The inevitable scrabble for intellectual property in the Digital Video Recorder market has finally begun in earnest, now that a court has made it clear that TiVo genuinely owns patents which cover the basic trick play of fast forwarding, pausing live TV and offering the EPG a view of what’s on the hard drive.
Students of the first round of this war, will remember that TiVo and ReplayTV covered all this ground about 5 or 6 years ago, when what might be called an honorable draw was the outcome and a cross license between the two for the early IPR. It was ReplayTV which licensed Scientific Atlanta the basic DVR patents which protected them from legal action by TiVo, and we believe that Motorola may have been a similar patent licensee, but have never been able to nail that down.
Sony, Thomson and Philips all paid TiVo dollars in the early years of its life for intellectual property licenses, but actually fought shy of building any DVRs. Operators, in the main were reticent. In fact the DVR may never have come into being as a concept if TiVo had not actually gone to the trouble of both beginning to make its own DVR devices, and if it had not won an agreement with DirecTV to use those same devices to push its satellite DTH TV service in the US.
The concept was so impoverished that ReplayTV failed entirely to make a business out of the invention and was sold initially to Sonic Blue, and eventually to Japan’s D&M Holdings, which made its own name with the consumer electronics brands of Denon and Marantz.
But in the wake of yet another round of legal decisions going in favor of TiVo, in its patent dispute with US satellite operator EchoStar’s DISH networks, DirecTV has moved to acquire ReplayTV, along with its patents, from D&M. It’s hard to see exactly the attitude that TiVo management had towards DirecTV. It was, after all, the pay TV operator that gave it its first big break in the first place. DirecTV today still has contracts with TiVo to license its ideas and intellectual property in DVR based advertising, and it also still makes up well over half of the TiVo customers. TiVo gets to charge for its service on top of the DirecTV provision of the basic DVR device, which is now designed by News Corp subsidiary NDS and manufactured by a number of consumer electronics manufacturers, many of which (such as Humax) that have never paid TiVo anything for the core DVR patents.
DirecTV is currently owned by News Corp, and there are a considerable number of satellite operators outside the US, which are controlled by News Corp, which have also never paid TiVo anything for the basic DVR rights.
So at the very least right now TiVo is ambivalent towards DirecTV, and increasingly likely to become less and less friendly over time. If it considers that it has been cut off from future revenues from that quarter, and if DirecTV is shortly to become a subsidiary of Liberty Media, the remaining parts of the News Corp empire are the parts that TiVo might most want to chase for royalties.
What was paid for ReplayTV remains a mystery, but even more mysterious will be exactly which company has rights to the ReplayTV patents. Will it just be DirecTV, or will it also be all of News Corp? One suspects that the only way for TiVo to find out will be to start legal proceedings, something that it has been reluctant to do for the past four years, until the Dish suit was resolved. Companies that small like one fight at a time.
But the matter is unlikely to rest there. The legal actions between TiVo and ReplayTV were over the most basic DVR patents and since 2003 TiVo has continued to actively add to these patents, while ReplayTV is understood not to have had any real R&D. The result is that TiVo has never licensed the more advanced ‘smart’ recording patents which allow it to create a ‘season’s pass’ or ‘wish list’
A TiVo can be set up to recognize favorite programs and record those with similar themes and the same actors or directors. It can also be set up to ignore episodes of TV series’ that have previously been recorded.
Another issue is that the Cablecard initiative presided over by the FCC in the US, means that DRM and set tops can now be separated. It was recently made clear that TiVo set tops can be integrated with a CableCard enabled TV, meaning that it can be set up to ‘see’ the previously encrypted EPG data. DVRs which cannot see a pay TV service EPG, can only record a channel when the TV is on that channel, and have taken off far more slowly, because they are cumbersome.
With CableCard implementation deadlines looming, TiVo devices will become more and more popular and more and more useful on cable TV devices. Cable can have good DVRs like TiVo, but satellite, clearly cannot under this scenario, not without infringing on patents.
The icing on the cake are the advertising patents, which were largely funded by Comcast, and which are now being integrated through a software upgrade to a Motorola set top. DirecTV also has a similar deal, but most pay TV operators, including the new breed of IPTV suppliers, and including both AT&T and Verizon on the US, and their supplier Microsoft Mediaroom, do not have rights to TiVo patents as far as we can fathom.
But in the end only one company could buy out ReplayTV, and if it tries to license its patents to others, there is every chance that TiVo, will come after them legally for the features which are added and which infringe on its latter day claims. It may even decide that DirecTV and News Corp’s ownership of ReplayTV patents do not make them immune to prosecution, but that’s not so straightforward as going after its licensees, otherwise DirecTV could license EchoStar for a pittance, and it might now claim that it had rights to TiVo technology.
There are a whole raft of companies that have paid nothing for the persistent inventiveness of TiVo, which are far easier to go after than those, starting with a swift check of European and Asia Pacific patents and the pay TV operators there, not to mention companies offering DVR capabilities through software on the PC. Even Orb Networks, which is one of the pioneers behind placeshifting, along with EchoStar’s Sling Media, offers a placeshifting system with the DVR capability bundled, through Hauppauge Digital in the US.
D&M Holding said that ReplayTV was profitable, but gave no idea of its revenues, and said it will remain the operator of existing service contracts for current subscribers for the foreseeable future.
We maintain that the freshly freed up EchoStar, once it separates from DISH, on January 1, should go and buy TiVo, and then offer set top manufacturers the combined licenses to placeshifting and DVR technology all from the same intellectual property base. That would save EchoStar the $72 million that it is due to pay TiVo in the near future over its successful, and largely complete patent action, but of course it might mean ten times that amount to buy the company. Another option of course is for DirecTV to buy TiVo, and unify the intellectual property with ReplayTV, and hold the world to ransom on all the DVR patents.