FTC Weighs In On TiVo-EchoStar Case

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The Federal Trade Commission urged the U.S. Court of Appeals for the Federal Circuit to consider the market effects of contempt rulings and injunctions in the full court's review a ruling in TiVo's patent litigation against EchoStar and Dish Network, while the agency took no position on the case itself.

In May, the appeals court granted a request by Dish and EchoStar to consider whether a Texas district court's injunction -- ordering the satellite operator to disable millions of DVRs that infringe a key TiVo patent -- as well as the appeals court's subsequent upholding of that injunction and contempt finding were appropriate.

In its amicus brief filed with the appeals court Monday, the FTC supported neither TiVo nor Dish/EchoStar and took no position on the specific facts of the case.

However, the agency recommended that "in shaping the appropriate standards, the court consider how making contempt proceedings and contempt sanctions too easily available could dampen incentives for follow-on innovation, but also should bear in mind how enforceable injunctions can serve as an important prerequisite to innovation and entry."

The FTC vote approving the amicus brief filing was 3-2, with commissioners William Kovacic and Edith Ramirez dissenting. A copy of the brief is available here.

The en banc review by the U.S. Court of Appeals for the Federal Circuit could take several months, during which the current stay of Dish's DVR disablement injunction will presumably be extended.

Previously, a federal appeals court panel in a 2-1 decision in March held that the Texas district court had properly evaluated EchoStar's post-judgment conduct in contempt proceedings, and held EchoStar in contempt based upon its finding that EchoStar had infringed TiVo's "Time Warp" patent, which covers a system for simultaneously recording and playing back TV programming.

Separately, in June the U.S. Patent and Trademark Office ruled that TiVo's "Time Warp" DVR patent was invalid in light of two prior-art references. TiVo called that "just one of several steps in the review process."

But courts should consider the PTO finding that the TiVo patent is invalid in considering the enforcement of an injunction through contempt proceedings, Verizon Communications argued in an amicus brief with with the appeals court last month. The telco is itself engaged in patent litigation with TiVo.

"Where the PTO has cast doubt on the validity of an issued patent, enforcement of the patent through an injunction -- even more than enforcement through payment of money damages -- can deprive the public not only of legitimate competition and the benefits that such competition brings, but also of further innovation that comes through continued participation in the market," Verizon said in its brief dated July 2.

TiVo originally sued EchoStar Communications in January 2004 for allegedly violating the "Time Warp" patent. 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 and EchoStar in contempt for violating a court order to stop using TiVo's "Time Warp" 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.