Cable Operators

TiVo, Microsoft Call Patent Truce

3/26/2012 12:01 AM Eastern

Now that TiVo has settled its patent dispute
with Microsoft, the DVR company’s lawyers are retraining
their sights on Verizon Communications — and, potentially,
Time Warner Cable and Cablevision Systems.

Already, TiVo has won nearly a billion dollars through
its patent litigation strategy. And its real targets aren’t
technology suppliers l ike
Microsoft, but TV operators.

Separately, TiVo said it
is lopping five bucks off its
monthly plans for Premiere
DVR customers — dropping it
down to $14.99 — and is reducing
pricing on high-end models,
as the company tries to
lure customers away from cable
operators’ DVR offerings.

TiVo and Microsoft last week
said they agreed to drop their
patent-infringement lawsuits
against each other. That came
after the digital-video-recorder
pioneer reached a settlement
and patent-licensing deal with
AT&T, which uses Microsoft’s Mediaroom IPTV platform
for U-verse TV.

Microsoft did not grant any patent rights to TiVo under
the settlement (and vice versa), and under the agreement
no money is changing hands. TiVo disclosed the agreement
in an 8-K filed
with the Securities and
Exchange Commission.

Analysts said the closure
on the Microsoft
matter was positive for
TiVo, even though the
company won’t receive
any payments. “I think
it’s another acknowledgment
that TiVo’s [intellectual
property] is
formidable, which increases
their odds of getting
more money” from
other pay TV operators,
Janney Capital Markets
analyst Tony Wible said.

In May 2011, the company
reached a landmark
$500 million
settlement with satellite-
TV provider Dish
Network, after seven
years of litigation. That
was on top of $105 million
Dish and Echo-
Star had paid to TiVo
up to that point. The key patent at issue was TiVo’s “Time
Warp” patent, U.S. Patent No. 6,233,389, which covers the
simultaneous playback and recording of TV programming.

The Dish deal may have persuaded AT&T to settle out
of court. Under the terms of that settlement, announced
in January, AT&T will pay a minimum of $215 million —
and as much as $300 million — through June 2018.

TiVo’s case against Verizon is expected to go to trial in a
Texas federal district court later this year. The DVR maker
is suing Verizon over the same three patents it alleged in
the AT&T case: the Time Warp patent and U.S Patent Nos.
7,529,465 (“System for Time-Shifting Multimedia Content
Streams”) and 7,493,015 (“Automatic Playback Overshoot
Correction System”).

Meanwhile, Time Warner Cable and Cablevision are the
only two major pay TV operators that do not have some
kind of patent-licensing or business deal with TiVo. In past
statements, TiVo president and CEO Tom Rogers has expressed
a preference for amicable arrangements rather
than pursuing litigation against operators.

On the retail front,
the company on March
25 was to start shipping
the four-tuner TiVo Premiere
Elite DVR, which
can record up to four
shows and store up to
300 hours of HD content.
The 2-Terabyte
Elite carries a retail
list price of $349.99 —
$150 less than TiVo’s
previously announced
$499.99 list price. In addition,
TiVo is cutting
$50 off the price of the
two-tuner Premiere XL,
with 1 TB of storage for
up to 150 hours of HD,
to $249.99.

With a one-year
contract , the TiVo
monthly service fee will
be $14.99 per month for
Premiere users. That
makes it lower than
most cable offerings,
the company said.

The pricing changes are intended to get “TiVo-owned”
subscribers (those who buy the DVRs at retail) moving
in the positive direction after years in decline. But at the
same time, TiVo risks ratcheting up competition with MSO
partners that offer Premiere DVRs to their own subscribers,
including Charter Communications and Suddenlink
Communications.

SEE YOU IN COURT?
NEXT TARGETS FOR TIVO:

Verizon: Trial expected to commence later this year
in U.S. District Court for the Eastern District of Texas,
barring a settlement. TiVo alleged FiOS TV infringes the
“Time Warp” patent and two others, the same asserted
in the AT&T suit.

Motorola Mobility: Like Microsoft, the set-top vendor
entered the legal fray on behalf of its customer (Verizon).
Motorola is seeking a judgment of non-infringement on
two patents in the Verizon case, and also alleged TiVo
DVRs infringe three of its patents.

Time Warner Cable and Cablevision Systems: The
two MSOs are the largest pay TV operators (aside from
Verizon) that have not reached a patent-licensing, distribution
or marketing agreement with TiVo.

SOURCES: TiVo, Multichannel News research