TiVo Awarded $200M in EchoStar Patent Dispute

(CN) - A federal judge in Texas fined Dish Network's sister firm, EchoStar, $200 million for flouting a court order to stop selling digital-video recording technology that infringes on TiVo's patent.

Five years ago, TiVo accused EchoStar of violating its patented DVR technology for storing and playing back television shows.

A jury ruled for TiVo, and U.S. District Judge David Folsom in Marshall, Texas, blocked EchoStar and Dish Network from selling any products that infringe on TiVo's patent.

But TiVo claimed, and the judge agreed, that EchoStar had violated the court order by creating and selling "design-around" products that still infringed TiVo's patent.

It asked the court to punish EchoStar with nearly $1 billion in sanctions - the full $974.5 million in DVR profits that EchoStar made during the contempt period between April 2008 and July 2009. TiVo urged the court to triple the jury's royalty rate of $1.25 per subscriber per month during that period, as EchoStar has since increased its monthly DVR fee from $4.98 to $5.98.

EchoStar pushed for no sanctions, but said that if the court deemed them necessary, they should be capped at about $138 million, or no more than $1.50 per subscriber for the contempt period.

Judge Folsom rejected both suggested awards and settled for something in the middle: a royalty rate of $2.25 per DVR subscriber, or about $200 million.

"This award will include approximately $110 million in compensation based on the jury's award and approximately $90 million in sanctions," Folsom explained.

"A $2.25 rate per month would represent a nearly 40% royalty on the $5.98 per month fee that EchoStar currently charges its customers," the judge added. "Although EchoStar's financial resources are considerable, a 40% royalty is substantial and cannot be easily overlooked. It will be difficult for EchoStar to pass this $1 rate increase onto its consumers without charging more for DVR service than its main competitors."

Folsom also ruled that Dish Network and EchoStar's continued infringement was not intentional.

"While the Court finds it distasteful that EchoStar would engage in an ad-campaign that touted its DVRs as 'Better Than TiVo' while continuing to infringe TiVo's patent," Folsom wrote, "the Court finds that EchoStar may have genuinely believed in its design-around efforts."

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