Dish Network (Nasdaq: DISH ) and EchoStar Communications (Nasdaq: DISH ) are running out of second chances. A federal court of appeals just confirmed that a lower court was correct to say that TiVo (Nasdaq: TIVO ) had valid claims of patent infringement against the bifurcated satellite operator.
The decision reversed two claims of hardware-related infringement, but reaffirmed the two software decisions in TiVo's favor. Damages were kept unchanged at $74 million plus another $20 million in interest accumulated since the original decision, because the fine wasn't based on individual claims but rather on the existence of set-top boxes that broke patent rules. Oh, and everybody please pay your own lawyers.
The decision leaves Dish with nowhere left to go but U.S. Supreme Court, and the company might even call it a day at this point and just settle the account. Unless there's another round of appeals, the companies are sure to hammer out some kind of licensing deal akin to what TiVo already has going with cable giant Comcast (Nasdaq: CMCSA ) and the other satellite TV provider, DIRECTV (Nasdaq: DTV ) .
This could, as we discussed in November, be the genesis of TiVo as a serial software licensor that stands to profit from every DVR device on the market. The Comcast deal has proven that set-top boxes made by Motorola (NYSE: MOT ) can look, feel, and act like the real TiVo deal after an automated software update. There's no reason why Scientific-Atlanta hardware from Cisco Systems (Nasdaq: CSCO ) wouldn't pass the same test, and the same goes for untold hordes of other knockoffs.
Falling back on this momentous and now nearly incontrovertible legal victory, TiVo calls the tune in those negotiations. And it will make some beautiful music. I'd suggest "Money" by Pink Floyd, the other "Money" as sung by the Beatles, or ABBA's "Money, Money, Money." The one riff I'd stay away from is Dire Straits' "Money for Nothing" because TiVo has worked hard for its fair share and richly deserves to be paid. In my humble opinion, of course.