Microsoft has got itself in deeper and deeper by suing TiVo on behalf of its clients AT&T and Verizon. The first court that takes a long look at this, and it is now likely to be the US International Trade Commission, will, we believe, come down hard on Microsoft for this.
This week Microsoft made it known that it was seeking an injunction to prevent TiVo importing DVRs, which it claims use patents which Microsoft has filed around the onscreen TV guide. Given that these patents have never been widely licensed and never (as far as we can find) seen legal scrutiny, they might be used to target any and every pay TV operator or supplier, but instead Microsoft is purely going after tiny TiVo, in a move that will be laughed at legally.
Using the ITC for tactical market battles or to defeat existing, unrelated litigation, will backfire, we are pretty sure. At the outset the ITC can simply say no to the request to ban the import of TiVo devices. At the worst Microsoft will get financially hit by the suit, or have its patents taken away as obvious, out of date and containing prior art. This is like Intel trying to prevent DVRs from being installed because they have a ‘chip’ in them. It’s dumb.
The fact that Microsoft is acting on behalf of its customers AT&T and Verizon is transparent, and tasteless. Let them defend themselves.
The ITC case is simply a new front in a determined effort by the entire pay TV community to avoid paying TiVo its due on patent licensing for Trick Play DVR features. Already the Dish Network has been ordered to pay around $400 million because it refused to pay a simple reasonable royalty over these patents, and although part of that is about to be reviewed by an ‘en banc’ retrial, the core issue that the patents are strong and valid, has been through courts twice. TiVo now needs to be afforded Gemstar status and the majors need to pay royalties on its inventions, and use the TiVo technology top to bottom, not try to sue it out of existence.
Microsoft brought up the issue of these EPG patents after TiVo waded into AT&T and Verizon in the wake of what was thought of as the Dish final legal decision (although that case has lingered on). There is a simple, painless licensing deal to be done here. Microsoft supplies middleware, hardware and technical services to both Verizon and AT&T pay TV services, but instead of embracing TiVo, it has attempted to sideline the issue, and now this forlorn hope of battering it into submission over unrelated, and untested patents of its own, are likely to end in grief ‘ not for AT&T and Verizon, but for Microsoft.
TiVo has a long history of defending its basic intellectual property around digital video recorders, and has had the patents deeply examined in courtrooms and at Markman hearings, and it has been found that they are sustainable. Instead this is a merely an attempt, and a not too subtle one at that, at mitigation.
It is customary for a company as large as Microsoft and AT&T, each with extensive patent hoards of their own, to find a patent that they believe their opponent uses used illicitly and barter the two, one against the other. It mostly slows down the rate of the court case as they try to get the two heard together or simply settle out of court for no payment or more likely a lesser payment. But Microsoft has tried to up the ante by the predictable attempt to get a ban on the imports of TiVo boxes by the ITC. In our experience the ITC is rarely pushed to a measure that extreme, although it almost went that route in the Broadcom Qualcomm dispute, but of course that was eventually settled out of court, as this should be.
Because these two sets of patents are completely different, they will go to separate conclusions and cannot be lumped into a single court case, so the TiVo actions against AT&T and Verizon will continue and would come to court far earlier than the Microsoft suit. The only hope Microsoft has is to leapfrog the timeframe by using the ITC. Tactically TiVo might have missed a trick by not filing with the ITC itself.
If the court cases run their course, discovery on the DVR patents will take almost no time because of all the work that has been done at the TiVo end, preparing for the EchoStar/Dish case. In the Microsoft case against TiVo these are patents that are untried in a court of law, and would likely come to court years later after several attempts to get the patents revoked.
So once the ITC moves in favor of TiVo, these shenanigans will have to move to settlement immediately, because Microsoft has no plan B to fall back on.