M+E Daily

TiVo announced Monday that Verizon has agreed to pay the DVR developer $250 million to settle the patent-infringement case it had brought against the telco TV provider back in 2009. Verizon also agreed to pay license fees to TiVo through 2018 for use of its DVR technology in Verizon FiOS set-top boxes.

In addition to the cash payments, Verizon and TiVo “are exploring, among other things, future distribution of Internet video services developed through Verizon’s joint venture with Redbox by making content distributed via that service part of the diverse selection of linear and broadband-delivered content accessible to users of TiVo’s retail DVR products,” TiVo said in a press release.

News of the settlement sent shares of TiVo soaring more than 9 percent in midday trading Monday.

While the payout will certainly boost TiVo’s near-term earnings, the real upside for investors could be the settlement’s implications for TiVo’s future. The original DVR developer has won similar settlements from AT&T and from Dish Network, and successfully to its DVR patents brought by Microsoft.

Cases remain pending against Cisco, Google-owned Motorola Mobility, and Time Warner Cable. But TiVo’s courtroom record in its long campaign to vindicate and defend its DVR patents remains unblemished. And with each victory its position becomes more secure.

The question for TiVo is, what does it do once it has established clear and unchallenged title to basic DVR functionality? It can force cable and satellite operators to pay a license fee to use the technology, as it did with Verizon. But those deals don’t help TiVo sell more standalone set-top boxes or up-sell consumers on TiVo’s own high-margin subscription service. If anything, those licensing deals likely limit the market for standalone DVRs and force TiVo essentially to compete with itself.

Clear and unchallenged title to DVR technology could make TiVo a more attractive takeover target, however, for some with designs on challenging cable and satellite operators for supremacy in the living room. Someone like Apple, for instance, which is angling to build its own user experience and user interface atop consumers’ existing pay-TV service.

Apple said when it launched its Apple TV STB that it wasn’t interested in adding DVR functionality to the platform. But earlier this year it partnered with TiVo to create TiVo stream, a service that allows users to stream recorded content from their TiVo DVR to their iOS devices, suggesting Apple may be warming up to the idea of incorporating DVR capability into Apple TV and the iTunes ecosystem.

Apple, in other words, might be able to make greater strategic use of TiVo’s patents than TiVo can. So long as those patents remained in dispute, the risk in acquiring them remained high. But as TiVo gradually clears the field of challengers, it may also be clearing the way for a strategic acquirer.

That may be the real reason, in fact, that TiVo’s stock is up in the wake of the Verizon deal.