Wow. I don't imagine that the public relations people working for TiVo (NASDAQ:TIVO) get much sleep these days.

Hot on the heels of a splendirrific earnings report, a bucketful of analyst upgrades, and some exciting new service features that should help the company bring more subscribers into the TiVo fold, the video recorder pioneer gets an early holiday gift from the U.S. Patent Office. The long-running lawsuit against satellite TV operator EchoStar (NASDAQ:DISH) can continue, because TiVo's "Time Warp patent" is incontrovertibly valid.

What's that?
The time warp lawsuit has been frozen for a while, awaiting this decision by the patent office. EchoStar has already lost a jury decision and -- seemingly out of desperation -- fired off a petition to invalidate the patent. The District Court decision under appeal would award TiVo $90 million for damages and force EchoStar to stop selling and servicing any TiVo-like DVR services. Given the legal history of the case and this small but important victory, it's hard to imagine that the Dish Network operator could pull out a win.

$90 million is a serious chunk of change for TiVo -- that payout would instantly more than double the company's cash balance, or cover between two and three years' worth of net losses at the rates TiVo is losing money today. To the much bigger EchoStar, it's about half of last quarter's $200 million net profit, or about 9% of its $992 million trailing free cash flow.

Is that all?
If this was just a simple numbers game, EchoStar could have settled the suit long ago, paid up for a patent license, and gone on its merry way. But this particular battle means much more than a one-time $90 million payment. The outcome can be completely game-changing for TiVo and for the entire broadcasting industry.

Those new service features I mentioned earlier shine a new light on this angle. Plenty of lights, actually. First, the long-awaited rollout of TiVo software to Comcast (NASDAQ:CMCSA) subscribers has yet to make much of an impact, but the company has proven beyond a doubt that you don't need TiVo hardware to get TiVo service. Installing the right software on Comcast's preferred Motorola (NYSE:MOT) boxes works just fine.

Second, a partnership with German video software company Nero AG promises to turn your computer into a TiVo, too. Put one and two together, and you get the potential for massive growth in TiVo's installed user base -- without the difficulty and expense of building any hardware. Just run on other people's machines.

The Foolish takeaway
If I ran TiVo, I'd love it to be a pure software and service company that collects tons of subscription royalties at almost no cost and no risk. If and when the company finally wins the EchoStar lawsuit, every TV service provider worth its salt will have to pay up or face a lawsuit of its own -- with the backing of legal precedent very high up in the court system. Time Warner Cable (NYSE:TWC) would do it. DirecTV (NYSE:DTV) has about eighteen months left on its three-year licensing agreement, and would be a sure bet to renew that deal indefinitely. Verizon (NYSE:VZ) FiOS without a legal DVR? Puh-leeze. Pay up!

TiVo is already a verb, synonymous with recording anything on a digital video recorder. This legal battle stands to make TiVo the only game in town if you want a DVR -- and who doesn't? The company would -- nay, will -- become very profitable, very quickly, and then hang around until set-top boxes become obsolete. Don't hold your breath for that to happen, folks. Just take a nice, long nap.

Further Foolishness:

TiVo is a former Motley Fool Stock Advisor recommendation. Pick up a free 30-day trial pass (and find out why David Gardner pulled the plug) right here.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and you don't need a law degree to appreciate our Foolish disclosure guidelines.