TiVo 2005 Annual Report Download - page 21

Table of Contents
In August and September 2004, Phillip Igbinadolor, on behalf of himself, filed complaints against TiVo, Sony Corporation, Sony Electronics, Inc.,
Sony Corporation of America, JVC, Clarrion Corporation of America, and Philips Consumer Electronics Company in the U.S. District Court for the Eastern
District of New York alleging infringement of U.S. Patent Nos. 395,884 and 6,779,196 and U.S. Trademark No. 2,260,689, each relating to an "integrated car
dubbing system." The complaints were consolidated into one action captioned Igbinadolor v. Sony Corporation et al. The complaints allege that
Mr. Igbinadolor is the owner of the patents and trademark allegedly infringed. On November 10, 2004, we filed our answer, affirmative defenses and
counterclaims and on January 31, 2005, we filed a motion for summary judgment. On July 18, 2005, the Court granted summary judgment in our favor and in
favor of the other defendants on the ground that, as a matter of law, there is no infringement of either the patents or the trademark. On August 30, 2005,
Mr. Igbinadolor filed a notice of appeal with the United States Court of Appeals for the Federal Circuit appealing the July 18, 2005 summary judgment order.
The Federal Circuit docketed the appeal on September 2, 2005. On October 31, 2005, counsel for JVC submitted a letter on behalf of JVC, Sony, TiVo and
Clarion advising the Federal Circuit that JVC, Sony and TiVo have declaratory judgment counterclaims for invalidity that remain pending before the district
court and requesting that the appeal be dismissed as premature because the district court's decision was not a final appealable order. On February 10, 2006, the
Federal Circuit issued an order dismissing the entire consolidated appeal as premature. This order was issued as a mandate on March 3, 2006 and jurisdiction
was transferred back to the district court. TiVo, Sony and JVC's declaratory judgment counterclaims are currently pending before the district court. 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.
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 our
agreement with Humax governing the distribution of certain DVRs that enable the TiVo service, we are required to indemnify Humax against any claims,
damages, liabilities, costs, and expenses relating to claims that our technology infringes upon intellectual property rights owned by third parties. On May 10,
2005, Humax formally notified us of the claims against it in this lawsuit as required by our agreement with Humax. On July 1, 2005, the defendants filed their
answer and counterclaims. On January 18, 2006, EchoStar filed a motion to dismiss its claim of infringement against TiVo and Humax relating to patent 112
("Method and System for Recording In-Progress Broadcast Programs"). Matters relating to discovery and claim construction are ongoing. We intend to defend
this action vigorously; however, we could be forced to incur material expenses in connection with this lawsuit and/or as a result of our indemnification
obligations and, in the event there is an adverse outcome, our business could be harmed.
We have filed a patent infringement lawsuit against EchoStar Communications Corporation. We are incurring significant expenses as a result,
and an adverse outcome in the lawsuit 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. On August 18, 2005, the Court issued a claim construction order. On April 13, 2006, the jury rendered a verdict in our favor for
the amount of approximately $74.0 million dollars. The jury ruled that our patent is valid and that all nine of the asserted claims in our patent are infringed by
each of the accused EchoStar products. The jury also ruled that the defendants' willfully infringed the patent. We plan to seek an enhancement of damages for
willfulness, prejudgment interest, attorneys' fees and costs, and an injunction against the defendants' further infringement of the patent. The defendants' claim
of inequitable conduct against us remains pending. There can be no assurance that we will collect these monies, that we will not be found to have engaged in
inequitable conduct, that an injunction will be issued, or that the decision will be upheld in post-trial proceedings or on appeal. We are incurring material
expenses in this litigation.
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