Digital Video Recorders (DVRs) have changed the way we watch television. No longer do you need to run home to catch your favorite shows or bother with VHS tapes to record programs. DVR technology allows for people to easily record shows without tapes, without a VCR and without timers. With the touch of a button, people can pause live TV, view an instant replay and rewind their favorite scenes. The most popular feature, the "season pass" enables viewers to set up auto-recording for an entire season of a program.
TiVo, Inc. launched its first video recorders in 1999 and is the pioneer of DVR technology. A few years later, other companies created their own version of DVRs, and customers began using their services instead. TiVo then lost customers and profits, and filed patent infringement lawsuits against several companies. Five years ago TiVo sued Dish Network, this case is still unresolved. More recently, TiVo brought a lawsuit against AT&T and Verizon in the same court where it is in a legal battle with Dish Network.
What Is Patent Infringement?
Just as physical property, such as your home, is protected by law, intellectual property, such as ideas and creations, are also protected. When a person or company invents something, they can apply for a patent.
A patent is a set of exclusive rights granted by the government to an inventor for a limited period of time, in exchange for public disclosure of the intention. To enjoy patent privileges, the creator needs to go through a legal application process. TiVo's patent covers the "real time capture, storage and display of television broadcast signals."
Patent infringement is when someone uses or sells the patented invention without the permission of the creator. The patent holder can grant permission to other companies or people to use his invention for an exchange of money, through a license.
If the creator thinks that someone is using his patented idea without paying a licensing fee or getting permission, the creator can sue and seek money damages as well as an injunction. An injunction is an order of a court that requires the person or company to stop doing something and refrain from doing it in the future.
Here, TiVo accuses AT&T and Verizon for infringing on its DVR systems and patent. Because TiVo has been engaged in a lawsuit with Dish Network for over five years now, this recent lawsuit came as a surprise. Most people expected TiVo to wait for the initial case to be settled.
The Dish Network Lawsuit
TiVo initially sued Dish Network and won. They were awarded more than $200 million from Dish Network, and a permanent injunction against Dish Network has been filed. Dish Network appealed that decision.
AT&T and Verizon
TiVo claims that AT&T and Verizon are also infringing on its patent by offering TV service with DVRs (Verizon with FiOS, AT&T with U-verse).
Before filing the lawsuit, TiVo unsuccessfully tried to come to a commercial agreement with the two companies. "We need to stop their continued unauthorized use of our intellectual property," TiVo CEO Thomas Rogers is quoted as saying. He added that patent infringement could cause irreparable harm to the company.
TiVo's Financial Situation
TiVo is already feeling the damages. Only 31,000 subscriptions were added in the last three months, which is 14% lower than usual. In addition, TiVo reported a loss of $4.2 million this quarter. Most of its losses are attributed from customer loss due to DirecTV users switching to high definition (HD) DVRs. TiVo's own HD DVR is not yet available.
What Does This Mean?
We don't know how the court will rule in TiVo's two lawsuits. If TiVo wins the appeal, Dish Network will have to either shut down all of its current customer's DVRs, or else sign a licensing deal with TiVo. AT&T and Verizon could also face a similar fate.
The issue of market competition and patent rights are constantly in friction with one another. While having choices and competition is good for customers, it is also important for patents to be protected and infringements be banned. If patent protections are not strictly enforced, people and companies will not dedicate time and money to create new inventions.
Questions for Your Attorney
- What are the rights of consumers in cases such as this? What if you signed a cable or satellite service contract based on certain features, such as having TiVo service? Have there been any related lawsuits by consumers?
- What happens to consumers if a patent infringement case renders their products obsolete or no longer useable?
- Does TiVo claim as its property the technology for the recorder, the software, or both? How are consumers impacted if they've bought a specific brand of DVR? Do patent laws apply to the consumer if a TiVo machine has been modified? What if someone was selling souped-up DVRs - is that infringement?