TiVo 2008 Annual Report Download - page 77

Table of Contents
Under certain circumstances, the Company may have recourse through its insurance policies that would enable it to recover from its insurance company
some or all amounts paid pursuant to its indemnification obligations. The Company does not have any assets held either as collateral or by third parties that,
upon the occurrence of an event requiring it to indemnify a customer, the Company could obtain and liquidate to recover all or a portion of the amounts paid
pursuant to its indemnification obligations.
11. COMMITMENTS AND CONTINGENCIES
Legal Matters
Intellectual Property Litigation. 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 April 13, 2006, the jury rendered a verdict in favor of the Company in the amount of
approximately $74.0 million dollars. The jury ruled that the Company's patent is valid and that all nine of the asserted claims in the Company's patent are
infringed by each of the accused EchoStar products. The jury also ruled that the defendants willfully infringed the patent. On September 8, 2006 the district
court issued an Amended Final and Permanent injunction that prohibited EchoStar Communications Corporation from making, using, offering for sale or
selling in the United States the following EchoStar DVRs: DP-501, DP-508, DP-510, DP-721, DP-921, DP-522, DP-625, DP-942, and all EchoStar
Communications Corporation DVRs that are not more than colorably different from any of these products. On October 3, 2006, the United States Court of
Appeals for Federal Circuit stayed the district court's injunction pending appeal. On January 31, 2008, the U.S. Court of Appeals for the Federal Circuit in
Washington, D.C. unanimously ruled in favor of TiVo Inc. in connection with EchoStar's appeal of the district court judgment of patent infringement against
EchoStar with respect to several claims (so called software claims) of the patent, upholding the full award of damages from the district court, and ordering that
the stay of the district court's injunction against EchoStar's infringing digital video recorders that was issued pending appeal will dissolve when the appeal
becomes final. The district court's judgment of infringement by EchoStar of certain other claims of the patent (so called hardware claims) were reversed and
remanded for further proceedings. On October 6, 2008, the Supreme Court denied EchoStar's writ of certiorari. On October 8, 2008, the Company received
$104.6 million from EchoStar of which approximately $87.8 million represents damages through September 8, 2006 and was recorded as litigation proceeds
within the operating expense section of TiVo's statement of operations. The remaining approximately $16.8 million was recorded as interest income and
represented pre- and post-judgment interest through October 8, 2008. With respect to the district court's injunction and damages after September 8, 2006, the
district court held a hearing on EchoStar's alleged work around of the Company's patent on February 17, 2009 and a decision is pending. The Company is
incurring material expenses in this litigation.
On May 30, 2008, Dish Network Corporation and its related entities filed a complaint against TiVo in the U.S. District Court for the District of
Delaware for declaratory relief that Dish's unspecified digital video recorders do not infringe TiVo's 389 patent. On July 7, 2008, TiVo filed a motion to
dismiss Dish's complaint against TiVo for declaratory relief that Dish's unspecified DVRs do not infringe TiVo's 389 patent. On March 31, 2009, the court
denied TiVo's motion to dismiss and ordered briefing on whether the complaint should be transferred to the Eastern District of Texas. The Company intends
to defend this action vigorously; however, the Company may incur material expenses in connection with this lawsuit and in the event there is an adverse
outcome, the Company's business could be harmed. The Company may incur expenses in connection with this litigation that may become material in the
future. No loss is considered probable or estimable at this time.
On April 29, 2005, EchoStar Technologies Corporation filed a complaint against TiVo and Humax USA, Inc. in the U.S. District Court for the Eastern
District of Texas alleging infringement of U.S. Patent Nos. 5,774,186 (Interruption Tolerant Video Program Viewing), 6,529,685 B2 (Multimedia Direct
Access Storage Device and Formatting Method), 6,208,804 B1 (Multimedia Direct Access Storage Device and Formatting Method) and 6,173,112 B1
(Method and System for Recording In-Progress Broadcast Programs). The complaint alleges that EchoStar Technologies Corporation is the owner by
assignment of the patents allegedly infringed. The complaint further alleges that the TiVo and Humax have infringed, contributorily infringed and/or actively
induced infringement of the patents by making, using, selling or importing digital video recording devices, digital video recording device software and/or
personal television services in the United States that allegedly infringe the patents, and that such infringement is willful and ongoing. Under the terms of the
Company's agreement with Humax governing the distribution of certain DVRs that enable the TiVo service, the Company is required to indemnify Humax
against any claims, damages, liabilities, costs, and expenses relating to claims that the Company's technology infringes upon intellectual property rights
owned by third parties. On May 10, 2005, Humax formally notified TiVo of the claims against it in this lawsuit as required by Humax's agreement with TiVo.
On July 1, 2005,
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