Successful litigation campaigns against DISH Network (Nasdaq: DISH) and AT&T (NYSE: T) extracted hundreds of millions of dollars in damages and license fees for TiVo (Nasdaq: TIVO). This week, the digital video recorder specialist followed up on those wins by launching another patent infringement suit against Cisco Systems (Nasdaq: CSCO).
No, wait -- I got that backwards. It's actually Cisco claiming that TiVo's DVR technology steps all over the networking giant's intellectual property.
Cisco isn't asking for fat damage checks, but wants TiVo to call off the legal attack eagles. According to a Reuters report, Cisco simply claims that TiVo's DVR patents should be declared invalid. At the very least, Cisco wants a declaration of non-infringement so TiVo can't turn its lawsuit machine on Cisco next.
This may seem benign, but Cisco would actually cut-block TiVo if its Scientific Atlanta set-top boxes become immune to lawsuits. You see, in TiVo's stick-and-carrot approach to becoming a software and technology provider for all the world's DVRs, lawsuits provide the stick. This attack could actually take away a very large part of TiVo's future earnings, if Cisco starts a trend.
DISH and Ma Bell have already paid their dues and helped TiVo set a precedent, but those guys simply buy set-top boxes from the likes of Cisco. A challenge from a major hardware builder could prove altogether hairier than the service provider suits, which TiVo has been setting up and knocking down with relative ease.
Investors on both sides of this conflict would be smart to keep a close eye on how it all works out. Just click here to add TiVo and Cisco to your Foolish watchlist, and you'll always be in the know. TiVo is down but not out, and I'm not sure that Cisco's challenge will stick. The smartest investors make a mint from understanding when low prices set them up for massive bounces. In this special free report, we share how you can apply the thought process investing greats to find some great additions for your portfolio. Click here to grab your copy today.
