TiVo 2005 Annual Report Download - page 36

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Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None
ITEM 2. PROPERTIES.
Our corporate headquarters, which houses our administrative, sales and marketing, customer service and product development activities, is located in
Alviso, California, under a lease that expires in March 2007. We believe that our corporate facilities will be adequate to meet our office space needs for the
next several years as we currently utilize approximately 90% of the total office space. Our facilities lease obligations are subject to periodic increases and we
believe that our existing facilities are well maintained and in good operating condition. The Company also has an operating lease for sales and administrative
office space in New York.
Additionally, we currently lease international office space in Berkshire, United Kingdom under a lease that expires in March 2006. We have vacated
this facility and no longer maintain an office in the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS.
Intellectual Property Litigation. In September 1999, TiVo received letters from Time Warner, Inc. and Fox Television stating that TiVo's personal
television service exploits these companies' copyrights without the necessary licenses. The Company believes that the TiVo service does not infringe on these
copyrights and believes that there will not be an adverse impact as a result of these letters.
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. On August 18, 2005, the Court issued a claim construction order. 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 defendants' willfully infringed the
patent. The Company plans to seek an enhancement of damages for willfulness, prejudgment interest, attorney's fees and costs, and an injunction against the
defendants' further infringement of the patent. The defendants' claim of inequitable conduct against the Company remains pending. The Company is incurring
material expenses in this litigation.
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, 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. The Company intends to defend this action vigorously; however, it could be forced to incur material expenses in connection
with this lawsuit and/or as a result of its indemnification obligations and, in the event there is an adverse outcome, the Company's business could be harmed.
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