The International Trade Commission has delivered an expected patent ruling that will interrupt Comcast’s importation and sale of Arris- and Technicolor-made set-top boxes for the X1 operating system.
The ITC’s final ruling upheld Rovi Corp.’s claim that Comcast violated patents on technologies that let users schedule set-top DVR recordings remotely via mobile device.
The ruling will put pressure on Comcast to forge a licensing deal. Rovi Corp., which acquired TiVo Corp. and adopted the TiVo moniker subsequent to initiating its dispute with Comcast, could gain as much as $15 million to its quarterly bottom line with a Comcast deal in place. TiVo shares rose nearly 8% on the NASDAQ today. In 2015, before its $1.1 billion acquisition of TiVo, Rovi made 54% of its revenue from the licensing of intellectual property.
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Comcast, however, said it will simply remove features related to the patents (see statement below). The ITC’s ruling follows a determination by an administrative law judge in June that Comcast violated two TiVo/Rovi patents. The ruling, rendered November 21, has a 60-day presidential review period before it takes a effect.
In addition to halting imports of X1 set-tops from Mexico and Asia, the ITC also ordered Comcast to stop sales of X1 boxes already in North America. This ruling will not just impact Comcast; other North American cable operators, including Cox, Rogers, Shaw and Videotron license X1 technology from Comcast and distribute set-tops with the same patents.
“We respectfully disagree with the ITC’s decision in this matter,” Comcast said in a statement. “In fact, Rovi has never disputed that Comcast or its predecessors independently developed our X1 platform and our cloud- and app-based technology. While we believe the ITC reached the wrong decision, we will remove this feature from those offered to our subscribers while we pursue an appeal.”
Last year, Comcast replaced TiVo with Gracenote as the supplier of metadata services for X1. Insiders with knowledge of Comcast’s decision said the ITC complaint was a key influencer.
According to Multichannel News, Raymond James analyst Simon Leopold said he spoke to Arris executives about the dispute earlier. He said these executives “expressed a lack of worry when we spoke to them about this risk, which suggests they have some insight, but citing the litigation and the fact that the issue is in the hands of their top customer, they declined to elaborate.”
Meanwhile, identifying itself as a “TiVo company,” Rovi responded with this statement: “Rovi is pleased the International Trade Commission issued its final ruling in our favor and found that two Rovi patents are valid and infringed by Comcast’s X1 products, and issued an exclusion order that bans Comcast from importing and selling X1 devices that infringe our valuable intellectual property. Today’s Commission Opinion reinforces the need for Comcast to take the necessary licenses to our IP.”