Appeals Court Affirms That Dish Must Disable DVRs In TiVo Case

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The U.S. Court of Appeals for the Federal Circuit upheld a lower court's ruling that Dish Network must disable eight models of its DVRs -- found to have infringed on a key patent owned by TiVo -- and must pay sanctions for violating prior injunctions to disable the equipment, as the parties' seven-year legal fight appears to be nearing an end.

However, the court -- which considered the appeal en banc, as opposed to by a three-judge panel -- vacated the Texas district court's finding of contempt of the infringement provision of the permanent injunction, and vacated in part the damages awarded to TiVo for EchoStar's continued infringement.

"Faced with an imminent shut-down of millions of DVRs (the precise number has never been disclosed), we believe Dish will be faced with a gun-to-the-head settlement requirement," Sanford Bernstein senior analyst Craig Moffett wrote in a research note.

Analysts have previously estimated Dish would be forced to pay a licensing fee of $1.75 to $3 per DVR per month in a settlement with TiVo.

The eight models of Dish/EchoStar receivers that a jury found infringed the TiVo patent are: DP-501, DP-508, DP-510, DP-522, DP-625, DP-721, DP-921 and DP-942.

The total cost to Dish of disabling and replacing the infringing DVRs could run as high as $3 billion, according to Moffett, although he added that it's possible Dish has replaced some of the infringing DVRs already which would lower that figure.

TiVo originally sued EchoStar Communications in January 2004. After the satellite operator was found to have violated the TiVo "Time Warp" patent, the U.S District Court for the Eastern District of Texas ordered Dish to disable all infringing DVRs in August 2006. After Dish/EchoStar did not comply the court awarded TiVo a total of about $300 million in additional damages and sanctions.

The U.S. Court of Appeals for the Federal Circuit upheld the $300 million award in March 2010. The court upheld additional sanctions of $90 million in its ruling Wednesday but vacated $110 million related to the contempt sanction for infringement.

In a statement, TiVo said: "We are pleased that the United States Court of Appeals for the Federal Circuit sitting en banc affirmed the district court's finding of contempt and award of sanctions against EchoStar for failing to comply with the district court's injunction. This marks the second time that the district court's contempt ruling has been upheld by the Court of Appeals."

TiVo continued, "We look forward to the permanent injunction against EchoStar and Dish Network finally being enforced with respect to the DVRs they must now disable. This ruling also paves the way for TiVo to receive substantial damages and contempt sanctions regarding the DVRs that EchoStar and Dish Network failed to disable. With respect to the remand of the infringement provision of the District Court's order, we intend to pursue the most rapid path to resolution. We will continue our efforts to protect our intellectual property from further infringement by EchoStar and Dish Network."

Dish and EchoStar said Wednesday they planned to appeal the decision to the U.S. Supreme Court. The satellite TV operator said only certain older MPEG-2-based DVRs are affected and that those will be upgraded "as quickly as possible" if it cannot obtain a stay.

EchoStar and Dish have already paid TiVo $104.6 million in initial damages plus those accrued through Sept. 8, 2006, with interest, after the U.S. Supreme Court declined to review the case in 2008.

Separately TiVo also is engaged in litigation with Motorola Mobility, AT&T, Verizon and Microsoft.

TiVo has sued AT&T and Verizon over patents and both telcos have countersued, while Microsoft has filed two lawsuits against TiVo alleging patent infringement, and Motorola Mobility initiated a patent lawsuit against TiVo in February.

The DVR company last month issued a $150 million debt offering in part to fund intellectual property litigation. TiVo had $7.6 million in litigation expenses for its fiscal quarter ended Jan. 31, 2011, and the company said it expects legal costs "will significantly increase" in the current quarter.

TiVo has struck various distribution and partnership deals with several pay-TV operators, including Comcast, DirecTV, Charter Communications, Cox Communications, Suddenlink Communications, RCN and Virgin Media.

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