Quick TiVo Patent Verdict Strong Signal to Industry; What’s Next is Unclear
It took a Tex. jury 2 hours, including a cigarette break, to decide EchoStar willfully infringed 9 sections of a TiVo patent on DVR “time warp” technology, but it will take much longer to sort how far into the DVR world the ruling extends. It’s not clear how the ruling, the appeals and an EchoStar countersuit affect other pay-TV competitors and manufacturers who supply them DVRs, analysts said Fri. But one things is certain, analysts said: The Tex. jury’s decision will be worth more to TiVo than the $74 million it was awarded.
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A clear picture of the post-TiVo win world faces 4 firms
- DirecTV, EchoStar, TiVo and Comcast -- said Carmel Group’s Jimmy Schaeffler, author of a Feb. study on DVR use. DirecTV called a precautionary patent truce with TiVo the day the TiVo case went to jury, and Comcast is said to be safe from TiVo patent infringement under its current TiVo partnership (CD April 13 p6). “But for all of the others in the game -- Time Warner, Cox, Cablevision, Pioneer, Panasonic, Motorola, Scientific-Atlanta -- for all of them, they really have no idea of what’s ahead,” Schaeffler said: “Some may be thinking, ‘On Monday morning, I'm going to call [TiVo CEO] Tom Rogers.’ Others will be talking to their business and legal affairs people over the weekend about whether they're liable.”
TiVo now has charge of the time warp patent -- that much is clear, analysts said. “The quickness with which the jury came back is a message to TiVo and to all of the industry that this is a very strong patent and that the next jury could come back even quicker,” Schaeffler said. Also clear is that TiVo will sue if pushed, analysts said. “There would be no reason for them to let up now. In fact, it probably would be an offense to many TiVo’s shareholders if they were to let up today. This jury gave them a mandate, which is that the time warp patent belongs to TiVo, and TiVo is expected to aggressively protect it,” Schaeffler said.
Scientific-Atlanta is “aware of the patent litigation between TiVo and EchoStar,” it said. But Scientific- Atlanta’s DVRs “are not affected by the outcome,” an S-A spokeswoman said. The firm supplies DVRs to Comcast, Time Warner, Cablevision, Charter, Adelphia, and others, she said. Calls to Motorola weren’t returned by our deadline. Intellectual property already is a large part of DVR production costs. A ruling like TiVo’s “shuffles the deck” and “accounting ledgers” but likely won’t add to the cost to consumers of DVRs, said DBS analyst Steve Blum of Tellus Ventures Assoc.
EchoStar called the verdict “the first step in a very long process,” voicing confidence the verdict “will be reversed either through post-trial motions or on appeal.” The statement said federal patent officials are re-examining the validity of TiVo’s patent, and some EchoStar DVRs aren’t covered by the decision. “Dish Network subscribers can continue to use the receivers in their homes, including their DVRs. Furthermore, TiVo dropped their claim that EchoStar’s Dishplayer 7200 DVR infringes their patent,” the EchoStar statement said.
An EchoStar countersuit against TiVo and Humax U.S.A. is pending in U.S. court in Texarkana, Tex., where it’s set for a Feb. 2007 trial. That suit claims TiVo and Humax infringed 4 patents held by Tex.-based EchoStar subsidiary, EchoStar Technology Corp. (ETC). EchoStar is claiming TiVo infringed its own patents covering pausing live TV, recording it, storing it and formatting it, according to patent documents filed with the Texarkana court. One ETC patent dates back to 1998; the others are from 2001 and 2003.
EchoStar has been aggressive in developing its own DVR, set-top box and data networking intellectual property because EchoStar CEO Charles Ergen “clearly doesn’t like having to pay for intellectual property,” said Blum. Ergen would rather EchoStar did its own engineering and own innovation, he said: “As a result, EchoStar has developed a lot of its own intellectual property in house and may have a valid counter claim against TiVo and everybody else.”
DVRs are fast becoming standard pay-TV subscriber gear. A Feb. Carmel Group study said by 2010 50% of satellite and cable-TV households will have DVRs. A five-fold rise in overall DVR industry revenue is expected to accompany that spread, the report said, up to $5.5 billion in 2010 from $1.1 billion in 1999. The satellite TV industry continues to claim about half of DVR users, followed by cable at about 42%. DVR revenue has the same pattern, the study said, with satellite TV generating more than $750 million, followed by cable at more than $400 million.