dan9999
03-11-2010, 05:17 PM
TiVo Zaps Dish on Patent
Legal Win Gives DVR Maker More Leverage With Other Operators
By Todd Spangler -- Multichannel News, 3/8/2010 6:48:00 AM
Fresh from its court win over Charlie Ergen’s Dish Network, TiVo may be looking around for other scores to settle.
Time Warner Cable, Verizon Communications and AT&T each face the increased likelihood that they will need to do business with TiVo, following the digital video recorder company’s victory last week in the six-year patent battle with Dish Network and EchoStar, analysts said.
The U.S. Court of Appeals for the Federal Circuit, in a 2-1 decision last week, denied Dish Network’s request to overturn a lower-court ruling finding the satellite operator in contempt of an order to disable DVRs that were found to infringe a key TiVo patent. Th e TiVo “Time Warp” patent describes a system for simultaneously recording and playing back TV programming.
At the close of trading last Th ursday (March 4) TiVo shares were up 62% to $16.53 — a nearly 10-year high for the stock — and Dish had declined 5%, to $20.59.
“This strengthens TiVo’s hand tremendously,” said Jimmy Schaeffler, chairman of consulting firm The Carmel Group, noting that the legal win gives the company greater leverage in negotiating with other pay TV providers.
TiVo in August 2009 filed lawsuits against Verizon Communications and AT&T, alleging they violated three patents, including the Time Warp patent. TiVo has said it has engaged in discussions with TWC; to date, TiVo has not sued the operator.
The DVR pioneer, which separately rolled out its next-generation Premiere boxes last week, has various distribution deals with other U.S. pay TV players including Comcast, DirecTV, Cox Communications and RCN.
Now, one way or another, TiVo will extract more money from Dish.
TiVo stands to get at least $300 million from Dish and EchoStar in damages and contempt sanctions through July 1, 2009 — and potentially even more. “We will also seek further damages and contempt sanctions for the period of continued infringement thereafter,” TiVo said in a statement.
Dish and EchoStar, in a joint statement, said they would seek review of the decision by the full Federal Circuit. Th e companies said DVR customers are currently not affected and said they plan to propose a new workaround design to the Texas federal district court, which issued the injunction, for approval.
But Dish may be forced to disable as many as 8 million of its DVRs within a month and could even lose the ability to offer a DVR altogether, according to Sanford Bernstein senior analyst Craig Moffett.
The implications of the appeals court ruling for Dish Network “are enormous, and go far, far beyond the retrospective licensing fees and damages that will now be payable to TiVo,” Moffett wrote in a research note. “What is at stake is nothing less than their ability to continue to offer DVRs. ”
Any settlement between TiVo and Dish will likely be even higher than previously proposed licensing fees of up to $2.25 per month per subscriber, according to Moffett. Each $1 per subscriber per month would cut Dish’s earnings before interest, taxes, depreciation and amortization (EBITDA) by $96 million per year, he estimated. In the worst-case scenario, Dish’s loss in the case could give TiVo an opening to negotiate an exclusive distribution deal with DirecTV in the satellite space. In 2008, TiVo struck a new deal with DirecTV under which the DVR maker is developing an HD DVR as an option for DirecTV subscribers.
“[I]f one assumed that Dish Network would no longer be a viable competitor without a DVR offering — not an entirely unreasonable proposition — then DirecTV’s gain from exclusivity would be nothing less than all current and future satellite subscribers,” Moffett said.
Other Wall Street analysts were less dire about Dish’s situation.
Wells Fargo analyst Marci Ryvicker said she expected Dish CEO Ergen to settle for between $1.75 and $3 per subscriber per month, which would amount to $126 million to $216 million in EBITDA — a range that is “reasonable” and is likely “already expected by the market,” Ryvicker said.
PATENT REWIND
Recapping the TiVo v. EchoStar litigation:
January 2004: TiVo sues EchoStar Communications for infringing “Time Warp” patent.
April 2006: Federal jury finds in TiVo's favor, awards $74 million.
August 2006: U.S District Court in Texas orders Dish to disable infringing DVRs.
October 2008: Dish/EchoStar pay TiVo $104.6 million in initial damages plus those accrued through Sept. 8, 2006, with interest after U.S. Supreme Court declines to review the case.
June 2009: Texas court finds Dish/EchoStar in contempt for violating the injunction; awards TiVo additional $103 million plus interest.
September 2009: Texas court orders Dish and EchoStar to pay about $200 million in additional damages and contempt sanctions.
March 2010: U.S. Court of Appeals for the Federal Circuit upholds contempt ruling against Dish/EchoStar.
