DISH / EchoStar ordered to pay TiVo $190 million in patent infringement case
By Donald Melanson 
posted Jun 2nd 2009 8:23PM
posted Jun 2nd 2009 8:23PM
We're a bit hesitant to call this one done given the history involved, but a federal judge in Texas has dealt DISH / EchoStar yet another serious blow in its long-standing dispute with TiVo, and this time he's taken a number of other measures that could cause EchoStar to finally rethink its workaround-litigate strategy. The big setback for EchoStar, however, is the one-two punch of $190 million in damages it's been ordered to pay TiVo and an order to disable the "infringing function" on all but 193,000 DVRs now in the hands of subscribers. The judge also found that EchoStar's recently-implemented workaround technology still violated the patent in question and, as a result, he's ordered EchoStar to inform the court before it decides to try its hand at another "design-around" of the infringing patent. For its part, TiVo says that it is "extremely gratified by the Court's well reasoned and thorough decision," while DISH / EchoStar would only say that it plans to appeal the court's decision and file a motion to stay the order with a federal appeals court.Read - The New York Times, "Court Awards TiVo $190 Million in EchoStar Patent Case"
Read - TiVo Statement on U.S District Court for the Eastern District of Texas Decision
Someone want to fill me in on the "infringing function" DISH will inevitably disable? I'm about ready to sign my mother-in-law up for TurboHD and I don't want to pay for a DVR that isn't really a DVR.
For now, this injunction only applies to Dish Network's older SD DVRs. It does not apply to any of Dish Network's HDTV DVRs.
The "infringing function" is the one that records to a disc and/or plays back from the disc. There is no current order to turn off the HDTV DVRs, but it is inconceivable that they oberate on different principles and if TiVo files suit in the same court, the chances of an immediate injunction are good.
TiVo won't because the current order is enough to force Dish to buy a license on TiVo's terms.
What did Echostar actually infringe? Some code sharing or something? What about other DVR's like DirecTV, I-Guide, Passport Echo, SARA, Moxi, and all the PC software (Beyond TV, WMC, etc..)? They all pretty much do the same thing... records TV to a hard drive. How can you sue for that? That's like Kleenex suing other tissue manufacturers because people use their products to also wipe their nose.
So what will Tivo do with the $190 million? Will they use it as a jump start to finally stop operating out of the red? Will they use it to fund development on a new Series 4 Tru2Way box? Will they put some into R&D for a reworked user interface?
cypherx,
TiVo patented a hardware and software implementation for DVR functionality on low-cost, low-performance hardware. Most current DVRs use that implementation, because it's the cheapest way to produce a DVR. If cable and satellite companies used high-performance AMD and Intel CPUs in their boxes, they'd have no need for TiVo's implementation. But they all want to build a box for $200, not $800, and TiVo's patents help to make that possible with today's technology.
(Eventually, faster hardware will eliminate the need for the patents at issue in this case.)
Comcast, Cox, and DirecTV all have licensing agreements with TiVo. Dish Network, Cisco, Macrovision (Passport Echo), Moxi, Time Warner, and Verizon do not. The TiVo patents are not applicable to computer software like Beyond TV, WMC, all of which run on high-performance PC hardware.
Echostar's final bill will be significantly higher than $190 million. Last October, Dish Network paid $104 million after interest for infringement that occurred up until April, 2006. Now they'll pay another $104 million plus interest -- probably closer to $125 million after interest -- for infringement between then and now. That amount was calculated based on $1.50/mo per infringing SD DVR.
Assuming the U.S. Court of Appeals affirms this decision, Dish Network will have to license the TiVo's patents to continue service on its older DVRs. This 2004 case only pertains to Dish Network's older SD DVRs, but for any settlement, TiVo will undoubtedly demand a percentage of the HD DVR fees too. TiVo was awarded $1.50/mo per DVR for infringement on the SD DVRs, so they'll probably want something along those lines.
DirecTV struck an agreement with TiVo before the outcome of the Echostar case was known, so they got a much better deal. DirecTV won't pay TiVo a dime for DVRs running its own software, but next year, they will offer the TiVo software as an option on their DVRs. DirecTV will pay TiVo about $2/mo for every customer that chooses the TiVo software. It shouldn't cost customers extra (i.e. DirecTV is expected to foot the bill), although we won't know that for certain until it's available.
As for what TiVo will do with that money, your guess is as good as any. TiVo has averaged about $60 million per year in R&D; perhaps that will increase with this influx of cash.
There was an error in my post above with respect to the damages. Fixed timetable as follows:
x - September 9, 2006 ==> $104 million, after interest, paid October 2008
September 9, 2006 - April 18, 2008 ==> $103 million PLUS back interest due
April 18, 2008 - now ==> amount to be determined in hearings In June and July
Another inaccuracy above -- this numbers above are based on assessed fees of $1.25/mo per infringing DVR, not $1.50/mo. Best not to post at 3am. :)
Wow, that's interesting. I still find it hard to fathom as to why the U.S. Court System would allow such a high fine. In today's sue happy country, I guess that's to be expected. That makes me wonder about other products that have duplicate usage. Like does Puff's have to license technology to make tissues to Kleenex? Does Hoover pay royalties to Eureka (or whatever the very first electric vacuum cleaner was)? I mean they all do the same thing, just in a different way.
Now I could see if Dish Network took the exact same chipset as the Tivo, and threw very simular (although it would be different unless they had help from a tivo insider spy) code on it. To me it still doesn't have merit because the UI is vastly different, and Tivo items such as Wishlists, Season Pass, TivoToGo, etc.. do not exist, and if they would its under a different name and UI.
But then again, are all light bulb manufacturers paying royalties to GE (or whatever company took over Thomas Edison's invention)...
Just like playing devils advocate here :-)