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TiVo Ain't Done With This Dish Yet

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The Supreme Court took one look at Dish Networks' (Nasdaq: DISH  ) appeal for mercy and wanted none of that action. TiVo (Nasdaq: TIVO  ) has finally won this long-running court battle over digital video recorder technology -- but there are still a few loose ends left to tie up.

The earlier United States Court of Appeals for the Federal Circuit ruling will stand, and the satellite TV specialists need to pay up for the pleasure of stepping on TiVo's patented DVR toes. In the "next few days," Dish and kissing cousin EchoStar Communications (Nasdaq: SATS  ) will pay $104 million to cover damages and interest.

It's a drop in the bucket next to the $2.6 billion of operating cash flow Dish produced in 2007, but a bigger deal to tiny TiVo with its $273 million in net sales and a tradition of negative cash flows. However, Dish is still fighting back, and for good reason.

The final ruling also told Dish to shut down its customers' DVR boxes, which would put the company at a serious disadvantage against rival satellite DirecTV (NYSE: DTV  ) and terrestrial TV guys like Comcast (Nasdaq: CMCSA  ) or Verizon (NYSE: VZ  ) . Dish came up with a "software design-around" to skirt that issue, so its customers can keep using their DVR hardware. TiVo is fighting that notion and has filed motions to convince the court that this workaround is just more of the same old infringement.

The outcome of that battle is what really matters now. A few more million dollars of additional interest is neither here nor there, but we're looking at a legal precedent here. If Dish ends up paying license fees to TiVo despite its protestations, then a real TiVo DVR could soon become the only legal DVR solution. Any satellite, cable, or rabbit-ear TV signal provider that wants to look hip to technology trends could be forced to go through the TiVo clearinghouse, giving the company real power over the market and a serious additional revenue stream besides good old subscription fees and hardware sales.

I haven't seen the workaround or the code behind it, so betting on a total TiVo victory in court is a bit of a gamble at this point. It's better to base your buying decisions on TiVo's solid business moves and newfound affinity for profits. A final legal smackdown would just be a serious bonus on top of all that.

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Netflix is a former Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund doesn’t own shares in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.

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