SOURCE: Multichannel News research
Legal Win Gives DVR Maker More Leverage With Other Operators
By Todd Spangler -- Multichannel News, 3/8/2010 6:48:00 AM
Fresh from its court win over Charlie Ergen’s Dish Network, TiVo may be looking around for other scores to settle.
Time Warner Cable, Verizon Communications and AT&T each face the increased likelihood that they will need to do business with TiVo, following the digital video recorder company’s victory last week in the six-year patent battle with Dish Network and EchoStar, analysts said.
The U.S. Court of Appeals for the Federal Circuit, in a 2-1 decision last week, denied Dish Network’s request to overturn a lower-court ruling finding the satellite operator in contempt of an order to disable DVRs that were found to infringe a key TiVo patent. Th e TiVo “Time Warp” patent describes a system for simultaneously recording and playing back TV programming.
At the close of trading last Th ursday (March 4) TiVo shares were up 62% to $16.53 — a nearly 10-year high for the stock — and Dish had declined 5%, to $20.59.
“This strengthens TiVo’s hand tremendously,” said Jimmy Schaeffler, chairman of consulting firm The Carmel Group, noting that the legal win gives the company greater leverage in negotiating with other pay TV providers.
TiVo in August 2009 filed lawsuits against Verizon Communications and AT&T, alleging they violated three patents, including the Time Warp patent. TiVo has said it has engaged in discussions with TWC; to date, TiVo has not sued the operator.
The DVR pioneer, which separately rolled out its next-generation Premiere boxes last week, has various distribution deals with other U.S. pay TV players including Comcast, DirecTV, Cox Communications and RCN.
Now, one way or another, TiVo will extract more money from Dish.
TiVo stands to get at least $300 million from Dish and EchoStar in damages and contempt sanctions through July 1, 2009 — and potentially even more. “We will also seek further damages and contempt sanctions for the period of continued infringement thereafter,” TiVo said in a statement.
Dish and EchoStar, in a joint statement, said they would seek review of the decision by the full Federal Circuit. Th e companies said DVR customers are currently not affected and said they plan to propose a new workaround design to the Texas federal district court, which issued the injunction, for approval.
But Dish may be forced to disable as many as 8 million of its DVRs within a month and could even lose the ability to offer a DVR altogether, according to Sanford Bernstein senior analyst Craig Moffett.
The implications of the appeals court ruling for Dish Network “are enormous, and go far, far beyond the retrospective licensing fees and damages that will now be payable to TiVo,” Moffett wrote in a research note. “What is at stake is nothing less than their ability to continue to offer DVRs. ”
Any settlement between TiVo and Dish will likely be even higher than previously proposed licensing fees of up to $2.25 per month per subscriber, according to Moffett. Each $1 per subscriber per month would cut Dish’s earnings before interest, taxes, depreciation and amortization (EBITDA) by $96 million per year, he estimated. In the worst-case scenario, Dish’s loss in the case could give TiVo an opening to negotiate an exclusive distribution deal with DirecTV in the satellite space. In 2008, TiVo struck a new deal with DirecTV under which the DVR maker is developing an HD DVR as an option for DirecTV subscribers.
“[I]f one assumed that Dish Network would no longer be a viable competitor without a DVR offering — not an entirely unreasonable proposition — then DirecTV’s gain from exclusivity would be nothing less than all current and future satellite subscribers,” Moffett said.
Other Wall Street analysts were less dire about Dish’s situation.
Wells Fargo analyst Marci Ryvicker said she expected Dish CEO Ergen to settle for between $1.75 and $3 per subscriber per month, which would amount to $126 million to $216 million in EBITDA — a range that is “reasonable” and is likely “already expected by the market,” Ryvicker said.
PATENT REWIND
Recapping the TiVo v. EchoStar litigation:
January 2004: TiVo sues EchoStar Communications for infringing “Time Warp” patent.
April 2006: Federal jury finds in TiVo's favor, awards $74 million.
August 2006: U.S District Court in Texas orders Dish to disable infringing DVRs.
October 2008: Dish/EchoStar pay TiVo $104.6 million in initial damages plus those accrued through Sept. 8, 2006, with interest after U.S. Supreme Court declines to review the case.
June 2009: Texas court finds Dish/EchoStar in contempt for violating the injunction; awards TiVo additional $103 million plus interest.
September 2009: Texas court orders Dish and EchoStar to pay about $200 million in additional damages and contempt sanctions.
March 2010: U.S. Court of Appeals for the Federal Circuit upholds contempt ruling against Dish/EchoStar.
SOURCE: Multichannel News research