The En Banc review of the Dish Network and EchoStar infringement of TiVo time warp and other patents has resulted in a huge swing in TiVo’s favor, with the infringement upheld, and the contempt for not disabling one brand of EchoStar DVRs also upheld. This means that $90 million of the $200 million awarded in the contempt of court hearing is affirmed as being on its way to TiVo and Dish still needs to switch off its offending devices.
What is still in doubt is whether or not the workaround that it provided in software for its Broadcom chip enabled devices is significantly different so as to not infringe. The court hasn’t offered an opinion on this, which will have to go to another court to decide, in a new trial, but confirmed that because it ‘might’ be different enough, the contempt hearing wasn’t the place to sort it out. So the court has vacated the decision for a further $110 million in the contempt hearing.
This is a double edged sword for EchoStar and it has grasped it immediately, saying that it will ask for a stay of execution and appeal the decision to the Supreme Court. The fact that some of the decision had a bank of judges split 7 to 5 suggests that the details of law are tough enough to nail down, that the Supreme Court might want to get involved.
It’s tough to say whether or not it will. Have any technology patent trials ever been subject to a workaround and then had a contempt hearing used to back up the court’s view? Probably, but this isn’t really the part that EchoStar wants to go to the Supreme Court, really it wants the infringement to be reversed and that’s black and white and here at Faultline, and throughout the US stock market no-one thinks that the Supreme Court will be interested in taking the case. EchoStar may not even get a stay of execution because of it.
TiVo’s share price jumped 41% on the day, and may well jump again. The double edged sword we are talking about is what if TiVo sues once again and the new Broadcom DVRs are also shown to be infringing, a second court would be entitled to raise the stakes from the $400 million that has been at stake so far, to something more than double, say $1 billion ‘ a big enough legal bill to hurt the previously stable Dish and EchoStar businesses, and consign them to the dustbin of history. A settlement will happen one way or another, either with Supreme Court involvement, or more likely on the day that it declines to hear the suit.