Court Puts TiVo’s Dish Defeat on Hold
June 5, 2009
WASHINGTON: The ongoing battle between Dish Network and TiVo over video recording and playback technology has nearly run its course. A federal appeals court issued a temporary stay yesterday on a lower-court decision issued Tuesday in favor of TiVo. Analysts said the stay was unlikely to mean much in the long run, though it prevented Dish from having to shut down the digital-video recording function in its set-top boxes.
“Investors had been waiting for the TiVo vs. Dish litigation be over already, and it seemed like this was the case given the [lower] court’s ruling… as statements in court documents were pretty harsh towards Dish,” Wachovia’s Marci Ryvicker wrote. “While we were relatively surprised that Dish was granted a temporary stay… TiVo was not and does not expect the stay to impact the final outcome of this case--meaning that Dish will likely be forced to pay TiVo the $103 million plus interest and shut off their DVR boxes, leading in our opinion to a licensing agreement.”
Rich Greenfield of Pali Capital concurred: “We believe a more permanent injunction may be difficult to attain. It appears increasingly likely that Dish will be compelled to reach a licensing agreement with TiVo.”
The U.S. District Court for the Eastern District of Texas handed TiVo a second win in the technology dispute, which started five years ago. TiVo sued Dish in 2004 for infringing on its Time Warp patent, which allows subscribers to simultaneously play back one program while recording another. TiVo won that battle last year when the courts ordered Dish to pay up nearly $105 million in fees and interest.
Dish proceeded to make what it considered work-around technology, but it wasn’t differentiated from Time Warp enough to satisfy TiVo, and so the legal fires flew again. The Texas court awarded TiVo another $103 million plus interest, and ordered Dish to immediately disable the DVR functionality in its set-tops. The U.S. Court of Appeals for the Federal Circuit issued the temporary stay Wednesday. TiVo must respond by June 10.
“We believe that at the end of the day, Charlie Ergen’s best option is to partner with TiVo--we don't know why he didn't do this in the first place,” Ryvicker wrote. “TiVo already partners with Comcast, Cox Cable and DirecTV. However, we believe that Dish would pay TiVo a higher subscriber fee than its peers--ranging from $1.50 to $2 per subscriber.”
Shares of Englewood, Colo.-based Dish (NASDAQ: DISH) fell about 9 percent on news of the Texas court decision, closing Tuesday at around $17.23 to around $15.70 today. TiVo (NASDAQ: TIVO), based in Alviso, Calif., have jumped nearly 57 percent, from around $6.95 Tuesday to around $10.90 a share today. -- Deborah D. McAdams
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