Gemstar Sues UVSG Over Patents

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Stepping up their legal battles, Gemstar International
Group Inc. said last Tuesday that it filed a patent-infringement lawsuit in federal court
against United Video Satellite Group Inc.'s Prevue Networks Inc. unit.

Meanwhile, UVSG reported a strong second quarter last week,
highlighted by Prevue's results. UVSG emphasized the performance of Prevue
Interactive, the digital set-top electronic program guide that Gemstar specifically
addressed in the lawsuit.

Gemstar, which recently rebuffed a $2.8 billion buyout
offer from UVSG, claimed that Prevue Interactive infringes on patents that Gemstar
controls through its 1997 acquisition of StarSight Telecast Inc. This lawsuit is separate
from an old StarSight lawsuit against UVSG that was the subject of a recent trial in
federal court in Tulsa, Okla., a Gemstar spokesman said.

The Gemstar complaint -- filed in U.S. District Court in
San Jose, Calif., and dated July 24 -- seeks damages and injunctive relief against Prevue
for violating two Gemstar patents related to displaying TV-schedule data. One of the
patents was issued June 14, and the other dates back to 1987, according to the complaint.

In a press release, Gemstar said the lawsuit was aimed at
Prevue Interactive, and it cited UVSG's own earnings release, which claimed 650,000
customers for Prevue Interactive, growing by 8,000 to 10,000 per day. Prevue said seven of
the top 10 MSOs have launched Prevue Interactive.

UVSG president Peter C. Boylan III said last Tuesday that
he had no immediate comment about the lawsuit, since he hadn't had time to study it.
But he added that it was "unfortunate" that Gemstar had chosen to sue,
"because it is not in the cable and satellite industries' best interests to be
suing and slowing down digital" deployments.

Some operators have said that the disputes between Gemstar
and Prevue made it harder to choose either guide because of potential liabilities in the
future.

Boylan said UVSG now has to decide whether it wants to
start suing to protect its patents, rather than its usual practice of negotiating
licensing deals with companies that it believes are using its technology.

UVSG has been focusing on Prevue and the potential for EPGs
in digital boxes. That was the driving force behind the Tele-Communications Inc.
subsidiary's $2 billion deal to buy TV Guide and related assets from News
Corp., and it also drove the aborted effort to buy Gemstar after an attempt to merge the
companies' EPGs cratered.

Cash flow at Prevue -- which also includes widely
distributed analog product The Prevue Channel -- grew at a 37 percent clip in the quarter,
even after $2.3 million in one-time costs to improve the look of Prevue Channel. UVTV, the
unit that distributes WGN and other distant-signal broadcasters, reported a 21 percent
cash-flow increase.

Overall, UVSG's earnings rose 22 percent in the
quarter, to $13.7 million, or 37 cents per share, and cash flow rose 22 percent, to $31.1
million. Revenue rose 16 percent, to $149.2 million. UVSG saw declines in its SSDS
systems-integration and SpaceCom Systems network-services divisions.

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