TiVo Gets $490 Million Settlement with Cisco, Motorola, Time Warner Cable
TiVo agreed to a $490 million settlement of patent infringement suits it filed against Cisco, Motorola Mobility and Time Warner Cable, an amount that is below some analysts’ forecasts but averts an expensive legal battle before trial.
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While analyst firm Jefferies had forecast TiVo potentially seeking $1 billion in damages if its suit went to trial, Piper Jaffray analyst Michael Olson had pegged the combined settlement at $550 million. A trial in Motorola Mobility’s suit against TiVo that sought to have its so-called time-warp patent found invalid, was scheduled for June 10 in U.S. District Court, Marshall, Texas. TiVo sued Motorola, which is now owned by Arris, as well as Time Warner Cable and Cisco citing three patents, including those covering the time-warp IP and time-shifting of multimedia content. TiVo had been incurring about $9.5 million in quarterly legal costs.
Under the agreement, TiVo will get a $490 million payment from Google, which sold Motorola Mobility’s set-top business to Arris last year, with Cisco being responsible for $294 million of the total, according to an SEC filing. TiVo licensed Google, Arris and Cisco for four patents including the time-warp-related IP. The agreement with Google expires July 31, 2018, while Cisco’s ends 10 years from its effective date, a TiVo SEC filing stated. Time Warner isn’t mentioned in the settlement largely because it’s a Cisco customer for set-tops, but it was named in the TiVo suit. Cisco sued TiVo in May 2012, seeking to have its patents found invalid and claims construction in the case was to begin in Q3. Arris’ liability was limited to $50 million as part of its purchase agreement with Google.
TiVo was confident heading into trial with Motorola, with TiVo General Counsel Matthew Zinn arguing it would demonstrate that Motorola “took away an awful lot of business” it would have gotten if the company hadn’t infringed the patents. Motorola produced 20 million DVR/cable set-tops, the majority of which weren’t licensed, Zinn has said.
While the amount of TiVo’s settlement was “disappointing,” it removes uncertainty about the company and its legal expenses, Piper Jaffray’s Olson said. TiVo “felt strongly” about the merits of its case, but it “ultimately didn’t want to leave the decision in the hands of a jury,” Olson said. Gaining a degree of certainty was worth more to TiVo than a potentially higher damages amount had the case gone to trial, he said.
The settlement will “materially lower” TiVo’s legal costs and was in line with BMO Capital Markets’ “base case assumptions,” analyst Edward Williams said. BMO had forecast a Motorola settlement bringing in $300-$500 million for TiVo, Edwards said. A separate pact with Cisco could have been for 60 percent of the value of the Motorola agreement, Edwards said. Cisco ended up paying $294 million and Motorola, $196 million.
While TiVo will continue to sign new licensing pacts, the pace of them could be unpredictable and for smaller amounts because it has agreements most of the major cable and satellite set-top suppliers and service operators, Janney Capital Markets analyst Tony Wible said. In disclosing the settlements, TiVo also said it would double its stock buyback program to up to $200 million and extended it for two more years.