TiVo 2005 Annual Report Download - page 84

Table of Contents
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.
On August 5, 2004, Compression Labs, Inc. filed a complaint against TiVo Inc., Acer America Corporation, AudioVox Corporation, BancTec, Inc.,
BenQ America Corporation, Color Dreams, Inc. (d/b/a StarDot Technologies), Google Inc., ScanSoft, Inc., Sun Microsystems Inc., Veo Inc., and Yahoo! Inc.
in the U.S. District Court for the Eastern District of Texas alleging infringement, inducement of others to infringe, and contributory infringement of U.S.
Patent No. 4,698,672, entitled "Coding System For Reducing Redundancy." The complaint alleges that Compression Labs, Inc. is the owner of this patent and
has the exclusive rights to sue and recover for infringement thereof. The complaint further alleges that the defendants have infringed, induced infringement,
and contributorily infringed this patent by selling devices and/or systems in the United States, at least portions of which are designed to be at least partly
compliant with the JPEG standard. On February 16, 2005, the Judicial Panel on Multidistrict Litigation consolidated this and seven other related lawsuits and
coordinated pretrial proceedings in the United States District Court for the Northern District of California, where pretrial proceedings are currently ongoing.
On January 31, 2006, the United States Patent Office granted a request for reexamination of the patent in question. The Company intends to defend this action
vigorously; however, it could be forced to incur material expenses in the litigation and, in the event there is an adverse outcome, the Company's business
could be harmed by the inability to enable subscribers to display JPEG photos or having to pay a license fee to enable subscribers to do so.
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. On November 10, 2004, the Company
filed its answer, affirmative defenses and counterclaims and on January 31, 2005, the Company filed a motion for summary judgment. On July 18, 2005, the
Court granted summary judgment in favor of the Company and 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. The Company is incurring expenses in connection with this litigation that may become material in the future,
and in the event there is an adverse outcome, TiVo's business could be harmed.
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