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TiVo Wants "Billions" From Google and Cisco

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TiVo (Nasdaq: TIVO  ) is no stranger to the courtroom. A series of settlements in patent infringement lawsuits has netted the digital video recorder pioneer at least $1 billion in damages and license royalties. DISH Networks (Nasdaq: DISH  ) was first in line, and the biggest paycheck so far. Then came AT&T (NYSE: T  ) with a smaller Rolodex of DVR-toting customers, and hence a smaller settlement. Verizon (NYSE: VZ  ) rounds out TiVo's victory roll so far with a 7-year agreement to put TiVo-approved software on every FiOS-branded video recorder.

The next domino is about to fall. The last major action on TiVo's American docket is an indirect attack on holdout Time Warner Cable (NYSE: TWC  ) , by way of suing the companies who make Warner's set-top boxes. And it's a potential whopper.

How big is "big?"
In legal filings this week, TiVo said that it is looking for "billions of dollars" in damages alone (emphasis TiVo's, not mine!). Let's put that claim into context. From the filing:

This is an important case for TiVo. Motorola's massive production of infringing DVRs dwarfs the numbers of accused products at issue in TiVo's previous cases. TiVo's damages claim is likely to run into the billions of dollars and TiVo requests a permanent injunction against the infringing Motorola DVRs. TiVo seeks its day in court as quickly as possible ...

The motion was filed to join the cases against Cisco Systems (Nasdaq: CSCO  ) and Motorola Mobility, now a division of Google (Nasdaq: GOOG  ) . Like I said, TiVo sees a much larger damage claim this time, and makes similar claims against Cisco as well.

The fact that Google now owns Motorola Mobility is an important factor. Big G does not have a history of courtroom aggression, and TiVo's claims against Motorola are actually counterclaims to an earlier lawsuit going the other way. Google may have forced Motorola to drop a patent suit against Apple (Nasdaq: AAPL  ) earlier this month, the better to align the new division with its parent's intellectual property ideals.

Beyond the direct cash payments from these settlements, the legal campaign helps TiVo transform into a lightweight business model. Based on more than a decade of innovation and tons of spit-shine polishing, TiVo sits on a valuable portfolio of software and patents related to video recording and content management. These are being shopped around to cable and telecom operators around the world.

What's next?
The courtroom drama adds a big, scary stick to TiVo's user-friendly carrot. None of TiVo's lawsuits have actually gone to trial, because everybody from DISH to Verizon saw fit to settle their differences. All three linchpin actions were settled just days before going to jury trial. The parties in the current action are haggling over details like trial dates right now. I can smell another settlement coming by the end of November.

The final tally might not end up in the multibillion dollar range that TiVo outlines here -- some hyperbole is to be expected in any legal filing dealing with dollar amounts. But I don't see any reason why TiVo's victory lap around legal challengers would stop here. There's just too much precedent piled up against Big G and Cisco.

This is the final puzzle piece to TiVo's overall strategy, and the last chance to derail it all. Another win would remove a huge burden of uncertainty from TiVo's shoulders and share price. On the flip side, the damage to TiVo would be huge if I'm wrong.

All in all, I believe that TiVo's shares will bounce to about $15 on a favorable settlement and I'm about 80% sure it'll happen. Do your own due diligence and invest accordingly, dear Fool.

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Fool contributor Anders Bylund owns shares of Google and TiVo. Check out Anders' bio and holdings, or follow him on Twitter and Google+. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 19, 2012, at 12:29 AM, AndreWilliamson wrote:

    The DISH case didn't go to trial? Heh.

  • Report this Comment On October 19, 2012, at 9:13 AM, wvharbeson wrote:

    The statement of "All three linchpin actions were settled just days before going to jury trial," in the article's 1st paragraph of the "What's next?" section, is erroneous. The first of the 3 infringement suits, against Echostar/Dish and related, was found in TiVo's favor in April 2006 via a jury trial in the United States District Court for the Eastern District of Texas. Further, on appeal by Echostar the infringement finding was affirmed by the United States Court of Appeals for the Federal Circuit in January of 2008. Lastly, in October 2008, the U. S. Supreme Court rejected hearing Echostar's appeal of this case to that court. After this, and a bit more legal wrangling, Echostar settled with TiVo.

    What this points out is TiVo's precedent is a LOT stronger than just out-of-court settlements. Their patent in these infringement cases is tried and true, not only by settlements, but by court decisions and by examination and re-examination of the U. S. Patent Office that reaffirmed all TiVo's claims in their U. S. Patent 6,233,389, the principle subject of these suits. These facts were probably the main catalyst in the settlement of the suits with AT&T and Verizon BEFORE the jury trials (i.e., there's no sense beating a dead horse). I expect the same in the pending cases, and think there is better than an 80% chance of a favorable outcome to TiVo.

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