Like the seemingly invincible Mike Tyson -- after he got knocked out by longshot Buster Douglas in 1987 -- the once-intimidating Gemstar-TV Guide International (GMSTE) has entered a more fallible stage of its history.
Gemstar, the developer of interactive, onscreen television program guide technology, suffered a double whammy late last week in separate litigation actions with
and other companies accused by Gemstar of infringing on its intellectual property.
For Gemstar, which started suffering a streak of patent-related legal setbacks earlier this year, it appears the losses will require the company to take a less adversarial tack as it continues to aspire to becoming a television gateway for the great mass of the nation's couch potatoes.
The market's declining esteem for Gemstar's patent portfolio, along with revenue-recognition decisions that the company has decided to reverse, have battered Gemstar's stock. Shares fell 10 cents to close at $4.12 Friday, down 88% from its 52-week high. The company said last week that Nasdaq had put it on the short list for delisting, because of the company's failure to file recent financial reports. The company is fighting the Nasdaq delisting process.
"Gemstar was positioning itself as having a patent lock on electronic program guides," says Bill Niemeyer, founder of interactive TV consultancy Centrimedia.com. "It's clear things aren't going well in that respect," says Niemeyer, though he acknowledges that the full implications of last week's legal rulings -- one at the U.S. International Trade Commission, the other in U.S. District Court in Georgia -- would likely be mysterious to anyone other than a patent lawyer.
Philip Swann, president and publisher of the TVPredictions.com Web site, calls the rulings a turning point for Gemstar. "Gemstar is the Mike Tyson of interactive TV," says Swann. "They were considered indestructible. But once they're beaten, everybody beats them. It is a true case of the bully being exposed for being a bully."
Gemstar's patents covering electronic program guides, as well as the company's aggressive attitude toward enforcing its patents, was key to its strategy. The company won agreements with cable operators for them to use its program guide technology, says Swann, "because cable operators believed those patents were indestructible."
But now it seems, says Swann, that the threat of the patents was more powerful than the patents itself.
Gemstar, however, says it hasn't run out of ammunition in its arsenal of patents. In a statement issued Friday night, Gemstar says it has a portfolio including more than 200 issued U.S. patents, including some still asserted in the Georgia litigation. "Our resolve to innovate and to protect our innovations and inventions remains as strong as ever," said general counsel Jonathan Orlick.
The company says it will appeal both the Georgia case and the the ITC's decision not to review a June ruling in a case involving Scientific-Atlanta and
covering three of the company's patents.
But, says Swann, all isn't lost for the company, which also publishes
, which it acquired in a deal with major shareholder
First off, there's the TV Guide brand -- "very, very powerful," says Swann, especially as it relates to a program guide. Gemstar's chief executive officer Henry Yuen didn't appear to appreciate the brand's appeal to TV viewers and to advertisers, says Swann, but News Corp. CEO Rupert Murdoch and the growing influence Murdoch will have on Gemstar will likely change that.
"They still have potential to turn what they have as a company into a real player in the industry," says Swann. "It's going to take time. It's not going to be done overnight."
Another appealing asset of Gemstar's is its horse racing channel, TVG. By the end of the year, says Swann, EchoStar's DISH Network subscribers will be able not only to watch races on TV, but also to wager on them as well. "They have a lot of things going on there that can actually be used to build on and make decent strategies for the future," says Swann.
Another likely result of Gemstar's travails will be the emergence of newly emboldened competitors -- in addition to the already-targeted-by-Gemstar Scientific-Atlanta and EchoStar -- in the development of electronic program guides.
"It's important that there's room for innovation and competition in that market," says Niemeyer.