TiVo 2010 Annual Report Download - page 33

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 November 10, 2010, Guardian Media Technologies sued TiVo and 35 other companies 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 '158 patent and '160 patent by making, having made, installing, 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 complaint alleges that TiVo's infringement was willful. The Company intends to defend itself vigorously in this matter. Guardian
had previously sued TiVo and more than 30 other companies on the same patents in late 2008 in the U.S. District Court for the Central District of California.
In June 2009, the California court dismissed Guardian's complaint against TiVo and other defendants. Guardian subsequently re-filed its complaint against
TiVo in California, but then Guardian voluntarily dismissed the California complaint in late 2009. 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 December 20, 2010, Multimedia Patent Trust (“MPT”) sued TiVo and 6 other companies alleging infringement of U.S. Patent Nos. 4,958,226
(“Conditional Motion Compensated Interpolation of Digital Motion Video”); 5,136,377 (“Adaptive Non-Linear Quantizer”); 5,500,678 (“Optimized Scanning
of Transform Coefficients in Video Coding”) and 5,227,878 (“Adaptive Coding and Decoding of Frames and Fields of Video”). On March 2, 2011, TiVo
entered into a patent license agreement with MPT settling the pending litigation.
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 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. 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,
which was subsequently withdrawn without prejudice by the plaintiffs. 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. On April 2, 2009, the parties lodged with the Court a motion for preliminary approval of a
proposed settlement between all parties to the consolidated action,
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