ITEM 1.01 Entry into a Material Definitive Agreement.
Settlement and Patent License Agreement
On September 21, 2012, TiVo Inc. ("TiVo") and Verizon Communications Inc.
("Verizon") entered into a Settlement and Patent License Agreement (the
"Agreement"), pursuant to which the parties have agreed to: settle and dismiss
with prejudice all outstanding litigation between them (as described in TiVo's
periodic reports filed with the Securities and Exchange Commission (the
"Commission")); provide each party with a license to certain patents owned by
the other party; and release all infringement claims between the parties with
respect to such licensed patents.
Under the Agreement, Verizon will provide TiVo total compensation worth at least
$250.4 million. The payments will consist of an upfront cash payment of
$100,000,000 due on or before September 28, 2012 and twenty-five recurring
payments due to TiVo 30 days after the end of each calendar quarter in the
amount of $6,016,000 through September 30, 2018.
As part of the Agreement, Verizon may earn a credit of up to $29.4 million if
Verizon agrees to pursue a specified commercial services arrangement with TiVo
prior to December 21, 2012, which may reduce up to twenty-two of the quarterly
cash payments to $4,679,636. In addition to the $250.4 million in compensation,
TiVo will also receive incremental monthly fees at a higher rate than the rate
implied by the guaranteed fees per Verizon DVR subscriber if the growth of
Verizon's DVR subscriber base exceeds certain pre-determined levels. Any
incremental additional per subscriber fees are due to TiVo 30 days after the end
of each calendar quarter in which they are accrued.
Pursuant to the Agreement, TiVo granted Verizon a license under its advanced
television patents, including the patents that TiVo had asserted against Verizon
(U.S. Patent Nos. 6,233,389, 7,493,015 and 7,529,465), to make, have made, use,
sell, offer to sell and import advanced television technology in connection with
multichannel video programming services of Verizon (including the Verizon FiOS
TV pay television service) and video services of the joint venture between
Verizon and Redbox Automated Retail, LLC, subject to certain limitations and
exclusions. Verizon granted TiVo a license under its advanced television patents
to make, have made, use, sell, offer to sell and import advanced television
technology in connection with TiVo products and services, including products and
services provided to other multichannel video programming service providers,
subject to certain limitations and exclusions.
The Agreement expires on July 31, 2018. In addition, TiVo may terminate the
rights and licenses granted to Verizon pursuant to the Agreement under certain
circumstances, including but not limited to if Verizon has failed to make timely
payment. As in the past, TiVo expects that the timing of its revenue recognition
for the payments under the agreement will differ from its receipt of cash
payments. Additionally, during its current fiscal quarter, TiVo expects that it
will recognize some portion of the $100,000,000 initial payment as consideration
for past damages and will recognize the remainder of the upfront payment and the
ongoing payments as revenue in its financial statements.
The foregoing description of the Agreement is qualified in its entirety by
reference to the full text of the Agreement which will be filed with the
Commission as an exhibit to the Company's Form 10-Q for the quarter ending
October 31, 2012 and is incorporated by reference herein. TiVo intends to seek
confidential treatment of certain terms of the Agreement in connection with its
filing in accordance with the procedures of the Commission.
This current report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate
to, among other things, the amount of future payments TiVo expects to receive in
connection with its settlement of its patent litigation with Verizon and TiVo's
expectations that its revenue recognition for the settlement payments will
differ from its receipt of cash payments including recognition of a portion of
the upfront payment as consideration for past damages. Forward-looking
statements generally can be identified by the use of forward-looking terminology
such as, "believe," "expect," "may," "will," "intend," "estimate," "continue,"
or similar expressions or the negative of those terms or expressions. Such
statements involve risks and uncertainties, which could cause actual results to
vary materially from those expressed in or indicated by the forward-looking
statements. Factors that may cause actual results to differ materially include
delays in development, competitive service offerings and lack of market
acceptance, as well as the other potential factors described under "Risk
Factors" in TiVo's public reports filed with the Commission, including TiVo's
Annual Report on Form 10-K for the fiscal year ended January 31, 2012, TiVo's
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. TiVo cautions
you not to place undue reliance on forward-looking statements, which reflect an
analysis only and speak only as of the date hereof. TiVo disclaims any
obligation to update these forward-looking statements.
ITEM 7.01. Regulation FD Disclosure.
A copy of the press release issued by TiVo on September 24, 2012 regarding the
Agreement described in this report is attached as Exhibit 99.1 to this Current
Report on Form 8-K. The information in the press release that is an exhibit to
this Current Report on Form 8-K shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, regardless of any general
incorporation language in such filing.
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