AT&T Inc has agreed to pay TiVo Inc a minimum of $215 million and additional monthly licensing fees to settle a patent infringement dispute related to recording live TV.
TiVo's shares rose 14 percent in after-hours trade.
TiVo, whose brand is synonymous with a digital video recorders, has turned to litigation to generate revenue from licensing fees as the industry pioneer has struggled to fight competition from low-cost rivals in recent years.
The settlement is the second large victory in recent months for TiVo, which expects fees from AT&T to "significantly exceed" the guaranteed minimum payment.
TiVo also prevailed in a similar longstanding case against Dish Network and Echostar Corp in May. The companies, controlled by Charlie Ergen, agreed to pay TiVo $500 million to settle the dispute.
TiVo CEO Tom Rogers said in an interview that as part of the settlement, he could not reveal how much more revenue TiVo could generate from the deal but added "it's a number that has us holding our head very high."
TiVo will receive additional payments from AT&T that depend upon AT&T's subscriber base of DVR users meeting certain growth targets until 2018.
"No matter which projections you take, they all involve AT&T paying us significantly higher revenue than $215 million," Rogers said.
Todd Mitchell, an analyst for the firm Brean Murray, said he estimates AT&T could end up paying potentially 10 or 20 percent more per year if its TV business keeps growing.
An AT&T spokesman declined to comment.
The same patents involved in the case are a part of a lawsuit TiVo is embroiled in with AT&T's competitor, Verizon. Rogers said now that the AT&T case is settled, the parties will hold a conference and decide on a timetable for the Verizon case.
He added the AT&T settlement bodes well for the Verizon case since Verizon's TV service FiOS, like AT&T'S U-verse service, "has substantially built their business on operating DVRs."
A Verizon spokeswoman did not immediately respond for comment on Tuesday.
AT&T's first payment of $51 million, which was due Tuesday is slightly higher than TiVo's forecast for its fiscal fourth quarter revenue of $48 million to $50 million, announced in November.
The first payment will be followed by quarterly payments through June 2018, according to TiVo. In return the companies have agreed to dismiss all pending litigation and enter a cross licensing agreement.
TiVo shares rose 14 percent to $10.18 in after-hours trading.
(Reporting by Sinead Carew and Liana B. Baker; editing by Carol Bishopric)