TiVo 2008 Annual Report Download - page 78

Table of Contents
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) through December 6, 2000.
The central allegation in this action is that the underwriters in the Company's IPO solicited and received undisclosed commissions from, and entered into
undisclosed arrangements with, certain investors who purchased the Company's stock in the IPO and the after-market, and that the TiVo defendants violated
the federal securities laws by failing to disclose in the IPO prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More
than 300 issuers have been named in similar lawsuits. In February 2003, after the issuer defendants (including the TiVo defendants) filed an omnibus motion
to dismiss, the court Court dismissed the Section 10(b) claim as to the Company, but denied the motion to dismiss the Section 11 claim as to the Company and
virtually all of the other issuer-defendants. On October 8, 2002, the Company's executive officers who were named as defendants in this action were
dismissed without prejudice.
On June 26, 2003, the plaintiffs in the suit announced a proposed settlement with the Company and the other issuer defendants. This proposed
settlement was terminated on June 25, 2007, following the ruling by the United States Court of Appeals for the Second Circuit on December 5, 2006,
reversing the District Court's granting of class certification in the six focus cases currently being litigated in this proceeding. The proposed settlement had
provided that the insurers of all settling issuers would guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment
banks who acted as underwriters in those offerings. Under the proposed settlement, in the event that the plaintiffs did not recover at least $1 billion from the
non-settling defendants, the insurers for the settling issuers would make up the difference; the maximum amount that could be charged to the Company's
insurance policy under the proposed settlement in the event that the plaintiffs recovered nothing from the investment banks would have been approximately
$3.9 million.
On August 14, 2007, the plaintiffs filed Amended Master Allegations. On September 27, 2007, the Plaintiffs filed a Motion for Class Certification.
Defendants filed a Motion to Dismiss the focus cases on November 9, 2007. On March 26, 2008, the Court ruled on the Motion to Dismiss, holding that the
plaintiffs had adequately pleaded their Section 10(b) claims against the Issuer Defendants and the Underwriter Defendants in the focus cases. As to the
Section 11 claim, the Court dismissed the claims brought by those plaintiffs who sold their securities for a price in excess of the initial offering price, on the
grounds that they could not show cognizable damages, and by those who purchased outside the previously certified class period, on the grounds that those
claims were time barred. This ruling, while not binding on the Company's case, provides guidance to all of the parties involved in this litigation. The Court
has not yet ruled on the pending motion for class certification. 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 October 3, 2007, Vanessa Simmonds filed a complaint against the Company's former lead underwriters Credit Suisse Group and Bank of America
(Lead Underwriters), with the Company named as a nominal defendant, in the U.S. District Court for the Western District of Washington alleging violations
of Section 16(b) in connection with the Company's initial public offering and associated transactions in the Company's stock in the six month period following
the Company's initial public offering by the Company's Lead Underwriters. On or about December 3, 2007, Ms. Simmonds delivered a copy of the complaint
to the Company. The complaint itself is directed solely at the initial public offering underwriters, not at the Company itself, and does not seek any damages or
recovery from the Company itself. On February 25, 2008, the plaintiff filed an amended complaint which is substantially similar to the initial complaint, but
which also names Credit Suisse Securities (USA), Bank of America Corporation, and Robertson Stevenson, Inc. as defendants in the amended complaint that
continues to name the Company only as a nominal defendant. On July 25, 2008, thirty of the issuers, including the Company (collectively, the Moving
Issuers), in the coordinated proceeding filed a Joint Motion to Dismiss. Also on July 25, 2008, all of the underwriter defendants in the coordinated proceeding
filed an Omnibus Motion to Dismiss. The hearing on the motions to dismiss was held on January 16, 2009. On March 12, 2009, the Court granted both the
Issuers' Joint Motion to Dismiss and the Underwriters' Omnibus Motion to Dismiss. The Court held that the plaintiff's demand letters to the Moving Issuers
were legally insufficient and therefore the plaintiff lacked standing to maintain the thirty Section 16(b) suits relating to the Moving Issuers. Accordingly, the
Court granted without prejudice the Moving Issuers' Joint Motion to Dismiss, and further held that it would not permit the plaintiff to amend her demand
letters. In regard to the Underwriters' Omnibus Motion to Dismiss, the Court held that the remaining twenty-four Section 16(b) suits were barred by the statute
of limitations, and accordingly granted with prejudice the Omnibus Motion to Dismiss as to those suits. On March 31, 2009, plaintiff filed a notice of appeal
to the United States Court of Appeals for the Ninth Circuit of the District Court's dismissal of these fifty-four actions. 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
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