TiVo Rises as AT&T to Pay $215 Million to Settle DVR Case

Jan. 3 (Bloomberg) -- TiVo Inc. rose as much as 22 percent in extended trading after AT&T Inc. agreed to pay at least $215 million to settle a patent lawsuit over digital video recorders.

The settlement includes $51 million up front, followed by quarterly payments through June 2018 totaling $164 million, Alviso, California-based TiVo said in a statement today. Dallas-based AT&T also agreed to monthly license fees if its DVR subscribers exceed certain levels in that period, TiVo said.

“The growth that is expected by any analyst means they will pay us substantially more than $215 million over time,” TiVo Chief Executive Officer Tom Rogers said in a telephone interview. “There is value in our intellectual property.”

TiVo, a pioneer in the market for set-top boxes that can record a TV program and play it back at the same time, had lost customers to offerings from TV-service providers including AT&T and Verizon Communications Inc. TiVo accused those companies of using its patented time-warp technology, which also was at the center of a seven-year battle with Dish Network Corp. that ended this year with as much as $600 million in settlements.

TiVo in November reported its first net growth in subscribers in four years, which helped push revenue to $64.8 million in the fiscal third quarter ended Oct. 31.

“We went, over the course of the past year, from people saying what does TiVo really got to do in terms of demonstrating it can be a player in the cable industry, to being the leading player in advanced television,” Rogers said.

Microsoft Intervenes

TiVo rose to $10.91 at 5:17 p.m. New York time after closing at $8.92 in regular trading. AT&T rose less than 1 percent to $30.50.

Jury selection in the AT&T case was scheduled to begin Jan. 9 in federal court in Marshall, Texas. In addition to the time-warp technology, TiVo claimed AT&T’s U-verse service also infringed patents for an automatic playback overshoot correction system and one for time-shifting multimedia content streams.

Microsoft Corp., which supplies software technology for U-verse, intervened after AT&T was sued in 2009. The Redmond, Washington-based software maker also filed a patent case at the U.S. International Trade Commission over TiVo’s set-top boxes. That case went to trial in December, with a judge scheduled to release findings in March. Kevin Kutz, a Microsoft spokesman, said the company had no comment on the AT&T settlement.

As part of the settlement, AT&T and TiVo also have agreed to license each other’s patent portfolios in the advanced television field.

Motorola, Verizon

TiVo also has a case pending against Verizon over its FiOS television service. Motorola Mobility Holdings Inc., which supplies boxes for Verizon, claims it developed fundamental DVR technology before TiVo and filed a patent suit against TiVo.

A trial judge in Texarkana, Texas, today lifted a stay that had been imposed on the Motorola Mobility case six months ago because of the pending Verizon and AT&T cases. No trial has been set in the Verizon or Motorola Mobility cases, according to court dockets.

The case is TiVo Inc. v. AT&T Inc., 09cv259, U.S. District Court for the Eastern District of Texas (Marshall).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net