US Appeals Court Lets Echostar Hit Play On DVR Sales

October 3rd, 2006 Davis Posted in Disclosure - I own stock in co. mentioned, TiVo |

TiVo’s Motion to Strike is Denied_Page_1 Hosted on Zooomr

After losing their patent case to TiVo earlier this year, Dish found themselves in a precarious position when Judge David Folsom ordered Dish to disable and stop selling their DVRs within 30 days of his order. Almost immedietely, Echostar appealed the decision and was able to temporarily convince a US appeals court to place a stay on the order while Echostar appealed the jury decision to a higher court.

After looking at Echostar’s appeal, the US Court of Appeals for the Federal Circuit announced today that the injunction against Dish will not remain in effect during Echostar’s appeal process. This means that Echostar customers who are currently using the Dish DVR will not be losing service unless TiVo losses to Echostar’s appeal. In looking at the decision, the court found that Dish has a “substantial case” for appeal.

“Because EchoStar’s DVR was found to infringe both the hardware and software claims, to obtain a stay of the injunction, EchoStar must show that it is likely to prevail on its arguments concerning both sets of claims. Based upon our review of the motions papers, and without prejudicing the ultimate determination of this case by the merits panel, EchoStar has met its burden of showing that there is a substantial case on the merits and that the harm factors militate in its favor. Thus, the motion for a stay is granted.”

Dish responded to the announcement by issuing a press release stating

“We are pleased that this morning, the Federal Circuit Court of Appeals in Washington, D.C. temporarily blocked an injunction issued by a Texas Court, while it considers a longer-term stay of that injunction.

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.”

At the same time that the appeals court decision was announced, TiVo filed an 8K announcing that they have entered into a cross licensing patent agreement with IBM. As a result of the licensing agreement, the license granted by IBM extends to all products except “general purpose data processing products and data storage devices” and the “license that was granted to IBM extends to all products other than digital media recorders and digital media recorder software.”

TiVo also issued a press release responding to the appeals court decision saying

“We are confident that the jury’s decision in TiVo’s favor will be upheld once the Federal Circuit has the opportunity to review the entire record in this case. It is important to note that most injunctions in patent cases are stayed pending appeal, and the appeal itself will be decided on a totally different standard of review”

While this is hardly the end to this on again off again soap opera, today’s decision is certainly a blow to TiVo’s patent efforts. Armed with the injunction, TiVo had put themselves into an enviable position where they could force an end to their disagreement with Dish while threatening them with the loss of their DVR service. While this case is anything but over and Dish still needs to win on appeal, this does buy Dish more time to pursue their appeal without having to worry about their subscribers losing their DVR service.