TiVo wins ruling in EchoStar case, shares soar
SAN FRANCISCO (Reuters) - A federal appeals court affirmed on Thursday a contempt finding against Dish Network Corp and EchoStar Corp in their long-running patent case against digital video recorder maker TiVo Inc, sending TiVo shares soaring 52 percent.
The U.S. District Court for Eastern Texas had previously imposed contempt sanctions against sister companies Dish and EchoStar for violating a court-ordered permanent injunction to stop making and selling DVRs.
TiVo had sued EchoStar back in 2004, and a jury found that its DVR technology infringed TiVo patents.
Analysts hailed the ruling as a huge win for TiVo, one that potentially opens up major new market and licensing opportunities.
TiVo's options volume heated up to 14 times the norm in afternoon trading. In all, about 191,000 calls and 75,000 puts had traded, according to option analytics firm Trade Alert.
Janney Montgomery Scott analyst Tony Wible recommended that clients "buy the stock aggressively up to $15."
"Today's overwhelming victory significantly improves TiVo's ability to win new business and the rates it can demand for its technology from future deals, while also improving penetration of its DVR advertising platform," he wrote in a research note.
He said the ruling should also help TiVo in its litigation against AT&T Inc, Verizon Communications Inc, and Microsoft Corp.
TiVo said it was pleased with the appeals court ruling, and said it paves the way for the company to receive $300 million in damages and contempt sanctions awarded to it for EchoStar's infringement through July 1, 2009.
TiVo said it plans to seek further damages and contempt sanctions for infringement after July 1.
Bernstein Research analyst Craig Moffett said the court decision could lead to the complete disablement of as many as 8 million Dish DVRs, and said the company now has little leverage in any settlement negotiations with TiVo.
"The ruling opens the door for TiVo to now negotiate a commercial settlement with Dish with the proverbial gun to the head," he wrote in a research note.
Moffett said he expects a much higher settlement on DVR licensing fees than the historical precedent of $1 to $2.25 per unit a month.
Dish was spun out of EchoStar in 2008. Dish and EchoStar claimed they had modified some components of the DVRs Dish continued to sell so that they would no longer infringe TiVo's patents.
In a statement, the companies expressed disappointment with the appeals court ruling, made by a three-judge panel, and said they will seek a review by the full court.
Dish and EchoStar said their DVR customers are not affected by the ruling, and said they will propose "new design-around" DVR technology to the district court for approval.
Shares of Alviso, California-based TiVo were up 52 percent at $15.52 in afternoon trading on the Nasdaq. Shares of Dish Network were down 4.4 percent at $20.75.
The case is TiVo Inc vs Echostar Corporation, Case No. 2009-1374, United States Court of Appeals for the Federal Circuit.