Dish Network and EchoStar announced Monday that they will pay TiVo $500 million to settle all of their ongoing patent litigation, ending the companies' seven-year running legal battle.
Under the terms of the settlement, Dish and EchoStar will make an initial payment to TiVo of $300 million with the remaining $200 million distributed in six equal annual installments between 2012 and 2017. TiVo, Dish and EchoStar agreed to dismiss all pending litigation between the companies with prejudice and to dissolve all injunctions against Dish and EchoStar.
Last month Dish and EchoStar essentially ran out of legal options against TiVo, when the U.S. Court of Appeals for the Federal Circuit upheld a lower court's ruling that Dish must disable eight models of its DVRs -- found to have infringed on a key patent owned by TiVo -- and also affirmed that the satellite operator and EchoStar would have to pay sanctions for violating prior injunctions to disable the equipment.
According to the agreement Dish, EchoStar and TiVo announced Monday, the companies granted certain patent licenses to each other.
TiVo granted Dish a license under its Time Warp patent -- U.S. Patent No. 6,233,389, which was at the heart of the years-long litigation -- and certain related patents for the remaining life of those patents. TiVo also granted EchoStar a license under the same '389 patent and certain related patents for the remaining life of those patents, to design and make certain DVR-enabled products solely for Dish Network and two international customers.
EchoStar granted TiVo a license under certain DVR-related patents for TiVo-branded, co-branded and ingredient-branded products.
Finally, TiVo and Dish reached a marketing agreement under which the DVR maker will help Dish promote the Blockbuster digital video service. Dish last week completed the approximately $320 million deal to acquire Blockbuster, which had filed for bankruptcy.
"We have tremendous respect for TiVo's management, and we have always said that regardless of the outcome of the case, there were many ways that we could work together with TiVo," Dish chairman and CEO Charlie Ergen said in a statement.
Continued Ergen, "The results of TiVo's formidable intellectual property enforcement program speak for themselves, and consequently, we are pleased to put this litigation behind us and move forward. Additionally, we believe that our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo's Time Warp patent, which ultimately will allow us to enhance the performance of our award-winning DVRs. We look forward to continuing to offer Dish Network customers the most choices in video service."
Regarding TiVo's agreement to promote Blockbuster video-streaming service, Ergen added, "We are excited to work with TiVo to help develop our Blockbuster video service. Resolving the patent infringement case allows us to further engage with TiVo on a variety of exciting strategic initiatives, like Blockbuster, where we are uniquely positioned to collaborate."
TiVo CEO Tom Rogers commented, "We are extremely pleased to reach an agreement with Dish Network and EchoStar which recognizes the value of our intellectual property. The compensation from this settlement, including the resulting reduction in legal expenditures, puts TiVo in an enviable financial and strategic position. This settlement, which brings the total compensation paid by Dish Network for use of TiVo's '389 patent family to over $600 million, demonstrates the significant return afforded to our shareholders by diligent enforcement of TiVo's intellectual property rights. Those efforts will aggressively continue with other parties."
Separately TiVo also is engaged in litigation with AT&T, Verizon Communications, Microsoft and Motorola Mobility.
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.
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.