Court favoring TiVo in EchoStar patent dispute

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WASHINGTON -- A three-judge appeals court panel signaled Thursday it is likely to rule at least partly in favor of TiVo Inc. in its patent dispute with EchoStar Communications Corp.

EchoStar is seeking to overturn a lower court decision last year that ruled the Englewood, Colo.-based satellite broadcaster had infringed on patented TiVo technology that allows viewers to record one program while watching another. The court awarded TiVo $89.6 million in damages.

Shares of EchoStar fell 66 cents, or 1.4%, to $48.28 in midday trading, near the upper end of its 52-week trading range of $31.73-$52.15. TiVo's shares climbed 10 cents, or 1.4%, to a new 52-week high of $7.22.

TiVo sued EchoStar in 2004, alleging that its digital video recorders infringed on TiVo's "time warp" technology. TiVo, based in Alviso, Calif., pioneered digital recorders that allow viewers to pause, rewind and fast forward live television shows.

Donald Dunner, EchoStar's lawyer, argued before the Court of Appeals for the Federal Circuit that the trial court construed TiVo's patent too broadly.

EchoStar's technology differs from TiVo's in several respects and therefore doesn't infringe its patent, Dunner said.

Judge S. Jay Plager, however, appeared unconvinced.

If the jury accepted TiVo's description of the scope of its patent, "isn't that the end of the case?" Plager asked.

Plager and Judge William Bryson asked what the ramifications would be if they upheld only part of the lower court's ruling, related to the software aspects of TiVo's patent.

Seth Waxman, TiVo's lawyer, said a ruling of any infringement by EchoStar would be sufficient to uphold the lower court's decision.

But Dunner argued that a split decision by the appeals court could affect the size of the damages award. As a result, the case would have to be sent back to the trial court for additional proceedings.

In addition to the damages award, Judge David Folsom of the U.S. District Court in the Eastern District of Texas also ordered Echostar to shut down the three million digital video recorders used by its customers, but that order was stayed pending the outcome of today's appeal.

The case is critical to TiVo, because if its patent is upheld, it could have additional leverage to strike deals with other cable and satellite providers to license its technology. The company already has such deals with Comcast Corp. and EchoStar's satellite rival, DirecTV Group Inc.

TiVo's shares jumped over 6% in afternoon trading Wednesday after an analyst wrote that the company is likely to prevail in the litigation.

A ruling isn't expected for about six months, lawyers involved with the case said.
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