TiVo’s Business Still Ailing — And Now It Has To Borrow To Pay Legal Bills

TiVo TV

One thing practically every company involved in patent litigation can agree on is that it’s brutally expensive. The average cost to take a case through trial is $4 million to $5 million, and high-stakes disputes between big companies can easily run into the tens of millions. After beating EchoStar (NSDQ: SATS) in court, TiVo (NSDQ: TIVO) started suing other rivals in 2009; this year, legal counter-attacks against TiVo have been mounting. And now TiVo needs more cash to keep fighting.

In documents filed with the SEC yesterday and today, the company says it’s going to borrow $150 million to cover its growing legal bills. The problem is that TiVo as a business keeps losing money, while its litigation cost in increasing. For the fiscal year ending January 31, TiVo lost $84.5 million. This new moves shows that TiVo is “all in” on its lawsuit bets.

The documents also includes a lengthy list of the risk factors facing TiVo as it takes on additional debt. In addition to its ongoing lawsuit with EchoStar, now awaiting decision on what is likely to be a final, precedent-setting appeal, the company has patent battles with Verizon, AT&T (NYSE: T), Motorola (NYSE: MMI) and Microsoft (NSDQ: MSFT). That’s all in U.S. district courts; it doesn’t include a separate battle with Microsoft at the International Trade Commission, a quasi-judicial forum in Washington, D.C., where companies can ask the ITC to ban imports of competitors’ products if those products are found to violate patent laws. If any of those suits go badly for TiVo, it could hurt the company’s business further.

TiVo filed papers on Tuesday saying it would take on $120 million in debt; but it updated that with papers today, saying it will actually be $150 million in debt, paid back at 4 percent interest. The debt is in the form of convertible notes, which can be turned into TiVo stock at a later time if investors desire.

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