TiVo 2004 Annual Report Download - page 44

Table of Contents
Index to Financial Statements
subscription fees whether or not we increase or decrease the price of the TiVo service. If we change our subscription fees in response to competitive or other
market factors, our operating results would be adversely affected. Our decision to share subscription revenues is based on our expectation that these
relationships will help us obtain subscriptions, broaden market acceptance of digital video recorders, and increase our future revenues. If these expectations
are not met, we may be unable to generate sufficient revenue to cover our expenses and obligations.
Tiered pricing for the TiVo service may reduce our average revenue per user.
We may elect to offer additional tiers of the TiVo service at various price points, which may have the effect of reducing our average revenue per user.
The nature of some of our relationships may restrict our ability to operate freely in the future.
From time to time, we have engaged and may engage in the future in discussions with other parties concerning relationships, which have and may
include equity investments by such parties in our company. While we believe that such relationships have enhanced our ability to finance and develop our
business model, the terms and conditions of such relationships may place some restrictions on the operation of our business in the future.
Entertainment companies may claim that some of the features of our DVRs violate copyright laws, which could force us to incur significant
costs in defending such actions and affect our ability to market the TiVo service and the products that enable the TiVo service.
Although we have not been the subject of such actions to date, one of our former competitor's digital video recorders was the subject of several
copyright infringement lawsuits by a number of major entertainment companies, including the three major television networks. These lawsuits alleged that the
competitor's digital video recorders violate copyright laws by allowing users to skip commercials, delete recordings only when instructed and use the Internet
to send recorded materials to other users. TiVo-enabled DVRs have some similar features, including the ability to fast-forward through commercials, the
ability to delete recordings only when instructed, and when the TiVoToGo service is released, the ability to transfer recordings from a TiVo-enabled DVR to a
PC. Based on market or consumer pressures, we may decide in the future to add additional features similar to those of our former competitors or that may
otherwise be objectionable to entertainment companies. If similar actions are filed against us based on current or future features of our DVRs, entertainment
companies may seek injunctions to prevent us from including these features and/or damages. Such litigation can be costly and may divert the efforts of our
management. Furthermore, if we were ordered to remove features from our DVRs, we may experience increased difficulty in marketing the TiVo service and
related TiVo-enabled DVRs and may suffer reduced revenues as a result.
Our success depends on our ability to secure and protect our patents, trademarks and other proprietary rights.
Our success and ability to compete are substantially dependent upon our internally developed technology. We rely on patent, trademark and copyright
law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property
rights. However, the steps we take to protect our proprietary rights may be inadequate. We have filed patent applications and provisional patent applications
covering substantially all of the technology used to deliver the TiVo service and its features and functionality. To date, several of these patents have been
granted, but we cannot assure you that any additional patents will ever be granted, that any issued patents will protect our intellectual property or that third
parties will not challenge any issued patents. In addition, other parties may independently develop similar or competing technologies designed around any
patents that may be issued to us. Our failure to secure and protect our proprietary rights could have a material adverse effect on our business.
We have filed a patent infringement lawsuit against EchoStar Communications Corporation and may incur significant expenses as a result,
and an adverse outcome could harm our business.
On January 5, 2004, we filed a complaint against EchoStar Communications Corporation in the U.S. District Court for the Eastern District of Texas
alleging willful and deliberate infringement of U.S. Patent No. 6,233,389, entitled "Multimedia Time Warping System." On January 15, 2004, we amended
our complaint to add EchoStar DBS Corporation, EchoStar Technologies Corporation, and Echosphere Limited Liability Corporation as additional
defendants. We allege that we are the owner of this patent and further allege that the defendants have willfully and deliberately infringed this patent by
making, selling, offering to sell and/or selling digital video recording devices, digital video recording device software, and/or personal television services in
the United States. On March 9, 2005, the Court denied motions to dismiss and transfer our patent infringement case against EchoStar Communications
Corporation and its affiliates. The Court scheduled jury selection to begin October 4, 2005 in Marshall, Texas. We
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