Verizon and TiVo Reach $250 Million Patent Settlement

TiVo, which has been struggling in recent years, has found at least one source of revenue in the short run: patent settlements. Specifically, TiVo had alleged in its mid-2009 suit that Verizon infringed on three of its patents: its “multimedia time warping system,” “system for time shifting multimedia content streams,” and “automatic playback overshoot correction system.” These refer to the TV show recording technology which was once synonymous with TiVo. With the advent of TiVo, viewers were excited to gain unprecedented control over their ability to watch TV. Digital video recording meant that viewers could record shows and play them back at any time, even while they are being recorded. TiVo was the first company to make such technology commercially available, getting its start in 1999 and first breaking a profit in 2005. It didn’t take long after TiVo took off for cable providers to join in on the action, offering TiVo-style technology to its patrons; in 2008, Engadget reported: “Now that DVRs [digital video recorders] have really hit critical mass, just about everyone and their brother makes one.” That overlapping of ideas (which some might assert is infringement) eventually led to TiVo’s current position, where it is well-suited to take advantage of possible infringements to extract multiple settlements.

Verizon will now have to pay TiVo $250 million in an arrangement that starts with Verizon paying $100 million cash up front, with 25 recurring quarterly payments to follow, reaching a total of $150 million. The agreement also provides for the mutual patent licensing of the companies’ advanced television patents. The companies mention the prospect of Verizon allowing TiVo to use a technology being developed by Verizon and Redbox to compete with Netflix. Another possibility is a deal involving Verizon offering TiVo boxes to its customers.

Verizon isn’t the only one paying up. Last year, TiVo settled with satellite providers Dish and EchoStar for $500 million. In January, AT&T settled with TiVo for $215 million. Future settlements with Time Warner Cable and Motorola Mobility (now owned by Google) are possible. This series of settlements (some actual, some speculative) seems to bode well for TiVo. But it remains to be seen whether TiVo can thrive as a future innovator, notwithstanding its former development of its DVR “time warp” technology. To be sure, TiVo has had struggles, mainly due to competition from DVR services provided by cable and satellite television providers at a lower cost. But TiVo has fought back on a number of fronts, keeping an eye on the future rather than the past. First, TiVo has made it a point to include technology-sharing provisions in its settlements, so it can benefit from the innovations and initiatives of other tech companies. Second, TiVo has come out with newer models that integrate well with other tech devices and services. For example, as of June 2011, TiVo has iPhone and iPad apps, which allow users to schedule and manage recordings remotely.

If TiVo plays its cards right, it may be able defy expectations and make itself relevant once again. These settlement negotiations represent a critical opportunity as TiVo works to revitalize itself. There is some indication that TiVo is navigating its course skillfully. As Dish CEO Charlie Ergen said, “the results of TiVo’s formidable intellectual property enforcement program speak for themselves, and consequently, we are pleased to put this litigation behind us and move forward. Additionally, we believe that our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo’s Time Warp patent, which ultimately will allow us to enhance the performance of our award-winning DVRs. We look forward to continuing to offer DISH Network customers the most choices in video service.”

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* Lena Mualla is a third-year law student at Wake Forest University School of Law. She holds a Bachelor of Arts in Government and International Politics from George Mason University. Ms. Mualla was awarded a Fulbright ETA award to teach in Indonesia following undergrad. She is interested in the areas of banking law and IP law.