Dish Network CEO Charlie Ergen bit a half-billion-dollar bullet last week to settle up with TiVo — but Wall
Street had feared the payout might have been a lot more.
Satellite-TV provider Dish and EchoStar, Ergen’s technology fi rm, will pay TiVo $500 million to settle
their ongoing patent litigation, ending more than seven years of legal wrangling. Digital video recorder
maker TiVo granted Dish a license for the Time Warp patent, U.S. Patent No. 6,233,389, which was at the
heart of the dispute, and certain related patents for the remaining life of those patents.
For Dish, the amount of the TiVo settlement was “far less than we had expected,” Sanford Bernstein senior analyst
Craig Moffett wrote in a research note. “And it fi nally eliminates, after nearly fi ve years, a signifi cant overhang that in a
worst-case scenario could have meant disablement of potentially millions of DVRs, triggering a consequent exodus of DVR
subscribers.” (For more on Dish’s fi rst quarter, see Finance)
For TiVo, the dénouement of the Dish drama means not just money in the bank, but more leverage in seeking other
patent-licensing deals. President and CEO Tom Rogers spoke with Multichannel News technology editor Todd Spangler
about the settlement with Dish Network and EchoStar.
MCN: Was the Dish settlement in line with your expectations?
Tom Rogers: Well, I think that the notion of getting a
total of $600 million out of this situation — which, as you
know, is right up there with the famous BlackBerry settlement
[Research In Motion settled a patent lawsuit in
2006 for $612.5 million] and one of the biggest of all time
— is a big win. It gives us a tremendous amount of cash.
Based on the performance of the
stock, the market was expecting more
money. [TiVo shares closed at $9.37 per
share last Th ursday, after trading as high
as $10.60 on May 2 when the settlement
was announced.] But when we looked
at the process in terms of how the court
laid that out, it could have been two to
three more years of additional litigation.
[T]o be able to take this particular case
and nail it for that amount of money was
the right thing to do.
MCN: Who is TiVo going to sue next?
TR: Well, we have some major pending
litigation [involving AT&T, Verizon, Microsoft
and Motorola Mobility]. Beyond
that we can’t comment.
MCN: Do you believe the Dish settlement gives TiVo
more negotiating leverage?
TR: Well, I think you know the answer to that question.
Th is was by far the toughest litigant out there, who plays
the game of litigation like nobody else in the business
does. [Dish CEO Charlie Ergen] just fi nished a round
with us where he was ordered to pay $90 million, and he
could have continued with his delay tactics. And against
that backdrop, he decided to pay $500 million.
When the toughest guy who plays the toughest litigation
game makes that decision … it sends a very clear signal to
others who may be willing to take the chance on litigation.
It clearly shows the value and the strength of our enforcement
MCN: Are you in talks with either Verizon or AT&T about
TR: I really can’t discuss those cases, but I will tell you
they’re on a schedule. Th e cases will go forward to claims
instruction this spring, and later in the
fall go to trial. We have a couple of key
patents we did not have at the time we
sued Dish. We feel that as strong as
the Time Warp patent was, our hand
is even stronger relative to those cases.
MCN: What’s the status of negotiations
with Time Warner Cable and
TR: I’ll just say, in general, we have
discussions with all levels of players in
the cable industry. We have a few ways
we can have companies engage with
us. We have a pretty fl exible model in
ways that companies can work with
MCN: Charlie Ergen joked that you
owe him a $600 million dinner. Where are you guys
going out to eat?
TR: [Laughs.] Well, he fi rst off ered to buy me dinner,
then he reneged and said, no, I have to buy dinner and
he’s not even going to pick up the tip. I said, ‘OK, Charlie,
even though you’re reneging on the original agreement
I’ll pay for dinner.’
I’ve known Charlie for a lot of years. As hard-fought as this
was, this really did not get personal. He always expressed respect
for what we do. We have reasons to look at each other
now as constructive players.