TiVo shares were up about 10% in pre-market trading immediately following the announcement. The deal ends a bitter legal fight that began in 2009 and was scheduled to go to trial October 1. It ensures that Verizon FiOS customers can continue to use the company-supplied DVRs, which are manufactured by Cisco. In addition, the companies say that they’re looking at arrangements to collaborate — including by offering TiVo users content from the planned Redbox Instant By Verizon streaming video service. TiVo will collect about $100M “as consideration for past damages,” and recognize some of that in the current quarter, it says in an SEC filing. The settlement also resolves Verizon‘s countersuit against TiVo. The companies say they’ve “entered into a cross license of their respective patent portfolios in the advanced television field.”

The resolution continues TiVo’s string of victories in suits it has lobbed against DVR providers including Dish Network, Microsoft, and AT&T. TiVo still has suits pending against Motorola, Cisco, and Time Warner Cable. The DVR pioneer says it owns the rights to several processes that users take for granted including the ability to watch one show while recording another. CEO Tom Rogers told analysts last month that although earnings would be hurt in the short run by TiVo’s “significant investment” for the court battles, “we believe it is vital to protect our innovation, and we are confident that the return on investment will continue to be substantial over time.”

Here’s the release:

ALVISO, CA– TiVo Inc. (NASDAQ: TIVO) announced today that it has settled its pending patent litigation with Verizon Communications Inc. and that the companies have entered into a mutual patent licensing arrangement. Under the terms of the settlement, Verizon will provide TiVo total compensation worth at least $250.4 million. The payments from Verizon to TiVo shall be comprised of a $100 million initial cash payment followed by recurring quarterly payments totaling an additional $150.4 million through July 2018. If the companies pursue certain commercial initiatives prior to December 21, 2012, up to $29.4 million of the payments made by Verizon would be subject to a credit of an equal amount. In addition to the guaranteed compensation, Verizon will also pay monthly license fees through July 2018 for each Verizon DVR subscriber in excess of certain pre-determined levels.

In addition to the cash payments described above, 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.

As part of the settlement, TiVo and Verizon agreed to dismiss all pending litigation between the companies with prejudice. The parties also entered into a cross license of their respective patent portfolios in the advanced television field.

“We are pleased to reach an agreement with Verizon which underscores the significant value our distribution partners derive from TiVo’s technological innovations and our shareholders derive from our investments in protecting TiVo’s intellectual property,” said Tom Rogers, CEO and President of TiVo. “We also look forward to working together on a variety of future opportunities as we continue to expand the content choices available to TiVo subscribers. As with prior settlements, we also benefit by being able to operate our business under license from Verizon and by avoiding future legal expenses that we would have incurred during and after trial. Furthermore, we believe this settlement positions us well with respect to future enforceability of our patents.”