TiVo 2004 Annual Report Download - page 86

Table of Contents
Index to Financial Statements
related to this claim is not probable or estimable and therefore no amounts have been accrued in regards to this matter as of January 31, 2005.
On September 25, 2001, Pause Technology LLC filed a complaint against TiVo in the U.S. District Court for the District of Massachusetts alleging
willful and deliberate infringement of U.S. Reissue Patent No. 36,801, entitled "Time Delayed Digital Video System Using Concurrent Recording and
Playback." Pause Technology alleges that it is the owner of this patent, and further alleges that TiVo has willfully and deliberately infringed this patent by
making, selling, offering to sell, and using within the United States the TiVo digital video recorder. Pause Technology seeks unspecified monetary damages as
well as an injunction against TiVo's operations. It also seeks attorneys' fees and costs. On February 6, 2004, TiVo obtained a favorable summary judgment
ruling in the case in the District Court. The court ruled that the Company's software versions 2.0 and above do not infringe Pause Technology's patent, and
accordingly has ordered that judgment be entered in the Company's favor. On June 16, 2004, Pause Technology filed an appeal to the United States Court of
Appeals for the Federal Circuit appealing the February 6, 2004 summary judgment ruling in favor of TiVo. On April 7, 2005, the U.S. District Court for the
District of Massachusetts issued an Amended Final Judgment dismissing without prejudice the Company's remaining cross-claim for patent invalidity as
being moot in light of the February 9, 2004 judgment in favor of TiVo against Pause Technology as to all claims of infringement in Pause Technology's
complaint. On April 8, 2005, Pause Technology filed a notice of appeal with the United States Court of Appeals for the Federal Circuit appealing the April 7,
2005 Amended Final Judgment. The Company is incurring expenses in connection with this litigation that may become material, and in the event there is an
adverse outcome, its business could be harmed.
On February 5, 2002, Sony Corporation notified TiVo that Command Audio Corporation had filed a complaint against Sony Electronics, Inc. on
February 2, 2002 in the U.S. District Court for the Northern District of California. The complaint alleges that, in connection with its sale of digital video
recorders and other products, Sony infringes upon two patents owned by Command Audio, (U.S. Patent Nos. 5,590,195 ("Information Dissemination Using
Various Transmission Modes") and 6,330,334 ("Method and System for Information Dissemination Using Television Signals"). The complaint seeks
injunctive relief, compensatory and treble damages and Command Audio's costs and expenses, including reasonable attorneys' fees. On June 15, 2004, the
court denied Sony's motion for summary judgment of invalidity and granted in part and denied in part Command Audio's motion for summary judgment of
infringement. The court found that certain Sony products, including Sony's accused products that enable the TiVo service, literally infringed certain claims of
the 334 patent but did not rule on the validity or enforceability of the patents. A trial limited to certain of Sony's allegations that the patents-in-suit are
unenforceable was conducted in October 2004. On January 7, 2005, the Court issued a Findings of Fact and Conclusions of Law ruling that the patents-in-suit
are not unenforceable based on the allegations presented in the October 2004 trial. Trial of the remaining issues, including infringement of certain asserted
patent claims, validity of all the asserted patent claims and Sony's remaining allegations regarding the enforceability of the patents, is scheduled to commence
in October 2005. Under the terms of the Company's agreement with Sony governing the distribution of certain digital video recorders that enable the TiVo
service, TiVo is required to indemnify Sony against any and all claims, damages, liabilities, costs and expenses relating to claims that its technology infringes
upon intellectual property rights owned by third parties. The Company believes Sony has meritorious defenses against this lawsuit; however, due to its
indemnification obligations, the Company is incurring expenses in connection with this litigation. Since February 2002, the Company has incurred $5.5
million in legal expenses. The outcome of this matter or range of potential losses is currently not determinable. If Sony were to lose this lawsuit, the
Company's business could be harmed.
On January 5, 2004, TiVo 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, the Company
amended its complaint to add EchoStar DBS Corporation, EchoStar Technologies Corporation, and Echosphere Limited Liability Corporation as additional
defendants. The Company alleges that it is the owner of this patent, and further alleges 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 the Company's patent infringement case against EchoStar
Communications Corporation and its affiliates. The Court scheduled jury selection to begin October 4, 2005 in Marshall, Texas. The Company seeks
unspecified monetary damages as well as an injunction against the defendants' further infringement of the patent. The Company could incur material expenses
in this litigation.
On August 5, 2004, Compression Labs, Inc. filed a complaint against TiVo Inc., Acer American Corporation, AudioVox Corporation, BancTec, Inc.,
BenQ America Corporation, Color Dreams, Inc. (d/b/a StarDot Technologies), Google Inc., ScanSoft, Inc., Sun Microsystems Inc., Veo Inc., and Yahoo! Inc.
in the U.S. District Court for the Eastern District of Texas alleging infringement, inducement of others to infringe, and contributory infringement of U.S.
Patent No. 4,698,672, entitled "Coding System For Reducing Redundancy." The complaint alleges that Compression Labs, Inc. is the owner of this patent and
has the exclusive rights to sue and recover for infringement thereof. The complaint further alleges that the defendants have infringed, induced infringement,
and contributorily infringed this patent by selling devices and/or systems in the United States, at least portions of which are designed to be at least partly
compliant with the JPEG standard. On February 16, 2005, the Court ordered the case transferred to the U.S. District Court for the Northern District of
California. The Company intends to defend this action vigorously; however, it could be forced to incur material expenses in the litigation and, in the event
there is an adverse outcome, the Company's business could be harmed.
80