EchoStar's Struggling Only Makes It Worse

The showdown at high noon between digital video recorder pioneer TiVo (Nasdaq: TIVO  ) and the two-headed satellite TV hydra Dish Network (Nasdaq: DISH  ) / EchoStar (Nasdaq: SATS  ) never seems to end. TiVo sued Dish and EchoStar for patent infringement way back in 2004 and won $74 million of damages in 2006. After interest charges, EchoStar ended up paying more than $100 million last October.

And the battle goes on. TiVo is still seeking to force EchoStar and Dish to disable DVR boxes that use software that it asserts violates its patents.

In my dream world, EchoStar would now sign a license agreement with TiVo, which in turn would take a victory lap and sign more deals with other service providers like Time Warner Cable (NYSE: TWC  ) . TiVo could then get out of the hardware business entirely and be free to make profits hand over fist on licenses to use its DVR software on third-party set-top boxes, just as it has done with Comcast (Nasdaq: CMCSA  ) and DirecTV (NYSE: DTV  ) .

The reality
That may be what EchoStar should do to save itself from further legal hassles and expenses. In reality, EchoStar sailed yet another Hail Mary downfield, asking the Patent Office to invalidate TiVo's "time warp" patent.

I'm no lawyer (and I don't play one on TV), but the relentlessly TiVo-philiac history of this case points to the likelihood of yet another ignominious EchoStar defeat. Five years ago, Dish settled an eerily similar lawsuit by Gemstar TV Guide, now a part of Macrovision (Nasdaq: MVSN  ) . Management was "happy to put our disagreements with Gemstar-TV Guide behind us, and we look forward to working with the new Gemstar team." Licenses changed hands, and EchoStar even bought a subsidiary that Gemstar didn't want anymore.

It's not too late for history to repeat itself. TiVo needs to win or settle this suit in order to become the high-margin software business it really wants to be. For EchoStar and Dish, it's just one last concession to put this episode behind them. The market hates uncertainty; better, then, to get everything resolved sooner rather than later. 

Kiss and make up, and the world becomes a better place for both adversaries -- along with their customers and investors.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here, nor does he subscribe to any of their services. His DVR is another knock-off brand. You can check out Anders' holdings or a bio if you like. The Motley Fool is investors writing for investors.


Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2009, at 3:47 PM, randlem wrote:

    You have to be kidding me. If you're going to pretend to be a journalist, maybe you should do a little research before you write articles? If you didn't want to bother reading any other news organization's coverage of the case, maybe you could contact the TiVo or E* IR offices, or even just hang out on the TiVo forum board here on the Fool Forums for about 5 minutes. If you had done any of those things, you would know E* already paid the $100M to TiVo. You lost me in the first paragraph, Anders. Not good.

  • Report this Comment On January 14, 2009, at 4:06 PM, CuriousMark wrote:

    This is not a separate case, it is the enforcement phase of the first case.

    They are not trying to force Dish to disable all of their DVRs, only those specific models that were found infringing and are now a shrinking fraction of all Dish DVRs.

    TiVo already has the agreement with DirecTV signed that you are dreaming about. Time Warner and Cablevision are the next two targets.

    Despite those inaccuracies, kissing and making up is definitely what they should do. This action by Dish reeks of desperation and scorched earth battle tactics.

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