May 2, 2011 10:39 pm

TiVo takes $500m to end patent suit

TiVo settled a contentious patent dispute with Dish Network and EchoStar Corporation over digital recording technology on Monday, ending one of the longest-running legal battles in the media sector.

TiVo, which makes digital television recorders, will receive $500m, including an initial payment of $300m. Dish, the second-largest satellite television provider in the US, will pay $290m upfront, with the remaining $10m coming from Echo­Star. Dish and EchoStar will split payment of the remaining $200m in six instalments to 2017.

In return, TiVo agreed to dismiss all pending litigation between the companies and dissolve all injunctions against Dish and EchoStar.

The row stems from a 2004 lawsuit in which TiVo accused Dish and EchoStar, which were then part of the same company, of illegally using its patented video recording technology for its digital video recorder.

The settlement was for substantially less than had been expected. Many analysts expected Dish to settle for about $3 per DVR subscriber a month. But this settlement was worth closer to $1 per subscriber per month.

Stefan Anninger, Credit Suisse analyst, said the settlement was “very attractive [for Dish], and removes an overhang that has hobbled shares for years”.

The groups will exchange some patent licences as part of the settlement, and have agreed to collaborate in future.

“The results of TiVo’s formidable intellectual property enforcement programme speak for themselves and, consequently, we are pleased to put this litigation behind us and move forward,” said Charles Ergen, chief executive of Dish and chairman of EchoStar.

“We are extremely pleased to reach an agreement with Dish Network and EchoStar, which recognises the value of our intellectual property,” said Tom Rogers, TiVo chief executive. “The compensation from this settlement, including the resulting reduction in legal expenditures, puts TiVo in an enviable financial and strategic position.”

Because the dispute with Dish Network and EchoStar has been unresolved for so long, TiVo has struggled to capitalise on its patent portfolio.

Monday’s settlement follows a complicated ruling two weeks ago in which an appeals court ruled that Dish and EchoStar had infringed on TiVo’s patents, but left the door open for further appeals that would have taken at least another year to settle.

Because the settlement came on the heels of that complex ruling, the resolution of the case was not necessarily a good thing for patent law, said Richard Epstein, professor at the University of Chicago Law School.

“The slow and dilatory nature of the patent protection is yet another gratuitous weakening of the patent system,” he said. “Not a good show in my view.”

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