Verizon to pay to end 2 patent suits

TiVo settles for $250.4 million;ActiveVideo, $260 million

Tivo Inc. video recorders are displayed at a Best Buy store in Orem, Utah. Verizon Communications Inc. will pay more than $510 million to end patent-infringement suits filed by TiVo and ActiveVideo Networks Inc.
Tivo Inc. video recorders are displayed at a Best Buy store in Orem, Utah. Verizon Communications Inc. will pay more than $510 million to end patent-infringement suits filed by TiVo and ActiveVideo Networks Inc.

— Verizon Communications Inc. has agreed to pay more than $510 million to end patent-infringement suits filed by TiVo Inc. and ActiveVideo Networks Inc. that targeted features of its FiOS TV service.

Verizon, based in New York, will pay TiVo at least$250.4 million to end a dispute over digital-video-recording services, and agreed to pay CloudTV developer ActiveVideo more than $260 million over the video-on-demand feature.

The cases remove a drag on a service that Verizon is trying to promote as consumers demand more from their televisions. The company reported having 4.5 million FiOS Video connections at the end of the second quarter, a 16 percent increase from the year ago period. The wireline division, which includes the FiOS TV, phone and Internet services, generated $40.7 billion in sales last year and FiOS accounted for 65 percent of that division’s profit, Verizon said July 19.

In the TiVo case, Veri-zon will make an initial cash payment of $100 million, followed by quarterly payments totaling $150.4 million through July 2018, Alviso, Calif.-based TiVo said Monday in a statement. Verizon also will pay monthly license fees for every Verizon DVR subscriber beyond a predetermined level.

TiVo and Verizon were scheduled to begin trial next week in a federal court in Marshall, Texas. TiVo claimed that Verizon infringed three patents, including one for the so-called time warp system that lets users store TV broadcast programs while watching another show. That patent was at the heart of a seven-year legal battle with Dish Network Corp. that was settled last year.

“We are pleased to have reached settlements with both TiVo and ActiveVideo in these two matters,” Ed McFadden, a Verizon spokesman, said in an e-mail.

McFadden declined to say whether Verizon would alter its profit forecast based on the settlements.

A victory for TiVo could have forced Verizon to remove the DVR service from FiOS TV. Dish had been ordered to remove that function before the settlement was reached.

Verizon also had its own patent-infringement claims against TiVo that probably would have been tried separately. One of those patents was involved in a dispute Verizon had with ActiveVideo.

TiVo shares rose 38 cents, or 4 percent, to close at $9.94, after earlier advancing as much 9.3 percent for the biggest intraday jump since Jan. 4. The shares had risen 6.6 percent this year through Sept. 21.

Verizon shares rose 4 cents to $45.68.

In the ActiveVideo case, the two companies agreed to a patent cross-license. Closely held ActiveVideo didn’t say how much Verizon is paying in total, except that it involves an unspecified sum in addition to $260 million earlier ordered by a federal court.

The agreement was struck after a U.S. appeals court in August upheld a jury verdict that New York-based Verizon lost and an order that Verizon pay ActiveVideo $2.74 per month for each FiOSTV subscriber. The appeals court overturned a ruling that would have forced Verizon to stop providing the service to its customers.

“In the end our technology and its value have been recognized,” said Jeff Miller, chief executive officer of San Jose, Calif.-based ActiveVideo.

TiVo has cases pending against Google Inc.’s Motorola Mobility unit and Cisco Systems Inc. Both cases involve set-top boxes made for Time Warner Cable Inc. A trial in the Motorola Mobility case is scheduled for May and the case against Cisco could head to trial in 2014.

“This is a major victory for TiVo, who will now focus on their legal efforts on potentially larger infringement claims against Google, Cisco and Time Warner Cable,” said Kevin Stadtler, principal of Stadtler Capital Management LLC in Fort Worth, who owns TiVo shares and is projecting they will rise.

Verizon and Redbox are testing a streaming video rental service called Redbox Instant that is expected to deliver video in select markets by Christmas.

Business, Pages 21 on 09/25/2012

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