TiVo 2007 Annual Report Download - page 20

Table of Contents
From time to time, we receive letters from third parties alleging that we are infringing their intellectual property. Regardless of their merit, we are
forced to devote time and resources to respond to these letters. In addition, if any of these third parties or others were to sue us, our business could be harmed
because intellectual property litigation may:
• be time-consuming and expensive;
• divert management's attention and resources away from our business;
• cause delays in product delivery and new service introduction;
• cause the cancellation of current or future products or services; or
• require us to pay significant royalties and/or licensing fees.
The emerging enhanced-television industry is highly litigious Additionally, many patents covering interactive television technologies have been granted
but have not been commercialized. A number of companies in the enhanced-television industry earn substantial profits from technology licensing, and the
introduction of new technologies such as ours is likely to provoke lawsuits from such companies. A successful claim of infringement against us, our inability
to obtain an acceptable license from the holder of the patent or other right, or our inability to design around an asserted patent or other right could cause our
manufacturers to cease manufacturing DVRs that enable the TiVo service, our retailers to stop selling the product or us to cease providing our service, or all
of the above, which would eliminate our ability to generate revenues.
Under our agreements with many of our manufacturing and licensing partners, we are obligated to indemnify them in the event that our technology
infringes upon the intellectual property rights of third parties. Due to these indemnity obligations, we could be forced to incur material expenses if our
manufacturing and licensing partners are sued. If they were to lose the lawsuit, our business could be harmed. In addition, because the products sold by our
manufacturing and licensing partners often involve the use of other persons' technology, this increases our exposure to litigation in circumstances where there
is a claim of infringement asserted against the product in question, even if the claim does not pertain to our technology.
For example, 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 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.
We intend to defend this action vigorously; however, we are incurring material expenses in connection with this lawsuit and in the event there is an adverse
outcome, our business could be harmed. For a complete description of this lawsuit, please see our discussion under Item 3. "Legal Proceedings.".
Pending intellectual property litigations. We are subject to a number of pending intellectual property litigations. We intend to defend these actions
vigorously; however we could be forced to incur material expenses in connection with these lawsuits and/or as a result of our indemnification obligations and,
in the event there is an adverse outcome in any of these cases, our business could be harmed. For more information on our pending intellectual property
litigations, please see our discussion under Item 3. "Legal Proceedings."
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 (ECC) 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
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