TiVo scores patent win against EchoStar

Victory could lead to increased licensing revenues for the struggling DVR maker.

Tom Krazit
Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
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A Texas jury has awarded TiVo $73.9 million in damages after finding that EchoStar infringed on patents held by TiVo for digital video recorders.

TiVo sued EchoStar in 2004 for violating a patent on a "multimedia time warping system," which involved recording a program on one channel while watching another. The case was being closely watched by TiVo investors. The company has struggled to grow as set-top box makers incorporate DVR capabilities in their products.

"This decision recognizes that our intellectual property is valuable, and will ensure that moving forward EchoStar and any others that want to use our patented technology will be required to provide us with compensation," TiVo said in a statement.

EchoStar plans to appeal the verdict, it said in a statement. "This is the first step in a very long process and we are confident we will ultimately prevail. Among other things, we believe the patent--as interpreted in this case--is overly broad given the technology in existence when TiVo filed its patent...Additionally, the Patent Office is in the process of reexamining TiVo's patent, having determined there is a substantial question concerning the validity of the patent."

According to a document filed by the U.S. District Court for the Eastern District of Texas, the jury found that several EchoStar DVRs had "willfully infringed" on the TiVo patent.

EchoStar had argued the patent was invalid and that its DVRs were substantially different from TiVo's. But TiVo's claims were upheld by the jury, which might be a shot in the arm for the company's chances of building a business model around licensing its technology.

"It's not surprising that TiVo won round one," said April Horace, an equities analyst with Hoefer & Arnett. "But I expect EchoStar will appeal the decision. This is just the beginning of a long ballgame."

Horace isn't convinced that TiVo's win on Thursday does much to push forward the company's strategy to boost revenue by licensing its technology to other DVR makers.

"Do I think that the other cable companies, such as Time Warner Cable and Cablevision will automatically sign up and pay licensing fees to TiVo now? The answer is no," she said. "Some people have speculated that would happen if TiVo wins. But I base my predictions on history. And in the past that hasn't been the case."

TiVo lost $34.5 million during its 2006 fiscal year, which ended Jan. 31. This was an improvement over fiscal 2005, when it lost $79.8 million, but the pace of new subscriber growth was down compared with the previous year.

TiVo recently extended its partnership with DirecTV, which competes against EchoStar's Dish Network service. As part of that deal, TiVo gave up the right to sue DirecTV for patent infringement.

CNET News.com's Marguerite Reardon contributed to this report.