TiVo records victory in tech patent race

Rivals could be forced to pay license fee

TiVo scored a major victory Thursday in the digital video recorder wars, winning several patents for its technology that allows consumers to record television shows onto a hard drive without the need for a videocassette.

The ramifications of the patent, which solidifies TiVo’s competitive position in the space, could be enormous for its rivals, including Microsoft’s new UltimateTV and stalwart ReplayTV.

Because of the patent granted by the U.S. Patent and Trademark Office, the companies now may be forced to pay TiVo a license fee to continue marketing and selling their own competing digital video recording technologies.

San Jose, Calif.-based TiVo has yet to say whether it will use the patent to demand licenses or payments from its rivals, but the cash-strapped company is almost certain to pursue such a revenue-boosting option.

TiVo’s patent covers many of the key inventions associated with personal video recording, including the recording of one program while another is replayed; a method that allows viewers to pause, rewind or forward “live” television programming; and formats to convert digital and analog signals.

TiVo applied for a patent for its Multimedia Timewarping System in 1998.

While TiVo has been selling its service on Philips Electronics and Sony-built set-top boxes through the Internet and electronics retailers, the company’s future plans are to integrate its technology inside next-generation digital cable set-top boxes and television sets. ReplayTV has already made that move.

TiVo has attracted more than 200,000 subscribers to its set-top boxes since its introduction in late 1999. Internet research firm Forrester Research projects 8.2 million households will have personal video recorders by 2002.

Besides Philips and Sony, TiVo’s investors include AOL Time Warner, which has a 15% stake in the company and has made TiVo a core feature of its AOLTV service. Satcaster DirecTV owns 10% of TiVo. NBC, CBS, Disney, Showtime and HBO are also backers.

Stock surges

Shares of TiVo surged 72% on Thursday after the announcement. The stock ended the day up $3.56 to close at $8.50, its highest level since early February, although it still remains far off its 52-week high of $37.50.

“We are pleased that TiVo is receiving formal recognition for the invention of unique and novel technologies, underpinning the making of personal video recording devices,” said Jim Barton, TiVo’s chief technology officer.

Separately, after the markets closed on Thursday, TiVo announced a wider first-quarter loss of $50.2 million for the three-month period ended April 30, from a loss of $23.4 million for the same period a year ago. Revenues soared to $3.2 million from $499,000.

TiVo has recently been trying to curb costs. In an attempt to reduce spending by 35%, the company cut 80 jobs last month.

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