Jury verdict in patent case boosts prospects for TiVo

Friday, April 14th 2006, 8:44 am

By: News On 6

MARSHALL, Texas (AP) _ In a case cast as crucial to TiVo's survival, a federal jury decided that EchoStar Communication Corp. copied key technologies from the digital video recording pioneer and awarded nearly $74 million.

The 10-member jury spent just about two hours, including a cigarette break, to decide that the parent of the Dish satellite network had infringed nine sections of TiVo's patent on technology for digital video recorders that let viewers pause, rewind and fast-forward live TV shows.

``There was no one thing,'' said jury forewoman Cathy Lindsey, a school secretary. ``We just felt like there was infringement on all the charges. It wasn't unanimous to start with, but we were close.''

TiVo won most of the $87 million in damages it sought.

The case in federal district court was closely watched on Wall Street, with some analysts even dropping in during the two-week trial. They said a victory would help TiVo win other royalty deals involving digital video recorders, or DVRs.

News of the verdict sent TiVo shares soaring 21.7 percent, or $1.75, to $9.80 in after-hours electronic trading Thursday night. If that price holds in regular trading when the Nasdaq Stock Market reopens on Monday, it would mark a 52-week high for the stock. EchoStar shares dropped 22 cents to $29.75 in after-hours trading.

The judge could triple the $73.9 million award _ which is subject to appeal _ since the jury found that EchoStar had willfully infringed TiVo's patent.

In a statement, EchoStar called the verdict ``the first step in a very long process'' and said it considered TiVo's patent overly broad.

``We believe the decision will be reversed either through post-trial motions or on appeal,'' EchoStar said in a statement. The Englewood, Colo., company also said it is looking forward to trying its countersuit against TiVo, which is scheduled for early next year, also in East Texas.

TiVo attorney Matthew Zinn said the verdict gives his company a boost in its attempt to negotiate licensing deals with cable operators that use TiVo-like boxes from other manufacturers. He said as a last resort, TiVo might file patent-infringement lawsuits against cable companies.

Comcast Corp. recently signed a deal with Alviso, Calif.-based TiVo, but other cable providers have resisted. They _ along with Dish _ have taken sales from TiVo by offering boxes and service at lower prices. (Separately, TiVo said Wednesday it extended an agreement with its largest partner, satellite TV provider DirecTV Group Inc., for three more years.)

Jurors hewed to the recommendation of a TiVo consultant in finding that EchoStar's use of TiVo's patent for a ``multimedia time warping system'' cost TiVo $73.99 million.

That broke down to $32.66 million in lost profits from sales of set-top boxes _ $169.50 per box _ and another $41.33 million that EchoStar should have paid in royalties on its sales of more than 4 million TiVo-like boxes.

The jury declined to award TiVo the full $87 million it sought because the company hadn't stamped all of its boxes with a patent trademark, so damages only covered the period after TiVo filed the lawsuit in January 2004.

Like many of the jurors, Brenda Dotson, a third-grade teacher, took copious notes to understand a case that hinged on technical details about DVRs.

``We just looked at the evidence and tried to maintain the big picture,'' she said.

Both Dotson and Lindsey, the forewoman, said they made up their minds before Thursday's closing arguments. They were impressed by TiVo co-founder James M. Barton _ the first name on TiVo's patent _ who described how his box worked and calmly sidestepped efforts by an EchoStar lawyer to trip him up during cross-examination.

None of the jurors own a TiVo, although Judge David Folsom said he does.

In closing arguments Thursday, EchoStar attorney Harold McElhinny said TiVo was using EchoStar as a scapegoat for its own failure to compete against other makers of set-top boxes. He said TiVo's box was overpriced at a time when Dish and cable companies were giving away recorders to new subscribers.

McElhinny highlighted TiVo's financial problems _ it has lost nearly $650 million since its founding in 1997 _ which he blamed on erratic decision-making.

After two weeks of a hard-fought trial, lawyers for both sides tried to lighten the mood on Thursday with self-effacing humor.

TiVo's hometown Marshall attorney, Sam Baxter, began by apologetically telling jurors, ``If this (trial) were like TiVo, you could just fast-forward through this and go to lunch.'' Then he made a joke about trying in vain to get TiVo's lead lawyer, Morgan Chu, to get rid of his trademark bow tie.

A couple of hours later, the winning team of lawyers held a boisterous celebration in a pub across the square from the courthouse. By then, Chu had ditched the bow tie.