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Arris Would Pay Maximum of $50M in TiVo Patent Costs

Arris Must Pay $117.5 Million Breakup Fee to Google if the Deal is Called Off 12/21/2012 12:06 PM Eastern

Arris Group, under its agreement with Google to acquire Motorola Mobility’s Home business for $2.35 billion, would be responsible for no more than $50 million in damages and royalties in connection with TiVo’s pending patent litigation, Arris disclosed in a regulatory filing.

In addition, Arris must pay Google a breakup fee of $117.5 million if the deal is terminated, including if the transaction does not get regulatory approval, Arris said in an 8-K filing Thursday with the Securities and Exchange Commission.

“The removal of the overhang from TiVo [patent-litigation costs] also offsets some of the risk from the disclosure of $117.5 million breakup fee, which was a bit higher than we had expected,” Raymond James analyst Simon Leopold wrote in a research note Friday.

In addition, Google agreed to indemnify Arris from any injunction related to patent litigation, provided that Arris implements “in a timely manner all redesigns... to avoid infringement of the Redesign Patents that Seller reasonably requests Purchaser to implement,” according to the filing.

Google and Arris are each responsible for 50% of the first $50 million for any past infringement by “current products of the business,” and each company would pay 50% of the first $50 million for any future royalty payments. Google is responsible for any payments that top $100 million.

Apart from the patent-litigation provision, Google's indemnification of Arris is capped at $235 million, according to the filing.

Through its patent-litigation strategy, TiVo has scored more than $1 billion in cash settlements with Dish Network, AT&T and Verizon Communications payable over the next six years.

In March 2012, TiVo sued Time Warner Cable and Motorola Mobility, alleging they violate three of its patents. That came after Motorola last year filed a patent-infringement suit against TiVo, following the DVR company’s suit against Verizon. TiVo also has legal action pending against Cisco Systems.

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