TiVo slides after appeals court extends Dish stay

Shares of TiVo Inc. fell sharply Thursday after a federal appeals court ruling Wednesday extended a stay allowing Dish Network Corp. customers to continue using their digital video recorders.

TiVo and Dish had been enmeshed in a patent infringement case since 2004. A federal judge last month said Dish and EchoStar Corp. were in contempt of a ban on using a modified version of TiVo's DVR technology. Dish was ordered to pay TiVo $103 million plus interest in damages. Dish appealed that decision and applied to be able to continue using the technology until the appeal is heard.

Wednesday's ruling allows Dish to keep its DVRs active until the hearing, probably in November, said Collins Stewart analyst Thomas Eagan in a note to investors Thursday.

Eagan also said Wednesday's decision will enhance Dish's negotiating position in a potential licensing deal with Alviso, Calif.-based TiVo. He had previously anticipated that Dish would be willing to pay up to $3 or $4 per subscriber per month to TiVo for use of its technology, which lets viewers watch one show while recording another.

Now, he said, Dish should be able obtain a deal for a licensing fee under $2 per subscriber per month, or not have to strike a deal at all and hold out until its appeal is heard toward the end of the year.

If Dish loses that appeal, it would likely have to pay TiVo the higher fee range, Eagon said.

Janney Montgomery Scott analyst Tony Wible said the move doesn't change the nature of the case, which he still expects TiVo to win. TiVo will also likely receive extra cash damages from Dish for the additional use of its patented software, he said, on top of the $103 million already awarded.

Dish, the satellite broadcaster based in Englewood, Colo., spun off EchoStar Corp., which sells set-top boxes, in 2008.

TiVo shares fell $1.57, or 14.6 percent, to $9.20 in afternoon trading. Dish shares were down 2.4 percent, or 39 cents, to $16.09, while EchoStar dropped 22 cents, or 1.4 percent, to $15.92.

Stocks were generally lower Thursday. The Standard & Poor's 500 and Nasdaq composite indices were both down 2.3 percent.