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TiVo business split could free up sales but frustrate licensing negotiations

A source at the US technology company talks about the challenges and opportunities involved in separating the licensing and product businesses into two corporate entities

TiVo’s decision to split its product and licensing businesses into two separate corporate entities could unshackle the sales teams and allow them to generate higher revenues, but could also frustrate the licensing unit’s ability to start negotiations, according to a source at the firm.

TiVo, a US technology company based in California, announced in May that it would separate its business into two publicly traded companies with different management teams and boards. CEO David Shull said in Light Reading at the beginning of this month that the company was on track to separate its businesses by the second half of 2020. 

The business, which was founded in 1983, derives most of its revenue from licensing its IP rights within the consumer electronics industry but has a successful product business.

Internal divisions

Speaking to Patent Strategy about the split, an inside source says the move is something TiVo has been looking to do for a while because each side of the business felt they were being “hamstrung” by the other. He says that when it came to companies that TiVo knew were infringing its IP, the product sales team had to follow a red-tape strategy where it was limited in how it could engage with that business and what it could sell to it.  

“There would have to be long discussions and they would have to tiptoe around certain subjects because the licensing team knew there was potential to license IP with that business in the future,” he says.

He adds there were some instances where some of the bigger multi-service operators had taken combined licences and the sales team found it difficult to sell products to them as a result.  

The splitting of the two businesses is intended to enable the product side, which will include the service and software platform for retail, devices and services offered in partnership with various cable operators and telecoms companies, to make more sales.

Shell at TiVo said the change would enable the new division to further invest in its platform footprint and pursue new ways to generate revenue from said platform.

New channels of business

Our source notes that the change might also enable the company to sell products to businesses that it would otherwise be in conflict with. TiVo has been litigating against Comcast for patent infringement in the US district courts and at the International Trade Commission since 2016.

The source predicts that the split could enable TiVo’s product teams to sell to Comcast entities while the licensing team continues its cases against the cable-TV company.

“When Comcast bought Sky in the UK, there was a bit of an issue because Sky had an existing relationship with us and TiVo’s products were being used by Sky. Such situations are likely to become more common as big conglomerates increasingly look to purchase others.

“It seems to be going that way now – Virgin has been under the Liberty Global umbrella and Disney bought Fox last year.”

He adds that the IP business is also very confident of the opportunities that it can unlock from this change. The department has taken a bullish attitude to its future and has already started looking at how to increase the company’s portfolio.

“They will be doing a lot more of that,” he says.

The challenges

Patent Strategy’s source says that while there are undoubtedly great opportunities to be seized from this move, there are also some concerns.

He points out that some of the big technology companies have blanket policies that prohibit them from engaging in IP licensing negotiations with firms that do not have a product business – particularly those in the US, where ‘patent troll’ assertions are more common than elsewhere.

“Often if you try to engage people to tell them they are infringing, they will not even speak to you if you do not have a products business,” he says. “The IP department has raised these concerns, but it should free up the sales team to pursue their targets and get their business up and running.”

There is also the matter of what the legal team for each entity will look like and the question of whether it would be easier to completely move the IP team to the US or keep some of its smaller teams in Europe.

The change is not that far along, and it is likely that these questions will be answered early next year.

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