TiVo is a perfect example of how US patent laws and US courts continually work in favour of larger companies ‘ and make it harder and harder to extract money from genuine patents. But this week its stock surged around 30% in after hours trading (the US markets are not yet open as we write this) to something like $10 even, up from just under $7, after yet another courtroom win against EchoStar Communications, part of Dish Network.
TiVo has suddenly taken on its highest value ever since we have been covering the company, jumping from $700 million to over $1 billion in after hours trading.
The US court appearance was for contempt of court, and the judge was clearly angry with previous clear statements to Dish about its use of TiVo DVR technology, and sees the attempt at a work-around, without seeking court permission, as simply ignoring previous court decisions.
The court ordered Dish to pay TiVo another $103 million plus interest, on top of the damages of almost $105 million that it has already paid. Dish immediately said that it would appeal and ask for a stay of the payment, but the tone of District Court Judge David Folsom sounded like he would not grant an appeal if it was his decision. It’s not the money, but the fact that Dish has been told by him to disable the DVRs of millions of customers or quickly strike a licensing arrangement with TiVo.
This new $103 million may be considered punitive by another court and may get reduced, but it makes it extremely clear that ‘software’ workarounds to achieve the same ends are not going to pass muster. If an appeal is heard, Dish will once again argue that it complied with the court’s order by changing the software on millions of DVRs, but the rebuke from the Judge was enough to make it crystal clear that TiVo really does have the right to license the very core ideas of DVRs to pretty much everyone, on a global basis.
The thing that upset the judge was the Dish could have requested a review of the court’s order by itself to take into account the idea that its re-write was a legal work around but Dish instead merely ignored the order. He made it clear that in future any attempts to design around the patent must be shared with the court.
The Judge arrived at his $103 million figure by allocating a royalty rate of $1.25 a month for the 20 months that Dish should have been paying TiVo, on around 4 million infringing DVRs (out of its 13 million customers). Interest could push the award substantially higher.
TiVo Chief Executive Tom Rogers immediately made statements about this decision substantially increasing the perception of the value of TiVo’s intellectual property.
Faultline first went on record about four years ago saying that TiVo was being harshly undervalued for this same reason, and that really it should be measured as an intellectual property play with a service business attached and not merely as a service business.
If Dish fails in its appeal, it would be perfect timing for TiVo to put a realistic licensing charge on its intellectual property and then target other providers of DVRs around the world.