And Now… We Wait

10:30 AM -- TiVo Inc. (Nasdaq: TIVO) shares dropped more than 16 percent Thursday as investors reacted to a delayed court decision tied to the DVR pioneer's protracted patent fight with Dish Network LLC (Nasdaq: DISH)

TiVo shares went through the roof in January after an appeals court upheld the company's claim that Dish infringed on TiVo's "Time Warp" patent. (See TiVo Digs DVR Ruling .) In April, a Washington court denied Dish's request for a rehearing. In response, Dish has threatened to take the case to the U.S. Supreme Court. (See The Final Chapter?)

Investors sold off TiVo shares Thursday in reaction to news that the judge presiding over a contempt of court hearing in the U.S. District Court in Texas listened to arguments but opted to think things over for a bit. Judge David Folson may not issue a ruling until November.

In this chapter of the ongoing spat, TiVo is arguing that Dish's DVR workaround still infringes on the Time Warp patent. Dish has also filed a counter-suit in a Delaware court claiming that its new software does not infringe. (See Dish's DVR Boat Anchors.)

Despite the delay in a ruling, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett on Friday maintained an earlier view that Dish is faced with considerable financial risk well beyond the possibility of having to pay TiVo roughly $75 million per year in license payments.

In a report issued last month, Moffett said the "worst case scenario" would require Dish to immediately disable as many as 4 million DVRs. That could result in tremendous churn or cause Dish to replace those boxes altogether. At roughly $400 per box plus truck roll expenses, those costs could balloon to roughly $1.6 billion, in Moffett's estimation.

And yet another cloud to consider: "We believe that, should TiVo ultimately prevail in this case, TiVo would be under no obligation to license its service to Dish at all, either for $1 per month… or any other price, for that matter," he wrote.

That could cause customers who are accustomed to having a DVR to flee Dish and sign up with cable or DirecTV Group Inc. (NYSE: DTV), which just signed a new, non-exclusive deal with TiVo for the development of a new HD-DVR. (See DirecTV & TiVo to Play It Again .)

— Jeff Baumgartner, Site Editor, Cable Digital News

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