TiVo 2003 Annual Report Download - page 41

Table of Contents
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 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 proprietary
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 2, 2004, EchoStar filed its answer to TiVo's complaint, moved to dismiss for lack of personal jurisdiction, and moved to transfer
the case from the Eastern District of Texas to the Northern District of California. TiVo intends to oppose these motions. We seek unspecified monetary
damages as well as an injunction against the defendants' further infringement of the patent. We could incur material expenses in this litigation.
We could be prevented from selling or developing our TiVo software if the GNU General Public License governing the Linux operating system
and Linux kernel and similar licenses under which our product is developed and licensed is not enforceable.
The Linux kernel and the Linux operating system have been developed and licensed under the GNU General Public License and similar open source
licenses. These licenses state that any program licensed under them may be liberally copied, modified, and distributed. The GNU General Public license is a
subject of litigation in the case of The SCO Group, Inc. v. International Business Machines Corp., pending in the United States District Court for the District
of Utah. SCO Group, Inc., or SCO, has publicly alleged that certain Linux kernels contain unauthorized UNIX code or derivative works. Uncertainty
concerning SCO's allegations, regardless of their merit, could adversely affect our manufacturing and other customer and supplier relationships. It is possible
that a court would hold these licenses to be unenforceable in that litigation or that someone could assert a claim for proprietary rights in our TiVo software
that runs on a Linux-based operating system. Any ruling by a court that these licenses are not enforceable, or that Linux-based operating systems, or
significant portions of them, may not be liberally copied, modified or distributed, would have the effect of preventing us from selling or developing our TiVo
software and would adversely effect our business.
If there is an adverse outcome in the class action litigation that has been filed against us, our business may be harmed.
We and certain of our officers and directors are named as defendants in a consolidated securities class action lawsuit filed in the U.S. District Court for
the Southern District of New York. This action, which is captioned Wercberger v. TiVo et al., also names several of the underwriters involved in our initial
public offering as defendants. This class action is brought on behalf of a purported class of purchasers of our common stock from
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