A Texas judge has ordered EchoStar to shut down its digital video recorder service and pay TiVo nearly $90 million in damages following a long-running patent dispute. The satellite broadcaster has secured a stay from the Court of Appeals and says it will continue to appeal the case.
A federal district judge ordered EchoStar to stop selling its digital video recorders, turn off within 30 days more than three million devices already installed and pay $89.6 million in damages. It follows an earlier finding by a Texas jury that the company had wilfully infringed a TiVo patent for simultaneously recording and watching television channels.
Judge David Folsom in Marshall, Texas, issued the order four months after a jury awarded TiVo $74.9 million in damages for the alleged patent infringement, adding additional interest payments and supplemental damages for the intervening period. He denied requests from TiVo to triple the award, saying that the satellite broadcaster had not acted ‘in bad faith,’ as evidenced by the legal advice it sought regarding possible patent infringement.
However, the judge noted “TiVo is losing market share at a critical time in the market’s development — market share that it will not have the same opportunity to capture once the market matures.” In contrast, he observed that while EchoStar might suffer some degree of customer loss the company “will not be irreparably harmed”.
The injunction would prevent EchoStar from making, using, or selling the relevant digital video recorders, or DVRs, the DP-501, DP-508, DP-510, DP-721, DP-921, DP-522, DP-625, DP-942, and similar products.
It relates to an alleged violation of US patent 6,233,389 for a “Multimedia time warping system,” known as the “Time Warp” patent, first filed in July 1998 and issued to TiVo in May 2001. The patent describes a system that “allows the user to store selected television broadcast programs while the user is simultaneously watching or reviewing another program”.
The primary claim of the patent is for “a process for the simultaneous storage and play back of multimedia data” which includes the step of converting a “specific program to an (sic) Moving Pictures Experts Group (MPEG) formatted stream for internal transfer and manipulation”.
In a statement, TiVo, recognised as a pioneer in the field of consumer digital video recorders, said: “TiVo is pleased that Judge Folsom has granted a permanent injunction against EchoStar’s DVR products along with supplemental damages and interest. This decision recognizes that our intellectual property is valuable and will ensure that moving forward EchoStar will be unable to use our patented technology without our authorization.”
The company said: “We will also continue to vigorously defend our intellectual property for the benefit of our licensees and shareholders”. Beyond the “Time Warp” technology, TiVo has a portfolio of more than 80 patents, with 138 applications pending.
EchoStar immediately took the ruling to the Court of Appeals in Washington D.C., which temporarily blocked the injunction to preserve the status quo while it considers a longer-term stay, pending appeal.
The company said: “As a result of the stay EchoStar can continue to sell, and provide to consumers, all of its digital video recorder models. We continue to believe the Texas decision was wrong, and should be reversed on appeal. We also continue to work on modifications to our new DVRs, and to our DVRs in the field, intended to avoid future alleged infringement.”
EchoStar Communications Corporation serves more than 12 million satellite television subscribers through its Dish Network, more than 3 million of which have a digital video recorder, although apparently around 190,000 of these do not infringe the patent.
If it is unable to reverse the ruling, EchoStar could seek a licence from TiVo, or it could consider acquiring TiVo, a much smaller company, which has yet to make a profit, in order to control its patents.
EchoStar’s satellite rival, DIRECTV, with whom there are renewed rumours it may merge, has various licensing agreements with TiVo, since it effectively replaced their products with its own systems developed by News Corporation subsidiary NDS.
Meanwhile, TiVo could use the ruling to support alliances with other companies. It is currently developing a version of its service with cable company Comcast, but other operators have been offering generic devices.