August 18th, 2006 Davis
Over the last several years, TiVo has been in a bitter patent dispute with Echostar over their use of TiVo’s technology. After winning a jury verdict last April, TiVo was awarded $74 million. In addition to these jury damages, TiVo could also receive treble damages of up to tripple that amount from the judge overseeing the case. After winning the verdict award, TiVo immedietely filed for an injunction against Dish asking Judge Folsom to prevent Dish from selling DVRs and to prevent them from continuing to operate the 4 million DVRs that Dish has sold to date. In early August, the judge met with TiVo and with Echostar and told them that he was granting TiVo’s request for an immediete injunction, but he also placed both companies under a gag order until two more additonal issues were worked out. While TiVo and Echostar both have remained silent on this issue, someone may have forgotten to tell the Eastern Texas weblog about the order because they are reporting that Judge Folsom granted the immediete injunction against Dish.
Update #2 -
After TiVo first won their jury verdict, Echostar and TiVo both issued dueling press releases regarding the status of their injunction. At the time, Echostar pointed to the recent Supreme Court decision between Ebay vs. Merc as an example of why they expected to have their injunction stayed. Ironically, in his decision, Judge Folsom specifically cites that case and expands on his rationale for granting the injunction.
“Plaintiff has demonstrated both that it continues to suffer irreparable harm in the absence of an injunction and that there is no adequate remedy at law. Defendants compete directly with Plaintiff – Defendants market their infringing products to potential DVR customers as an alternative to purchasing Plaintiff’s DVRs. The availability of the infringing products leads to loss of market share for Plaintiff’s products. Loss of market share in this nascent market is a key consideration in finding that Plaintiff suffers irreparable harm – Plaintiff 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.”
This is a tremendous victory for TiVo in that it not only forces Dish to make a tough decision to settle their case or to lose market share, but it also sends a clear message to the other cable companies that if they can’t work out a deal with TiVo, then TiVo has real teeth to hurt them with. Dish may continue to appeal their loss and in fact, on their most recent earnings call they did indicate that they were working on a backup solution that wouldn’t infringe on TiVo’s patents, but this is now a very dangerous game of chicken for them to play. DVRs may have been slow to catch on, but their growth has undeniably increased and it’s the type of functionality that once you have, you can’t ever go back. When I first used TiVo, it was a life changing moment. I was no longer tethered to the Network’s schedules, TV was now tethered to my schedule. At the time I didn’t think I needed it, but after trying it, I realized how important time shifting could really be. If Dish insists on moving forward with their appeal, they will undoubtably lose customers to DirecTV and to the cable companies. Given the high cost to replace their 4 million boxes, as well as the churn that they would experience from not being able to offer this service, I would be very surprised if Dish doesn’t finally break down and make a settlement with TiVo. Dish still has their legal rights to move forward with their appeal, but given the patent review, the jury decision and now the injunction, it’s hard to see how they could convince a judge to overturn this ruling.
Update - Dave Zatz has a scan of the actual order by the judge and it indicates that TiVo did not receive treble damages, but will be receiving approximately $15 million more in damages and interest owed on their $74 million verdict. The judge’s order instructs Dish to cease operation of their boxes within 30 days.
Update #2 - Echostar is out with the first statement on the injunction. In a press release the company says that they are pleased that the courts concluded that they did not willfully infringe and that they plan on appealing the injunction. It looks like the company isn’t done fighting yet.
“We are pleased the Court concluded EchoStar did not act in bad faith and did not copy Tivo’s technology, and we intend to continue our vigorous defense of this case. We believe that, for a number of reasons, the Texas Court should be reversed in all other respects on appeal. We also continue to work on modifications to our new DVRs, and to our DVRs in the field, intended to avoid future infringement. Existing DISH Network customers with DVRs are not immediately impacted by these recent developments, and we will keep consumers informed as events develop. We hope to have additional information for our customers very soon.”
Posted in Disclosure - I own stock in co. mentioned, TiVo | 4 Comments »
