TiVo 2006 Annual Report Download - page 39

Table of Contents
USPTO issued its first office action confirming a majority of the claims in the 672 patent, while rejecting some claims. On June 28, 2006, the Court issued a
claim construction ruling. In November 2006, the Company and the other defendants entered into an immaterial settlement agreement with Compression Labs
under which the claims against the Company were dismissed without prejudice.
On January 3, 2007, Lycos, Inc. filed a complaint against the Company, Netflix, Inc., and Blockbuster, Inc. in the U.S. District Court for the
Eastern District of Virginia alleging infringement, inducement of others to infringe, and contributory infringement of U.S. Patent No. 5,867,799, entitled
"Information System and Method for Filtering a Massive Flow of Information Entities to Meet User Information Classification Needs" and U.S. Patent
No. 5,983,214, entitled "System and Method Employing Individual User Content-Based Data and User Collaboration Feedback Data to Evaluate the Content
of an Information Entity in a Large Information Communication Network." The complaint alleges that Lycos, Inc. is the owner of these patents and has the
right to sue and recover for infringement thereof. The complaint further alleges that the Company has infringed this patent by making, using, selling, offering
to sell and importing digital video recorder products that incorporate information filtering technology. The complaint further alleges that defendants continue
to willfully infringe such patents. The Company intends to defend this action vigorously; however, it may incur expenses in connection with this litigation that
may become material in the future, and in the event there is an adverse outcome, Company's business could be harmed.
Consumer Litigation. On December 22, 2005, a consumer class action lawsuit against TiVo Inc. was filed in the Superior Court of the State of
California, County of San Francisco. This action, which is captioned Nolz, et al. v. TiVo, was brought on behalf of a purported class of purchasers of the
Company's gift subscriptions which were allegedly sold to consumers in violation of a California law that allegedly makes it unlawful to sell gift certificates
in California containing an expiration date. On March 23, 2007, the Court entered final judgment in the lawsuit approving the Company's settlement
agreement with plaintiffs that included no admission or findings of any violations and dismissed the action. The settlement did not have a material effect on
the Company's results of operations.
Securities Litigation. On June 12, 2001, a securities class action lawsuit in which the Company and certain of its 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 the Company's initial public offering as defendants. This class action was brought on behalf of a purported
class of purchasers of the Company's common stock from September 30, 1999, the time of its initial public offering, through December 6, 2000. The central
allegation in this action is that the underwriters in the initial public offering solicited and received undisclosed commissions from, and entered into
undisclosed arrangements with, certain investors who purchased TiVo common stock in the initial public offering and the after-market. The complaint also
alleges that the TiVo defendants violated the federal securities laws by failing to disclose in the initial public offering prospectus that the underwriters had
engaged in these alleged 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, TiVo's 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.
On June 26, 2003, the plaintiffs announced a proposed settlement with the Company and the other issuer defendants. The proposed settlement
provides that the plaintiffs will be guaranteed $1.0 billion dollars in recoveries by the insurers of the Company and other issuer defendants. Accordingly, any
direct financial impact of the proposed settlement is expected to be borne by the Company's insurers in accordance with the proposed settlement. In addition,
the Company and the other settling issuer defendants will assign to the plaintiffs certain claims that they may have against the underwriters. If recoveries in
excess of $1.0 billion dollars are obtained by the plaintiffs from the
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