Cisco Systems had filed a lawsuit last week in federal court, seeking to void four TiVo patents related to digital video recorders (DVRs). The lawsuit escalated from a battle between the two over the right to profit from sales of the popular DVRs.
In the complaint filed on Wednesday, May 30, Cisco alleged that TiVo did not want to grant a broader license to its technology because it would impede its capacity to bring and settle lawsuits over its patents, which are a major source of revenue, Reuters reported. Cisco sells DVRs through its Scientific Atlanta division, and customers include big players such as AT&T Inc., Time Warner Cable Inc., and Verizon Communications Inc.
"Absent a declaration of invalidity and/or non-infringement, TiVo will continue to wrongfully allege that Cisco DVRs and Cisco's customers infringe the TiVo patents, and thereby cause Cisco irreparable injury and damage," Cisco said, as cited by Reuters.
David vs. Goliath
Cisco filed the lawsuit against TiVo in the federal court of its hometown of San Jose, California, seeking a court order that either voids the TiVo patents, or rules that Cisco and its DVRs are not infringing those patents. Meanwhile, TiVo sells its own set-top boxes and licenses technology to cable TV operators such as TirecTV, Charter Communications Inc., and Virgin Media Inc.
Brean Murray analyst Todd Mitchell, who has a "buy" rating on TiVo, said if the court sides with Cisco, TiVo could face a significant setback, especially considering its dependence on patent litigation related to its technology for recording television, Reuters reported. "What you have is all the big guns aimed at TiVo. It's a David vs. Goliath situation," said Mitchell. "Cisco has the ability to throw a lot of stuff at TiVo."
According to Mitchell, Cisco likely has a strong patent trove already, and its planned $5 billion acquisition of NDS Group Ltd., which makes PayTv software, would further add to the trove.
Context
TiVo posted a larger-than-expected quarterly loss of $20.8 million on Wednesday, May 30, as operating costs more than doubled. Revenue climbed 48 percent to $67.8 million. Meanwhile, Cisco net sales generated a total of $11.59 billion in the quarter.
TiVo also has ongoing patent litigations with Verizon and Google's recently acquired Motorola Mobility business. AT&T settled a patent litigation with TiVo back in January, agreeing to pay TiVo at least $215 million in addition to monthly licensing fees. Before that, in May 2011 Dish Network Corp and EchoStar Corp agreed to pay TiVo $500 million to settle a similar patent dispute.
The current patent case is Cisco Systems v. TiVo Inc, U.S. District Court, Northern District of California, No. 12-02766.
