TiVo 2008 Annual Report Download - page 36

Table of Contents
The jury ruled that the Company's patent is valid and that all nine of the asserted claims in the Company's patent are infringed by each of the accused
EchoStar products. The jury also ruled that the defendants willfully infringed the patent. On September 8, 2006 the district court issued an Amended Final and
Permanent injunction that prohibited EchoStar Communications Corporation from making, using, offering for sale or selling in the United States the
following EchoStar DVRs: DP-501, DP-508, DP-510, DP-721, DP-921, DP-522, DP-625, DP-942, and all EchoStar Communications Corporation DVRs that
are not more than colorably different from any of these products. On October 3, 2006, the United States Court of Appeals for Federal Circuit stayed the
district court's injunction pending appeal. On January 31, 2008, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. unanimously ruled in
favor of TiVo Inc. in connection with EchoStar's appeal of the district court judgment of patent infringement against EchoStar with respect to several claims
(so called software claims) of the patent, upholding the full award of damages from the district court, and ordering that the stay of the district court's
injunction against EchoStar's infringing digital video recorders that was issued pending appeal will dissolve when the appeal becomes final. The district
court's judgment of infringement by EchoStar of certain other claims of the patent (so called hardware claims) were reversed and remanded for further
proceedings. On October 6, 2008, the Supreme Court denied EchoStar's writ of certiorari. On October 8, 2008, the Company received $104.6 million from
EchoStar of which approximately $87.8 million represents damages through September 8, 2006 and was recorded as litigation proceeds within the operating
expense section of TiVo's statement of operations. The remaining approximately $16.8 million was recorded as interest income and represented pre- and post-
judgment interest through October 8, 2008. With respect to the district court's injunction and damages after September 8, 2006, the district court held a
hearing on EchoStar's alleged work around of the Company's patent on February 17, 2009. The Company is incurring material expenses in this litigation.
On May 30, 2008, Dish Network Corporation and its related entities filed a complaint against TiVo in the U.S. District Court for the District of
Delaware for declaratory relief that Dish's unspecified digital video recorders do not infringe TiVo's 389 patent. On July 7, 2008, TiVo filed a motion to
dismiss Dish's complaint against TiVo for declaratory relief that Dish's unspecified DVRs do not infringe TiVo's 389 patent. On March 31, 2009, the court
denied TiVo's motion to dismiss and ordered briefing on whether the complaint should be transferred to the Eastern District of Texas. The Company intends
to defend this action vigorously; however, the Company may incur material expenses in connection with this lawsuit and in the event there is an adverse
outcome, the Company's business could be harmed. The Company may incur expenses in connection with this litigation that may become material in the
future. No loss is considered probable or estimable at this time.
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 May 10, 2006, the district 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, the
magistrate judge for the U.S. District Court for the 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 USPTO has preliminarily rejected each of the claims of the 186, 685, and
804 patents, but we cannot assure you that all of the patent claims ultimately will be rejected or that they will not be amended and emerge from the USPTO
reexamination proceedings. The Company intends to defend this action vigorously; however, the Company is incurring expenses in connection with this
lawsuit, which could become material in the future 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 December 22, 2008, Guardian Media Technologies, LTD filed a complaint against more than 30 companies including TiVo in the U.S. District
Court for the Central District of California alleging infringement of U.S. Patent No. 4,930,158 ("Selective Video Playing System") and 4,930,160 ("Automatic
Censorship of Video Programs"). The complaint alleges that Guardian Media Technologies is the owner by assignment of the patents allegedly infringed. The
complaint further alleges that prior to the expiration of the patents in 2007, TiVo had infringed, contributorily infringed and/or actively induced infringement
of the 160 patent by making, having made, using, importing, providing, supplying, distributing, selling and/or offering for sale products and/or systems that
infringed or, when used, infringed one or more claims of the patent. The Company intends to defend itself vigorously in this matter. The Company may incur
expenses in connection with this litigation that may become material in the future. No loss is considered probable or estimable at this time.
Securities Litigation. The Company and certain of its officers and directors (TiVo defendants) were originally named as defendants in a consolidated
securities class action lawsuit 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 (IPO) as defendants. This class action is brought on
behalf of a purported class of purchasers of the Company's common stock from the time of the Company's IPO (October 31, 1999)
33