Zacks_Analysts' Blog : TiVo Infringes Motorola's Patents - Analyst Blog

TiVo Inc. (TIVO), a developer of advanced television services including digital video recorders (DVR), was accused of infringing DVR patents according to a latest suit filed by Motorola Mobility Holdings Inc. (MMI).

Motorola indicated that it was seeking to protect its interests after TiVo sued Verizon Communications Inc. (VZ), which uses Motorola's technology, for patent infringement. Motorola claimed that it had acquired the DVR patents through the acquisition of Imedia, which filed for the patents in April 1995.

TiVo has a long history of fighting law suits against major companies such as Echostar Corp. (SATS), Dish Network Corp. (DISH), Microsoft Corp. (MSFT), AT&T Inc. (T) and Verizon.

In August, 2009, TiVo filed a complaint against AT&T Inc. and Verizon Communications, Inc. for the infringement of three TiVo patents. In February, 2010, Verizon filed counter claims against TiVo, seeking declaratory judgment of non-infringement and invalidity of the three patents. Additionally, Verizon filed a suit against TiVo, alleging the infringement of its six patents.

In March 2010, AT&T filed a countersuit against TiVo in the United States District Court for the Northern District of California for the infringement of its four patents.

In January 2010, Microsoft filed a lawsuit against TiVo in San Francisco federal court, claiming that TiVo has infringed upon two of its US patents, which cover technologies for securely purchasing and delivering video and for displaying programmable information, respectively.

Most recently, in the long-running legal battle against Echostar, TiVo faced a setback when the U.S. District Court for the Eastern District of Texas lifted its stay on EchoStar's patent infringement suit against TiVo, filed way back in 2005.

The suit, originally filed by EchoStar on four patents, has been brought down to one patent. EchoStar has also changed its position regarding the meaning of claim terms.

TiVo continues to fight a bitter patent infringement suit against Dish Network Corp., which is currently under the en banc (full panel of Judges) review. Dish Network Corp., formerly a part of Echostar, was spun off as a separate company in 2008.

Our Take

We believe the Motorola suit adds to the woes of TiVo. TiVo remains entangled in various legal battles, which are expected to drive its litigation expense, which in turn will hurt profits going forward.

Moreover, competitive offerings from cable and satellite providers are threatening TiVO’s digital video recorder business, resulting in reduced subscriber additions.

However, we expect new customer wins and partnerships, new cable deals, gradual roll out of distribution deals, product launches and international diversification to drive long-term growth.

We maintain our Neutral rating over the long term (6-12 months). Currently, TiVo has a Zacks #4 Rank, which implies a Sell rating over the short term.