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TiVo Vs. the Telcos
Claiming further unauthorized use of patents that allow DVRs to record and play back a TV program at the same time, TiVo recently announced that it is now going after AT&T (NYSE:T) and Verizon (NYSE:VZN). The decision to go to court apparently came following the failure of behind-the-scenes attempts to reach a settlement.
This latest move adds a new chapter to the nearly five-year long legal battle over alleged patent infringement that has so far netted TiVo about $206 million in damages in its fracas with Dish/Echostar. But actually getting hold of the money is going to be another matter.
Legal Rulings Produce Shareholder Roller Coaster Ride
The seemingly endless legal back and forths in this battle has produced dramatic see-saw moves for TiVo shareholders. Last June, TiVo shares soared more than 50% in one day following the announcement that a U.S. district judge imposed additional damages of $103 million on Dish/Echostar for what was deemed to be continued infringement of TiVo's patents. But in July, TiVo shares slumped more than 15% when Dish/Echostar won a temporary stay on the ruling. More recently, the company has scored further legal wins with a ruling by the U.S. Patent and Trademark Office that TiVo's patent violation claims were invalid and that TiVo's request to cease a re-examination of its patents would be dismissed.
No End in Sight for Legal Fracas
With these latest rulings, it now a virtual certainty that the TiVo/Dish/Echostar legal battle will continue to grind on for the foreseeable future. Dragging AT&T and Verizon into the battle at this juncture is likely to further muddy the waters by making any potential settlement that analysts had been speculating was possible between TiVo and Dish/Echostar even less likely.
Digital World Marches On
In the meantime, the digital media world marches on, with new developments emerging that could make this whole battle over DVR patent rights redundant in the not-too-distant future. The Wall Street Journal recently reported that Time Warner Cable (NYSE:TWC) had signed a deal with seven large media companies to test the delivery of TV programming on the internet to paying subscribers. The moves follow last month's decision by Comcast (Nasdaq:CMCSA) to make more TV content available to its web subscribers.
The Bottom Line
The distinction between cable- and internet-delivered media is blurring and will soon be meaningless. In this new paradigm, the set-top box could easily be replaced by the PC configured to feed a wireless signal to a TV set. In this context, TiVo's ongoing legal fight looks increasingly like a battle over yesterday's technology. (For additional reading, check out Patents Are Assets, So Learn How To Value Them.)
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