TiVo 2007 Annual Report Download - page 28

Table of Contents
we could be required to seek licenses from third parties in order to continue offering our solutions, to re-engineer our solutions, or to discontinue the sale of
our solutions in the event re-engineering cannot be accomplished on a timely basis, any of which would adversely affect our business. The GNU General
Public License and certain other open-source licenses require that licensees, including TiVo, make the source code of any "derivative works" of the software
licensed under the open-source license available in source code form. Given the ambiguous drafting in many of these open-source licenses regarding the
definition of "derivative work," it is possible that third parties may claim that our proprietary TiVo software, or a portion thereof, that runs on a GNU/Linux-
based operating system is a "derivative work" of the open-source software and should be made available in source code form to all of our customers. This
would reduce the value of our proprietary software and would negatively affect our business. Finally, there is very little case law interpreting open-source
licenses. Any ruling by a court that these licenses are not enforceable, or that GNU/Linux-based operating systems, or significant portions of them, may not be
liberally copied, modified or distributed, would have the effect of preventing us from selling or developing our TiVo software and would adversely affect our
business.
In addition, a version of the GNU General Public License (GPL v3) was recently released that contains terms that restrict the manner in which hardware
manufacturers may use software licensed under the GPL v3. If such terms are broadly interpreted and the GPL v3 is widely adopted among the Linux
developer community, we may be unable to incorporate future enhancements to the GNU/Linux operating system into our software, which could adversely
affect our business.
If there is an adverse outcome in the class action litigation that has been filed against us, our business may be harmed.
We are named as defendants in a consolidated securities class action lawsuit filed in the U.S. District Court for the Southern District of New York. This
class action was brought on behalf of a purported class of purchasers of the Company's common stock from October 31, 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 undisclosed arrangements. More than 300 issuers have been named in similar lawsuits.
The Company intends to defend this action vigorously; however, we could be forced to incur material expenses in the litigation, and in the event there is an
adverse outcome, our business could be harmed. For more information on this litigation please see our discussion under Item 3. "Legal Proceedings."
Legislation, laws or regulations that govern the consumer electronics and television industry, the delivery of programming, access to television
signals, and the collection of viewing information from subscriptions could expose us to legal action if we fail to comply and could adversely impact
and/or could require us to change our business.
The delivery of television programming, access to television signals by consumer electronics devices, and the collection of viewing information from
subscriptions via the TiVo service and a DVR represent a relatively new category in the television and home entertainment industries. As such, it is difficult to
predict what laws or regulations will govern our business. Changes in the regulatory climate, the enactment of new legislation, or the expansion, contraction,
enforcement or interpretation of existing laws or regulations could expose us to additional costs and expenses and could adversely impact or require changes
to our business. For example, legislation regarding customer privacy or copyright could be enacted or expanded to apply to the TiVo service, which could
adversely affect our business. Laws or regulations could be interpreted to prevent or limit access to some or all television signals by certain consumer
electronics devices, or impose limits on the number of copies, the ability to transfer or move copies, or the length of time a consumer may retain copies of
some or all types of television programming. New or existing copyright laws could be applied to restrict the capture of television programming, which would
adversely affect our business. It is unknown whether existing laws and regulations will apply to the digital video recorder market. Therefore, it is difficult to
anticipate the impact of current or future laws and regulations on our business. We may have significant expenses associated with staying appraised of local,
state, federal, and international legislation and regulation of our business and in presenting TiVo's positions on proposed laws and regulations.
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