TiVo 2006 Annual Report Download - page 88

Table of Contents
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 May 10, 2006, the Court dismissed with prejudice, EchoStar's claim of infringement
against TiVo and Humax relating to patent 112 ("Method and System for Recording In-Progress Broadcast Programs") and claims 21-30 and 32 relating to
patent 186 ("Interruption Tolerant Video Program Viewing"). A claim construction hearing was held on May 11, 2006. On July 14, 2006, United States
Magistrate Judge Caroline M. Craven for the United States District Court, Eastern District of Texas, issued a stay of the case pending the USPTO completion
of proceedings with respect to TiVo's request for reexamination of the 186, 685, and 804 patents. The Company intends to defend this action vigorously;
however, the Company is incurring material expenses in connection with this lawsuit and in the event there is an adverse outcome, the Company's business
could be harmed. No loss is considered probable or estimable at this time.
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 USPTO granted a request for reexamination of the patent in question. On May 25, 2006, the 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 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. No loss is considered probable or estimable at this time.
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
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