U.S. Appeals Court Grants Rare Review in Dish-TiVo Case

A grant to Dish Network of a rare full-court review of a ruling of a DVR patent infringement ruling it lost to TiVo hinges on whether a redesigned satellite receiver/DVR should be subject to new infringement proceedings, analysts said. In granting an en banc review, the U.S. Appeals Court for the Federal Circuit ordered that four additional briefs be filed by September. That set the stage for oral argument this fall, analysts said.

The en banc review will be based on a series of questions including when should a lower court use contempt, rather than infringement proceedings, to find a redesigned product infringed a patent, the appeals court wrote. When a contempt proceeding is proper, what is the burden of proof to show that a device infringes, the court asked. It also will seek to decide what weight, in a finding contempt, should be given efforts to design around a patent and “good faith belief” that the new device doesn’t infringe a patent, the court wrote.

The ruling surprised analysts, who noted less than 10 percent of review requests are granted, and industry officials. Even Dish Network CEO Charles Ergen said earlier last week the company was prepared to disable its DVRs if it lost the court battle with TiVo (CED May 11 p5). In a split decision earlier this year, a three-judge appeals panel ruled that software changes made to receivers produced by EchoStar, now a separate company from Dish, didn’t make them different from those found to have infringed the TiVo patent (CED March 5 p1). Friday, TiVo stock fell 41 percent. Dish rose 4.4 percent.

During the course of its six-year legal battle with TiVo, Dish redesigned its satellite receiver/DVR to avoid infringing TiVo’s so-called time-warp patent that allows for the recording of one program, while watching another. A federal jury in 2006 awarded TiVo $76 million plus interest after finding Dish infringed the patent. U.S. District Judge Charles Folsom later ordered Dish pay $103 million in additional damages, along with about $200 million in contempt sanctions. Folsom issued an injunction barring Dish from selling products that infringed the TiVo patent. But implementation of the injunction was postponed as the case wound through the appeals process.

With the appeals court ruling, there is a “significant chance the Federal Circuit” will decide TiVo needs to pursue a separate infringement case against Dish’s redesigned satellite receiver/DVR, Stifel Nicolaus analyst Rebecca Arbogast wrote clients. Analyst Marci Ryvicker at Wachovia said that, “while many people believe that today’s decision may result in a faster negotiation between DISH and TIVO over a licensing deal, we do not agree.” Instead, she wrote, “We feel that today’s decision only emboldens Charlie Ergen to run the legal proceedings to the gamut, until he gets a full victory."

Dish and EchoStar hailed the appeals court ruling, maintaining the issues that “will be considered by the full court on rehearing will have a profound impact on innovation in the United States for years to come.” TiVo had no comment by our deadline.