EchoStar, Dish to Pay TiVo $103M
That much is clear after a federal court on Tuesday found Dish Network LLC (Nasdaq: DISH) and its technology spinoff, EchoStar Corp. (Nasdaq: SATS), in contempt of court and ordered them to pay TiVo another $103 million. The court also issued an injunction that gives Dish 30 days to disable the DVR functionality in roughly 4 million satellite receivers/set-tops.
Tuesday's court decision marks just the latest chapter in a protracted legal struggle between TiVo and Dish centered on TiVo's so-called "Time Warp" patent. In January 2008, an appeals court upheld a ruling that Dish infringed on that patent. Ten months later, the U.S. Supreme Court shot down Dish's appeal. (See TiVo Digs DVR Ruling and High Court Denies Dish.)
EchoStar and Dish claimed to have developed a "workaround" to the patent, but the U.S. District Court for the Eastern District of Texas declared that the software revisions still infringed on TiVo's intellectual property and ordered the Colorado-based company to disable the DVR capabilities in millions of devices that carry the infringing software. (See Dish vs. TiVo , Dish's DVR Boat Anchors, and The Final Chapter?)
In the order issued Tuesday, Judge David Folsom held that "any differences between the infringing and modified products are no more than colorable." Moreover, he said Dish and EchoStar "merely ignored" the original order to disable the infringing products.
In a joint statement, Dish and EchoStar said they plan to appeal the decision and file a motion to stay the order with the Federal Circuit. "Our engineers spent close to a year designing-around TiVo's patent and removed the very features that TiVo said infringed at trial," they added.
Dish also insisted that its current customers with DVRs are not immediately affected by the latest court decision.
For its part, TiVo said it was "extremely gratified" with the contempt of court ruling. "EchoStar may attempt to further delay this case but we are very pleased the Court has made it clear that there are major ramifications for continued infringement," TiVo noted.
Tuesday's contempt of court finding inches Dish closer to a "worst case scenario" envisioned by Sanford C. Bernstein & Co. Inc. analyst Craig Moffett, who suggested earlier that costs related to the case could hit the neighborhood of $1.6 billion if the satellite TV service provider is forced to replace as many as 4 million DVRs. His calculation was based on a rough estimate of $400 per box, plus truckroll expenses.
Even if EchoStar tries to settle and obtain a license from TiVo, it will likely have to pay a big premium. "TiVo would now appear to hold all the cards," Moffett said in a note issued Wednesday. "A settlement would likely be far above the licensing rates agreed to by DirecTV and Comcast a few years ago, leaving Dish Network at a decided competitive disadvantage."
Cable collision course
Although most of the court action has centered on Dish's DVRs, TiVo and EchoStar are also on a competitive collision course on the cable front. TiVo is already hooked up with Comcast, Cox, and Evolution Broadband LLC , which has signed on to sell TiVo boxes to small and mid-sized MSOs. TiVo is also expected to take the retail route with upcoming models based on cable's tru2way platform. (See TiVo Covers Its Cable Bases and TiVo à la Mode .)
EchoStar, which spun off from Dish in early 2008, has signed the requisite tru2way licenses, and in March introduced cable-ready boxes with "place-shifting" technology from its Sling Media Inc. division already baked in. EchoStar expects that box to reach volume production by the fourth quarter of 2009. EchoStar is also going after the European cable market with a Sling-loaded box that's capable of supporting a variety of middleware and conditional access system configurations. (See EchoStar Slings Its First Tru2way Set-Top and EchoStar Jumps the Pond .)
— Jeff Baumgartner, Site Editor, Cable Digital News
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