09:30 18.08.2006 | All news from "Tech News and Articles"
EchoStar must disable DVRs, judge rules (Reuters)
Thursday's ruling from U.S. District Judge David Folsom inMarshall, Texas, demands that within 30 days EchoStar mustbasically render useless all but 192,708 of the DVR units ithas deployed.
The decision comes four months after a jury ruled thatEchoStar should pay TiVo $74.9 million because it willfullyinfringed TiVo patents that allow for the digital storage of TVprogramming.
The judge also denied EchoStar's request that theinjunction be stayed pending appeal, making it difficult forEchoStar to continue offering its subscribers' DVRfunctionality without striking a quick licensing deal with TiVoor another DVR maker.
While the injunction battle clearly was won by TiVo, thescrappy pioneer of the DVR industry also was handed a lossThursday when Folsom ruled against its request that the juryaward be tripled. The judge, however, ordered EchoStar to payan additional $5.4 million in interest payments and $10.3million in supplemental damages, bringing the amount EchoStarowes TiVo to nearly $90 million.
NO BAD FAITH
In ruling against treble damages, Folsom noted thatEchoStar was not allowed to present evidence that it receivedoutside legal advice indicating that the DVRs it created didnot infringe TiVo's patents. That EchoStar sought such advicebefore TiVo sued it "could demonstrate a lack of willfulness"on the part of EchoStar, the judge wrote in denying TiVo'srequest of treble damages.
"The evidence does not show the defendants acted in badfaith, nor does the jury's willfulness finding amount to afinding of bad faith," Folsom wrote.
In asking for an injunction, TiVo argued that, while itwould become extinct if unable to protect its patents and sellits DVRs, EchoStar's primary business of satellite TVtransmissions does not depend on its ability to offer DVRs.
EchoStar claimed, among other arguments, that TiVo's motivein filing a lawsuit was to gain additional leverage overEchoStar and other prospective business partners in order tostrike lucrative licensing deals.
The vast majority of TiVo subscribers, in fact, come by wayof a licensing agreement with EchoStar competitor DirecTV.Another agreement with cable giant Comcast Corp. won't bearfruit until later this year, and TiVo has had trouble lining upother big players in the pay TV market, who mostly have beenoffering their customers generic DVRs.
Siding with TiVo, Folsom wrote that one thing bothcompanies agreed on is that DVR customers are "sticky," meaningthat once they obtain a DVR they stick with it, so businessthat TiVo has been losing to EchoStar might not be recoveredwithout a ruling of infringement.
'CRITICAL TIME'
TiVo, the judge wrote, "is losing market share at acritical time in the market's development -- market share thatit will not have the same opportunity to capture once themarket matures."
EchoStar also claimed that the timing of TiVo's lawsuit --several years after EchoStar began selling DVRs -- amounted toproof that it was not suffering irreparable injury. Folsom,though, noted that TiVo hadn't sued EchoStar sooner because itwas trying to enter into a business deal with it.
EchoStar also said an injunction would unduly hurt itsbusiness, an argument Folsom was not entirely unsympathetic to-- though, again, he came down on the side of TiVo.
"Although the injunction will likely result in some degreeof customer loss and will impact (EchoStar's) ability tocompete in the market, (EchoStar) will not be irreparablyharmed," he wrote.
Folsom's ruling was filed after the close of regular andafter-hours trading on Wall Street, so it did not affect theshare prices of EchoStar and TiVo. When TiVo won its jury trialin April, its shares moved up 23 percent in after-hourstrading, though the stock has since given back much of thatgain.
TiVo shares closed up fractionally Thursday to $6.49, whileEchoStar shares fell 1.1 percent to $32.75.
Reuters/Hollywood Reporter
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