UPDATE: AT&T Agrees To Pay TiVo At Least $215 Million For Patents

TiVo Inc. (TIVO) scored another major patent victory as AT&T Inc. (T) agreed to pay the set-top box maker at least $215 million to settle litigation and acquire rights to use TiVo's intellectual property.

The settlement, announced Tuesday, marks the latest gain from a string of lawsuits brought by the Alviso, Calif., company. TiVo, a pioneer in devices known as digital video recorders, or DVRs, has long accused many of its rivals of violating its patents.

TiVo shares leapt 13.2% to $10.10 after hours Tuesday, while AT&T rose 6 cents to $30.44.

Tom Rogers, TiVo's chief executive, said the settlement both underscored the value of his company's intellectual property while also avoiding the "significant legal expenses" that would come from a trial.

"People will begin to view our intellectual property value with some greater predictability," he said.

Under the terms of the settlement, AT&T agreed to pay TiVo $51 million upfront and $164 million in guaranteed payments through July 2018. AT&T will also pay incremental license fees based on subscriber numbers through that time should its own DVR subscriber base exceed certain levels, TiVo said.

AT&T declined to comment.

The patent-licensing agreement between TiVo and AT&T settles all outstanding litigation between the companies, which will cross-license each other's advanced-TV patents. It ends another legal dispute over the technology at the core of TiVo's business.

TiVo has been embroiled in patent lawsuits over its digital recording technology for years. The company originally sued Dish Network Corp. (DISH) and EchoStar Corp. (SATS) in 2004, claiming the companies infringed on its "time warp" technology, which allows customers to pause, rewind and fast forward through live television that is simultaneously recorded on a specialized device. Dish and EchoStar agreed to pay TiVo $500 million to settle the lawsuit last May, ending the seven-year-long patent dispute.

Alan Gould, an analyst at Evercore Partners, said the relative speed at which the agreement was made--TiVo's lawsuit with AT&T was roughly two years old--bodes well for its ongoing legal tussles with Verizon Communications Inc. (VZ) and Motorola Mobility Holdings Inc. (MMI).

"TiVo has agreements with two major players, both using the same patents," Gould said, referring to TiVo's "time-warp" recording technology.

The company's recent legal successes come as its set-top-box product has also begun to rebound. In November, the company said it broke a four-year streak of declining subscriber numbers in its fiscal third quarter. The company said it added a net 117,000 subscribers compared with a loss of 112,000 a year earlier. The company said many of those subscribers were the result of partnerships with cable and satellite companies that began offering TiVo technology to their customers.

-By Ian Sherr, Dow Jones Newswires; 415-439-6455; ian.sherr@dowjones.com

--Drew FitzGerald contributed to this report.

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