TiVo 2011 Annual Report Download - page 35

Table of Contents
From time to time, the Company is involved in numerous lawsuits as well as subject to various legal proceedings, claims, threats of litigation, and
investigations in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights,
commercial, employment, and other matters. The Company assesses potential liabilities in connection with each lawsuit and threatened lawsuits and accrues
an estimated loss for these loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements
indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. While
certain matters to which the Company is a party specify the damages claimed, such claims may not represent reasonably possible losses. Given the inherent
uncertainties of the litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if
any, be reasonably estimated. As of January 31, 2012, the Company has not accrued any liability for any lawsuits filed against the Company, as the Company
has neither determined that it is probable that a liability has been incurred at the date of the financial statements nor that the amount of any loss can be
reasonably estimated. The Company expenses legal costs as they are incurred.
Intellectual Property Litigation.
On August 26, 2009, TiVo filed separate complaints against AT&T Inc. (“AT&T”) and Verizon Communications, Inc. ("Verizon") in the United States
District Court for the Eastern District of Texas for infringement of the following three TiVo patents: U.S. Patent Nos. 6,233,389 B1 ("Multimedia Time
Warping System"); 7,529,465 B2 ("System for Time Shifting Multimedia Content Streams"); and 7,493,015 B1 ("Automatic Playback Overshoot Correction
System"). The complaints seek, among other things, damages for past infringement and a permanent injunction, similar to that issued by the United States
District Court, Eastern District of Texas against EchoStar. On January 15, 2010, Microsoft Corporation ("Microsoft") moved to intervene in the action filed
against AT&T, and on March 31, 2010 the district court granted Microsoft's motion.
On March 12, 2010, AT&T Intellectual Property I, L.P., and AT&T Intellectual Property II, L.P. (collectively, "AT&T IP") filed a complaint against
TiVo in the United States District Court for the Northern District of California for infringement of the following four patents: U.S. Patent Nos. 5,809,492
("Apparatus and Method for Defining Rules for Personal Agents"); 5,922,045 ("Method and Apparatus for Providing Bookmarks when Listening to
Previously Recorded Audio Programs"); 6,118,976 ("Asymmetric Data Communications System"); and 6,983,478 ("Method and System for Tracking
Network Use"). The complaint sought, among other things, damages for past infringement and a permanent injunction. This litigation had been stayed.
On January 3, 2012, TiVo and AT&T entered into a Settlement and Patent License Agreement (the “Agreement”), pursuant to which the parties agreed
to settle and dismiss with prejudice all outstanding litigation between them, including TiVo's claims against AT&T and AT&T IP's claims against TiVo,
provide each party with a license to certain patents owned by the other party, and release all infringement claims between the parties with respect to such
licensed patents.
Under the Agreement, AT&T has agreed to pay TiVo a minimum amount of $215.0 million (the “Payment to TiVo”) plus incremental monthly fees per
DVR subscriber if the growth of AT&T's subscriber base exceeds certain pre-determined levels. The first $51.0 million of the Payment to TiVo was paid on
January 4, 2012 and the remaining amount is due to TiVo in equal installments 30 days after the end of each calendar quarter in the amount of $5 million for
the first four calendar quarters and approximately $6.5 million in subsequent calendar quarters through the calendar quarter ending June 30, 2018. Any
incremental additional per subscriber fees are due to TiVo on the same schedule. Refer to Note 19. "AT&T Inc." for additional information.
Pursuant to the Agreement, TiVo granted AT&T a limited license under its advanced television patents, including the patents that TiVo had asserted
against AT&T (U.S. Patent Nos. 6,233,389, 7,493,015 and 7,529,465), to make, have made, use, sell, offer to sell and import advanced television technology
in connection with AT&T multichannel video programming services, including AT&T U-verse, subject to certain limitations and exclusions. AT&T granted
TiVo a limited license under its advanced television patents, including the patents that AT&T had asserted against TiVo (U.S. Patent Nos. 5,809,492,
5,922,045, 6,118,976 and 6,983,478), to make, have made, use, sell, offer to sell and import advanced television technology in connection with TiVo products
and services, including products and services provided to other multichannel video programming service providers, subject to certain limitations and
exclusions.
The Agreement expires on July 30, 2018. In addition, TiVo may terminate the rights and licenses granted to AT&T pursuant to the Agreement under
certain circumstances, including but not limited to if AT&T has failed to make timely payments.
On February 24, 2010, Verizon answered TiVo's August 26, 2009 complaint and Verizon asserted counterclaims. The counterclaims seek declaratory
judgment of non-infringement and invalidity of the patents TiVo
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