Nobody knows how much satellite TV provider team EchoStar (NASDAQ:SATS) and DISH Network (NASDAQ:DISH) really owe TiVo (NASDAQ:TIVO). After this weekend's $200 million of sanctions, the satellite guys now have a $400 million total bill to pay. But that most certainly won't be what their check says at the end of the day.
This latest legal bill comes as Judge David Folsom of the Eastern District Court of Texas held EchoStar in contempt of court for infringing on TiVo's video-recorder patents while the years-long case drags on. EchoStar says it has redesigned its systems to work around the TiVo patents, but TiVo and the courts disagree.
The $400 million will be paid out only if TiVo prevails in the final legal battle, which is yet to come. By then, the court "will seriously entertain the award of enhanced sanctions," and the final bill might end up being much larger -- or nothing at all, if the last decision goes EchoStar's way.
Of course, both sides put their own spin on the news. TiVo counts up the awards and is "confident that this ruling brings us closer to final resolution." EchoStar seems equally as convinced that it "ultimately will prevail on appeal."
If EchoStar wins, TiVo's entire business stands on very thin ice. The company is signing deals with broadcasters like Comcast (NASDAQ:CMCSA) and DirecTV (NASDAQ:DTV) these days, based on years of development work and good-looking patent protections. Remove the patents, and the cable guys could simply copy TiVo's business in-house.
On the other end of the pendulum, EchoStar and DISH can afford the $400 million because of the broadcaster's strong cash flows. Over the past 12 months, DISH produced $685 million in net profits and a cool billion in free cash flows. But it would triple TiVo's cash balance in a flash and cement those new third-party revenue streams.
Some people say that DISH and EchoStar would be better off just buying TiVo to put an end to the legal wrangling. That's certainly been done before, but I don't see how the companies could put years of spite and venom behind them to work together as one. Better, then, to get done with the courts, start paying a reasonable license fee, and go on making money. That should have happened years ago. Or perhaps Tim Beyers is right and Google (NASDAQ:GOOG) should buy TiVo instead.
What do you think? Share your thoughts in the comments box below.
