant to the company.

Lieberfarb first sued MOD in the summer of 2008, claiming MOD owes him at least $749,560 in loans, fees and business expense reimbursements. The suit claims MOD agreed to pay Lieberfarb 5% of any investment funds it received, but when Toshiba invested $3 million in MOD in 2007, the “defendant classified this investment in defendant’s business as a ‘non-recurring engineering fee’ as an artifice in order to avoid payment of any fee …” the suit reads.

MOD countersued earlier this month, claiming Lieberfarb overstated his connections and expertise.

“These representations were in fact false, and Mr. Lieberfarb knew they were false when he made the representations,” the suit reads. “Mr. Lieberfarb made these misrepresentations for the purpose of defrauding MOD Systems.”

The countersuit claims breach of contract by disclosure of proprietary information to an investment firm, and that Lieberfarb was planning to either “obtain MOD Systems or sell MOD Systems’ confidential technology, business plan, and other assets.” The countersuit also alleges Lieberfarb attempted to start a new venture to compete with MOD.

Regarding the business expenses, MOD alleges Lieberfarb spent money on luxury car services and luxury hotels. MOD is asking for a dismissal of Lieberfarb’s suit and a nonspecific monetary award.

Both Lieberfarb’s suit and MOD’s countersuit were filed in U.S. District Court in Seattle. Lieberfarb left MOD in March 2008, with MOD claiming he was “terminated as a member of MOD Systems board of directors.”

A spokeswoman for MOD said the company could not comment on pending litigation. A person reached at Warren N. Lieberfarb & Associates LLC offices in Los Angeles said Lieberfarb was unavailable to comment.

An October 2006 press release from MOD announcing Lieberfarb had signed on as a consultant called the collaboration “both an honor and an opportunity.” Lieberfarb was quoted as saying “MOD Systems is doing some exciting work with digital entertainment distribution.” He was given the title of vice chairman of MOD.

Seattle-based MOD is also drawing scrutiny from one of its former investors, philanthropist Robert Arnold, whose lawyer told the online news service Tech Flash that the company owes Arnold documents detailing the use of investment funds. The lawyer representing Arnold was not available for comment Jan. 21.

MOD announced in September that it had received a $35 million investment from Toshiba and NCR Corp. for a new digital delivery media system, by which retailers would host kiosks that allow content to be downloaded to SD cards by consumers.

Earlier this month, MOD announced it had reached agreements with Paramount and Warner Bros. to have their content on the new kiosks, which the company hopes to debut later this year.

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