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TiVo wins DVR patent dispute; Dish may have to pay fees
By David Lieberman, USA TODAY
TiVo shares rocketed nearly 62%, to $16.53, on Thursday after it won a key — and possibly decisive — victory in a long-running patent-infringement court case that could reshape the digital video recorder business.
The United States Court of Appeals for the Federal Circuit upheld a lower court ruling that Dish Network's DVRs violate TiVo's patents. One enables users to watch a TV show while recording another, a basic feature for digital recorders.
The appeals court decision appears to be "the beginning of the end game" in a six-year fight over TiVo's intellectual property, Bernstein Research analyst Craig Moffett says.
That could embolden TiVo (TIVO) to challenge other companies' DVRs, says JPMorgan analyst Bridget Weishaar.
TiVo has already sued Verizon and AT&T for patent infringement. The DVR pioneer has business deals with Comcast, Cox, RCN and DirecTV that preclude a lawsuit involving the technology in their recorders.
Yet, the case against Dish (DISH) could have a dramatic impact on the satellite TV business.
"What is at stake is nothing less than (Dish's) ability to continue to offer DVRs" — which many satellite viewers consider an essential service, Moffett says. For example, he says, TiVo could cut a deal with DirecTV that would give it the exclusive right to offer DVRs based on TiVo's technology.
Dish shares were down about 5%, to $20.59.
Dish's 14.1 million customers are not affected at this point, the company said in a statement. It will ask the entire Federal Circuit to review the appeals court's decision.
Such reviews are rare, though, and typically occur to resolve questions about the nature of the law, not the facts of a case.
"I don't think (the hearing request) does anything" for Dish, says Tom Eagan, an analyst at financial services firm Collins Stewart.
Barring a reversal of the decisions favoring TiVo, the big questions now involve the extent of the damage to Dish. The U.S. District Court in eastern Texas has ordered the No. 2 satellite company to pay $300 million to TiVo for patent infringements up to July 1, 2009. TiVo says it will ask for more cash to account for violations since then.
Wall Street analysts say Dish likely will have to cut a deal with TiVo and pay it a monthly fee to avoid having to replace millions of DVRs.
Dish's stock price suggests that investors believe it will have to pay $3 a month for each DVR, Eagan says. But he says the price could be closer to $4. If Dish then raised prices, it could lead about 500,000 customers to drop the service — possibly to switch to DirecTV or cable.
There's no consensus, though. For example, Wells Fargo Securities analyst Marci Ryvicker says a monthly fee could be as high as $3 and as low as $1.75.
By David Lieberman, USA TODAY
TiVo shares rocketed nearly 62%, to $16.53, on Thursday after it won a key — and possibly decisive — victory in a long-running patent-infringement court case that could reshape the digital video recorder business.
The United States Court of Appeals for the Federal Circuit upheld a lower court ruling that Dish Network's DVRs violate TiVo's patents. One enables users to watch a TV show while recording another, a basic feature for digital recorders.
The appeals court decision appears to be "the beginning of the end game" in a six-year fight over TiVo's intellectual property, Bernstein Research analyst Craig Moffett says.
That could embolden TiVo (TIVO) to challenge other companies' DVRs, says JPMorgan analyst Bridget Weishaar.
TiVo has already sued Verizon and AT&T for patent infringement. The DVR pioneer has business deals with Comcast, Cox, RCN and DirecTV that preclude a lawsuit involving the technology in their recorders.
Yet, the case against Dish (DISH) could have a dramatic impact on the satellite TV business.
"What is at stake is nothing less than (Dish's) ability to continue to offer DVRs" — which many satellite viewers consider an essential service, Moffett says. For example, he says, TiVo could cut a deal with DirecTV that would give it the exclusive right to offer DVRs based on TiVo's technology.
Dish shares were down about 5%, to $20.59.
Dish's 14.1 million customers are not affected at this point, the company said in a statement. It will ask the entire Federal Circuit to review the appeals court's decision.
Such reviews are rare, though, and typically occur to resolve questions about the nature of the law, not the facts of a case.
"I don't think (the hearing request) does anything" for Dish, says Tom Eagan, an analyst at financial services firm Collins Stewart.
Barring a reversal of the decisions favoring TiVo, the big questions now involve the extent of the damage to Dish. The U.S. District Court in eastern Texas has ordered the No. 2 satellite company to pay $300 million to TiVo for patent infringements up to July 1, 2009. TiVo says it will ask for more cash to account for violations since then.
Wall Street analysts say Dish likely will have to cut a deal with TiVo and pay it a monthly fee to avoid having to replace millions of DVRs.
Dish's stock price suggests that investors believe it will have to pay $3 a month for each DVR, Eagan says. But he says the price could be closer to $4. If Dish then raised prices, it could lead about 500,000 customers to drop the service — possibly to switch to DirecTV or cable.
There's no consensus, though. For example, Wells Fargo Securities analyst Marci Ryvicker says a monthly fee could be as high as $3 and as low as $1.75.
