Digital-video-recorder pioneer TiVo scored a big court victory Thursday at the expense of Douglas County-based EchoStar Communications Corp.
A Texas jury awarded TiVo $74 million in its four-year patent-infringement suit against EchoStar. TiVo claimed that EchoStar used its technology without license for the satellite company’s Dish Network DVRs.
“If a company can’t protect its intellectual property, then any company out there can just come and get it,” said Marshall, Texas, attorney Sam Baxter, who represented TiVo at the trial. “In that sense, this case was life or death.”
Because the jury found that EchoStar “willfully” violated TiVo’s patents, a federal judge could triple the damages.
EchoStar said it expects that the verdict, reached after less than three hours of deliberations, will be overturned.
Observers said the verdict is more important for Alviso, Calif.-based TiVo, which lost $79.8 million last year, than for EchoStar, which earned $1.5 billion. It will allow TiVo to seek royalties from other companies it says are violating its patents.
Though TiVo’s name is closely associated with the popular devices that allow viewers to record, store and replay live programs, it has been unable to stop some cable- and satellite-TV companies from selling what it calls knockoffs.
“TiVo has a much stronger hand now when it tries to negotiate licensing fees,” said Craig Moffett, senior analyst with U.S. Cable and Satellite Broadcasting in New York.
That, in turn, could eventually translate into higher prices for DVRs, which typically lease for $10 to $15 a month.
The jury valued the royalties owed by EchoStar at a flat sum of $10 per DVR.
For EchoStar, the verdict isn’t a major financial blow. It represents less than 1 percent of its $8.4 billion in revenues last year. Still, EchoStar said in a statement that the dispute isn’t settled.
“This is the first step in a very long process, and we are confident we will ultimately prevail,” the company said. “Among other things, we believe the patent – as interpreted in this case – is overly broad. … We believe the decision will be reversed either through post-trial motions or on appeal.”
EchoStar noted that the TiVo patent that the jury found to be valid is being re-examined by federal regulators, who it said have already raised “a substantial question” about its validity.
The company said customers of its Dish Network can continue using their DVRs.
Nearly 2.6 million of EchoStar’s 12 million Dish Network customers have DVRs, according to Magna Global USA, a New York research firm.
Across all cable and satellite providers, there are 11.4 million DVR users in the United States. Magna Global estimates that number will top 17 million by the end of this year.
TiVo said Thursday it will seek a court injunction to bar EchoStar from distributing DVRs of any kind to its customers. If granted, that could force EchoStar to begin paying TiVo royalties for each DVR in the future, costs that could be passed on to consumers.
TiVo had sought $87 million at trial, arguing that the infringement started in May 2001 when it obtained its patent, Baxter said. But the jury considered January 2002, when TiVo filed the suit, as the starting point for the infringement, he said.
Brian Wieser, director of industry analysis for Magna, said that customers who want DVRs would most likely be willing to pay a few dollars extra for them.
“Even in the worst-case scenario, (the decision) probably won’t have a material impact on EchoStar. It’s not like TiVo is trying to stop the sale of DVRs,” he said. “TiVo is going to be smart with what it says its license fees will be.”
EchoStar, which has aggressively marketed its DVRs – particularly new ones that can record and play back high-definition programs – may ease up on the heavy advertising of its DVRs, Wieser said.
El Segundo, Calif.-based DirecTV is the nation’s largest satellite provider, with 15 million subscribers. DirecTV has an agreement – which it renewed Wednesday – to offer TiVo service to its subscribers. Nearly 2.6 million TiVo boxes are leased to customers through DirecTV. TiVo users totaled 4.4 million at the end of January, according to Magna.
Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.
