TiVo Rules the Courtroom

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When will EchoStar (Nasdaq: SATS) learn?

Charles Ergen's satellite company once again came up short in its patent-infringement battle against TiVo (Nasdaq: TIVO) last night, costing EchoStar an additional $103 million for its unwillingness to play nice with TiVo's intellectual property.

The damage to EchoStar doesn't end there. The meter is still ticking on accumulated interest for the judgments that have all ended in TiVo's favor, dating back to the original victory three years ago. EchoStar will appeal -- again -- but one gets the feeling that it's only delaying the inevitable, with a tab that mounts with every passing courtroom defeat and interest-bearing day.

TiVo has struggled to grow the organic base of subscribers to its digital video recorder (DVR) platform. However, the company shrewdly staked a claim on the patents that power its time-shifting technology. As a result, cable and satellite television heavyweights like DirecTV (NYSE: DTV), Cox, and Comcast (Nasdaq: CMCSA) pay TiVo for the right to offer similar set-top boxes and solutions. Ergen's DISH Network (Nasdaq: DISH) remains the defiant holdout, and EchoStar continues to pay the price.

Ergen has had a rough year. He was trumped by John Malone's Liberty Capital (Nasdaq: LCAPA) in his play for satellite radio giant Sirius XM Radio (Nasdaq: SIRI) in February. Now he has another legal slap in the face, courtesy of TiVo's open hand and closed patents.

How will this end? DISH Network can't afford to deactivate the DVR boxes of its satellite-television customers. The company has already been shedding subscribers, and the sudden absence of DVRs' addictive, commercial-quashing capabilities probably wouldn't help matters. Unless there's a legal card it hasn't played before a sympathetic judge, EchoStar may as well just follow the example of larger players like Comcast and DirecTV, and strike a licensing deal with TiVo. If it's good enough for the leading cable and satellite television providers, what's DISH's dish?

Hasn't EchoStar realized that TiVo is the Harlem Globetrotters of DVR technology? At the very least, Ergen should know that his own company's looking more and more like the Washington Generals.

Other "thumbs up" reads on TiVo:

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TiVo is a former Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz owns shares in TiVo and a TiVo box. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy wishes it, too, could make that reassuring little "plunk!" sound.

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 June 03, 2009, at 5:10 PM, philbur8 wrote:

    After working for dish (lower case emphasized) at one of their call-center dungeons, for a few years, I think Charlile is finally getting what's coming to him. I can tell you from working for him, my lasting impression of him and his company was one who was willing to walk over anyone and everyone to be successful. Rules, ethics, and just common human decency were "for the little people" over at dish. Dish treats their employees somewhere between 2nd class citizens and disposable lighters. It is a repressive place to work. I'm glad some judge finally had the stones to call this weasly-Mr. Crabs out. Justice may be slow, but it does eventually come. May cloudy weather continue to block their signals.

  • Report this Comment On June 03, 2009, at 7:18 PM, PaulEngr wrote:

    Funny that Tivo has never attempted to sue their long time rival ReplayTV for patent infringements. ReplayTV is almost an unknown at this point because they made a stupid move...they had a superior product but an inferior marketing arm.

  • Report this Comment On June 04, 2009, at 1:03 PM, angusthermopylae wrote:

    Perhaps Dish is holding out for a realignment of the patent process. Great article about the "other side" at Groklaw:

    http://www.groklaw.net/article.php?story=20090603224807259

    Basically, there is a strong belief among many that software patents in general are wrong and damaging to businesses. One of the hard-argued patents along these lines is Amazon's 1-Click patent--they patented the idea that you can buy an item with a single mouse click.

    The phrase "time shifting" is one of those things that gets software developers riled up. It doesn't matter how you do it; Tivo has the patent, and you have to pay them.

    As a matter of disclosure, I am not a Dish customer--I agree with philbur8 in that they treat their customers pretty poorly, and I moved away from Dish a few years ago--partly because of customer treatment, and partially because of the Tivo suit. What can I say? I love my DVR (yes, I know this makes me somewhat of a hypocrite--but as a consumer, you have to live in the world as is...changing it is something else.)

  • Report this Comment On June 04, 2009, at 1:41 PM, cloudofjoy wrote:

    I have been a Tivo owner for more than eight years. I own multiple Tivo's. I have had Echo Star's DVR, and Comcast's DVR, but neither come close enoght to what Tivo is to make me happy. Why infringe on patents with an inferior product? They should have saved all that money they spent trying to avoid paying Tivo, nd just paid a licenseing fee for Tivo to do it for them.

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