Cisco sues TiVo over DVRs

Fri Jun 1, 2012 12:17pm EDT

* Cisco seeks to void four TiVo patents

* Cisco says its DVRs do not infringe TiVo patents

* Patent litigation is key part of TiVo business strategy

By Liana B. Baker and Jonathan Stempel

June 1 (Reuters) - Cisco Systems Inc has filed a lawsuit to void four TiVo Inc patents related to digital video recorders, escalating a battle over who has the right to profit from sales of the popular machines.

In a complaint filed on Wednesday, Cisco said TiVo has resisted granting a broad license to its technology because doing so would impede TiVo's capacity to bring -- and ultimately settle -- lawsuits over its patents, a key source of revenue.

Cisco sells DVRs through its Scientific Atlanta division to companies including 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.

Cisco sued in the federal court in its hometown of San Jose, California. It seeks a court order that voids the TiVo patents or declares that Cisco and its DVRs are not infringing them.

A TiVo spokesman did not immediately respond to a request for comment.

TiVo sells its own set-top boxes and licenses technology to cable TV operators including Charter Communications Inc , DirecTV and Virgin Media Inc.

Todd Mitchell, an analyst at Brean Murray who has a "buy" rating on TiVo, said a ruling in Cisco's favor could be a significant setback for TiVo, given its reliance on patent litigation related to technology for recording television.

"What you have is all the big guns aimed at TiVo. It's a David vs. Goliath situation. Cisco has the ability to throw a lot of stuff at TiVo," he said.

Mitchell said Cisco likely already has a strong patent trove, which would be aided by its planned $5 billion acquisition of NDS Group Ltd, which makes Pay TV software.

On Wednesday, TiVo posted a larger-than-expected quarterly loss of $20.8 million as operating costs more than doubled. Revenue rose 48 percent to $67.8 million.

Cisco net sales totaled $11.59 billion in the quarter.

TiVo is currently involved in patent litigation with Verizon and Google Inc's Motorola Mobility business.

In January, AT&T agreed to pay TiVo at least $215 million plus monthly licensing fees to settle patent litigation.

Dish Network Corp and EchoStar Corp in May 2011 agreed to pay TiVo $500 million to settle a similar case.

In morning trading on the Nasdaq, TiVo shares were down 44 cents, or 5.2 percent, at $8.10, while Cisco shares were down 32 cents, or 2 percent, at $16.01.

The case is Cisco Systems Inc v. TiVo Inc, U.S. District Court, Northern District of California, No. 12-02766.

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