TiVo 2004 Annual Report Download - page 15

Table of Contents
Index to Financial Statements
EchoStar Communications Litigation. 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 seek
unspecified monetary damages as well as an injunction against the defendants' further infringement of the patent. We are incurring expenses in connection
with this litigation that may become material, and in the event there is an adverse outcome, our business could be harmed.
Indemnification of Sony Corporation Against Command Audio Corporation Lawsuit. On February 5, 2002, Sony Corporation notified us 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 Facts 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 our 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. We believe Sony has meritorious
defenses against this lawsuit; however, due to our indemnification obligations, we are incurring expenses in connection with this litigation. Since February
2002, we have 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, our business could be harmed.
Pause Technology LLC. On September 25, 2001, Pause Technology LLC filed a complaint against us 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 we have 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 our operations. It also seeks attorneys' fees and costs. On February 6, 2004, we obtained a
favorable summary judgment ruling in the case in the District Court. The court ruled that our software versions 2.0 and above do not infringe Pause
Technology's patent, and accordingly has ordered that judgment be entered in our 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 March 14, 2005, the Appeals
Court rejected Pause Technology's appeal as premature pending the outcome of our remaining cross-claims for patent invalidity. On April 7, 2005, the U.S.
District Court for the District of Massachusetts issued an Amended Final Judgment dismissing without prejudice our 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. We are incurring expenses in connection with this litigation that may become material in the future,
and in the event there is an adverse outcome, our business could be harmed.
IPO Litigation. On June 12, 2001, a securities class action lawsuit in which TiVo and certain of our officers and directors are named as defendants was
filed in the United States 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 was brought on behalf of a purported class of purchasers of our
common stock from September 30, 1999, the time of our initial public offering, through December 6, 2000. The central allegation in this action is that our IPO
underwriters solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased our
common stock in our IPO and the after-market. The complaint also alleges that the TiVo defendants violated the federal securities laws by failing to disclose
in our IPO prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 150 issuers have been named in similar
lawsuits. In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers (including the TiVo
defendants) was filed by the entire group of issuer defendants in these similar actions. On October 8, 2002, our officers were dismissed as defendants in the
lawsuit. On February 19, 2003, the court in this action issued its decision on defendants' omnibus motion to dismiss. This decision dismissed the Section 10(b)
claim as to TiVo but denied the motion to dismiss the Section 11 claim as to TiVo and virtually all of the other issuer-defendants.
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