TiVo Gets Favorable Court Ruling - Analyst Blog

TiVo Inc. (TIVO) soared 61.9% (or $6.32) and closed at $16.53 yesterday and rose another 3.99% (or 66 cents) after hours following the company’s announcement of a favorable ruling for the third time in a long running patent infringement dispute (since 2004) against EchoStar Communications Corp. (SATS), the parent company of Dish Network Corp. (DISH). 

The satellite television provider TiVo is a pioneer in digital video recording (DVR) technology. Under the 5-year multimedia patent infringement, TiVo has been awarded a $300 million ($100 million in damages and $200 million in contempt sanctions) by the U.S. Court of Appeals for the Federal Circuit in the Eastern District of Texas, upholding the lower court ruling in TiVo's favor. 

The court’s decision recognizes the value of TiVo's intellectual property and provides incentive for other companies such as Comcast Corp. (CMCSA) and DirecTV (DTV) to enter into commercial arrangements with TiVo. 

Dish was spun off from EchoStar in 2008. It was found that a software in Dish Network’s set-top boxes violated TiVo live TV technology that consists of features like the ability to pause and rewind live programming.
 
Earlier in Sep 2009, TiVo had won patent infringement lawsuits against EchoStar, under which it had been awarded a sanction of $200 million ($110 million in damages and $90 million in sanctions in addition to attorney fees) from the U.S. District Court in the Eastern District of Texas.
 
While EchoStar said it created its own DVR with no intention of copying TiVo's technology and claimed that it had made an adjustment to its software that averted infringement, TiVo claimed that EchoStar continued the old patent violation and won the contempt judgment from the Texas court. 

In 2006, TiVo also received damages of $104.6 million on account of a willful patent infringement after the U.S. Supreme Court’s decision to uphold the lower court ruling in TiVo's favor. TiVo forced EchoStar to choose between payments of licensing fees or stopping the use of TiVo’s technology. 

This is good news for TiVo as it has been continuously winning lawsuits against Dish. If EchoStar does not abide by the injunction, it may be subjected to further sanctions. While this is an important win, Dish still plans to seek a review of the three-judge panel's decision by the full U.S. Court of Appeals for the Federal Circuit. 

However, we believe that TiVo’s long-standing patent infringement dispute with EchoStar remains an overhang. While TiVo has been winning claims against Dish Network, it is yet to qualify for a total victory. Further, TiVo had requested the court to make EchoStar pay $1 billion for using the modified technology from Apr 2008 to Jul 2009. But the court rejected TiVo’s huge claim and asked EchoStar to appeal again. If the EchoStar appeal is not successful, it will have to pay more contempt sanctions to TiVo. 

Guardian Media Technologies had also filed a complaint against TiVo alleging infringement of its patents. Recently, Microsoft Corp. (MSFT) has sued TiVo, asserting violations of technology to purchase and deliver video and the ability to display programming information. 

Additionally, TiVo had filed a lawsuit against large telecom providers such as AT&T (T) and Verizon Wireless (VZ) over its DVR technology claiming that they violated its patents. In case TiVo loses the claim, it will need to pay penalty charges. These disputes are hurdles to the company’s growth.
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