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/ 03.04.2010 3:00PM
TiVo Logs Another Win Against Dish
WASHINGTON: A
federal appeals court today upheld a ruling that technology used in EchoStar’s
Dish set-tops violates patents held by TiVo. The U.S. Court of Appeals for the
Federal Circuit ruled 2-1 in favor of a lower court ruling that EchoStar’s
work-around DVR technology didn’t meet the requirements of a previous
injunction.
TiVo first sued EchoStar in district court six year ago, claiming the
digital-video recording technology in Dish set-tops violated TiVo patents. Over
the course of the legal battle, Dish was ordered to pay damages of $103 million
and stop using the technology. The satellite provider then created work-around
technology, but the U.S. District Court for the Eastern District of Texas found
last June it still violated TiVo’s patents. Dish was slapped with another $105
million in damages and ordered it to disable the DVR function. It appealed and
won a temporary stay from the federal court, which today agreed with the lower
court.
It’s not yet clear when EchoStar will have to disable the DVR function of Dish
set-tops per the court order. As of last summer, an estimated 4 million out of
13.6 million Dish customers had DVR-enabled set-tops.
“We are disappointed in the Federal Circuit’s split decision, but are pleased
that Judge Rader agreed with our position,” the Englewood, Colo., satellite TV
provider said in a statement. “Therefore, we will be seeking en banc review by
the full Federal Circuit. We also will be proposing a new design-around to the
district court for approval. At this time, our DVR customers are not impacted.”
Shares of TiVo soared 60 percent on the news, shooting up more than $6 to
$16.27 in last afternoon. Wells Fargo analyst Marci Ryvicker said TiVo expects
to collect $300 million in damages through July 1. Shares of Dish dropped nearly
5 percent to around $20.60. Dish chief Charlie Ergen should settle, Ryvicker
said.
“Though Dish stated it is looking to do a workaround of the workaround, we
believe the most logical next step for Charlie Ergen, at this point in time,
would be a licensing agreement between the two parties,” Ryvicker wrote. “Our
expectations are a maximum of $3 and a minimum of a $1.75 per subscriber per
month, which would equate to [approximately] $126 million to $216 million in
EBITDA or $2 to $4 in equity value. To us, these amounts appear reasonable and
are likely already expected by the market.”
The bottom line, she said was that analysts believed Ergen would do “the right
thing and enter into an agreement. Once this occurs, the overhang of this
litigation should be removed from the Dish stock.”
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