Last week we argued that TiVo continued to be a good investment because of the upside of its huge patent hoard, now amounting to considerably more than 100 patents, all of them relating to some extra feature of digital video recorders.
We had no idea it would come so fast on the back of the contempt action that was already running and which has already cost Dish Networks $103 million plus interest, on top of the initial patent damages of almost $105 million, already paid to TiVo. The US Judge in the case has awarded TiVo another $200 million from Dish, this time as penance for continuing to use its DVR patents during a period since the last award, and up to the date when it registered its contempt of court verdict.
We said last week that TiVo could expect many more big pay days in the future when we analyzed its huge DVR patent hoard, but we expected this to come in valid license payments, not yet more Dish penalties.
The court upped the initial jury verdict from $1.25 per Dish DVR per month, to $2. throughout the contempt period. The contempt came about when the court said that Dish should switch off its DVRs, but instead Dish continued to use them after downloading new software which it thought was a valid work around.
The Judge in the case agreed that it had not acted wilfully, in which case the award would have been even higher, and sought a middle path between the initial Jury award and the excessive request by TiVo for $1 billion and came up with the $2.25 value, which amounts to close to another $200 million. Effectively is it as if Dish had to pay the same royalty rate from its jury trial over the extended period, plus about another $115 million. It amounts to around 40% of the average amount that Dish currently charges its customers for DVR service monthly.
The Court found that EchoStar’s attempted design around was not appreciably different to its first patent infringement and that EchoStar had failed to comply with the plain directives of the Court’s order.
The court has already heard an appeal of the original case which went all the way up to the US Supreme Court, which declined to look into it. Now there is an appeal of the first contempt action and there will be an appeal of this action, but Dish is definitively in trouble. It entire case hangs on yet another re-examination of the original TiVo patents which the USPTO is going through now. That won’t directly affect the outcome of either of these cases, however it could lead to a counter suit by Dish to reclaim monies if the patents were overturned, though that seems highly unlikely.
But if Dish sits around and does not agree a licensing fee of its own going forwards, it will get hit with another few hundred millions dollars of costs if it loses both the contempt appeals and this final patent examination, and will still have to cut a license with TiVo. The court is really leaning heavily on it to settle and the judge made this clear when he ordered Dish and its sister company EchoStar to pay TiVo’s attorney fees and other costs.