A federal court Tuesday ordered EchoStar Communications -- now part of Dish Network -- to pay TiVo an additional $103 million after finding the satellite operator in contempt of an order that it stop using a key TiVo DVR patent.
The U.S District Court for the Eastern District of Texas decision found that Dish's "workaround" DVR technology infringed TiVo's intellectual property, and ordered Dish to disable the DVR functionality of the approximately 4 million set-tops originally covered under the injunction within 30 days.
Dish Network, in a statement Tuesday, said existing customers with DVRs are not immediately affected by the ruling. The company said it would appeal the decision, and planned to file a motion to stay the order.
"We are disappointed in the district court's decision finding us in contempt," Dish said in a statement. "We believe a stay is warranted and that we have strong grounds for appeal. Our engineers spent close to a year designing-around TiVo's patent and removed the very features that TiVo said infringed at trial."
Analysts said the decision made it more likely that Dish Network would enter into a licensing agreement with TiVo.
"While Dish could continue go it alone (e.g, appeal today's ruling and win, design a new workaround), we believe that today's ruling increases the likelihood that a commercial licensing pact between TiVo and Dish will eventually be signed, which would increase costs for Dish," Credit Suisse analyst Spencer Wang wrote in a research note.
The Texas court had previously ruled that EchoStar infringed TiVo's "Time Warp" patent for DVR controls, and awarded TiVo $104.6 million in damages, including the initial $74 million in damages, supplemental damages accrued through Sept. 8, 2006, and interest. EchoStar paid the damages last October after the U.S. Supreme Court declined to review the case.
In a statement, TiVo said: "We are extremely gratified by the Court's well reasoned and thorough decision, in which it rejected EchoStar's attempted workaround claim regarding the TiVo patent, found EchoStar to be in contempt of court and ordered the permanent injunction fully enforced... 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."
The $103 million the court awarded Tuesday covers damages from Sept. 8, 2006, to April 18, 2008, not inclusive of interest. The court deferred ruling on potential monetary sanctions against EchoStar for contempt of the permanent injunction as well as certain other damages.