Dish Wins En Banc Review In TiVo Patent Case

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The U.S. Court of Appeals for the Federal Circuit on Friday granted a request by Dish Network and EchoStar to review a previous ruling in TiVo's years-long patent litigation against the satellite TV operator, which was seen as at least a temporary victory for Dish/EchoStar.

The court's granting of the en banc review has the effect of vacating the March 4 appeals court opinion, and reinstates Dish's appeal process. However, Dish's request for a full rehearing was denied. In the March 4 decision, the court denied the satellite operator's request to overturn a Texas federal district court's ruling finding Dish and EchoStar in contempt of an order to disable DVRs that were found to infringe a key TiVo patent.

Dish's stock price spiked 5% on the ruling, trading at $23.18 in early afternoon trading, while TiVo shares plummeted nearly 40% -- trading at $10.89 at around 1 p.m. ET, down $6.49 from Thursday's close.

TiVo said in a statement, "We are disappointed that we do not yet have finality in this case despite years of litigation but we remain confident that the Federal Circuit's ruling in our favor will be reaffirmed after all of the judges on the Federal Circuit have had the opportunity to review the merits of this case."

For their part, Dish and EchoStar said, "Dish Network and EchoStar are pleased that the full Federal Circuit Court of Appeals has granted their petition for rehearing en banc. We believe the issues that will be considered by the full court on rehearing will have a profound impact on innovation in the United States for years to come."

The granting of such a review is rare, typically on the order of 2% of requests, and is usually reserved for especially complex cases or those of particular significance, Sanford Bernstein senior analyst Craig Moffett wrote in a research note.

"While the mere grant of another review offers no assurances that Dish will actually win this time around, their odds unquestionably have to be judged better than they were before (that is, when they had already lost and when en banc review faced the aforementioned long odds of being granted)," Moffett said. "Dish has been granted another time at bat."

In the en banc review, the full court (as opposed to a three-judge appeals court panel) will decide whether the Texas district court's injunction and the appeals court's upholding of that injunction and contempt finding were appropriate. The review could take many months, during which time the current stay of Dish's DVR disablement injunction will presumably be extended, according to Moffett.

In January 2004, TiVo sued EchoStar Communications -- which in 2008 officially changed its name to Dish Network -- for allegedly violating the DVR company's "Time Warp" patent, which covers a system for simultaneously recording and playing back TV programming.

A federal jury found in TiVo's favor, and the U.S District Court for the Eastern District of Texas originally ordered Dish to disable all infringing DVRs in August 2006. In June 2009, a federal judge in the Texas court found Dish Network in contempt for violating a court order to stop using TiVo's "Time Warp" digital video recording patent and awarded the DVR company an additional $103 million, plus interest. In September 2009, the Texas court ordered Dish and EchoStar to pay about $200 million in additional damages and contempt sanctions.

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.

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