TiVo, Dish/EchoStar Settle Legal Dispute Over DVRs

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The satellite TV firms will pay the DVR provider $500 million, less than analysts had projected, and work with it on promoting the Blockbuster digital video service.

NEW YORK - TiVo Inc. and Charlie Ergen’s Dish Network and EchoStar Corp. said Monday that they have settled all their ongoing patent litigation. Under the terms of the settlement, Dish and EchoStar agreed to pay TiVo $500 million.

The deal includes an initial payment of $300 million with the remaining $200 million to be distributed in six equal annual installments between 2012 and 2017. The companies said the agreement brings total payments to TiVo in the dispute to more than $600 million.

The settlement means that both sides dismiss all pending litigation in the long-running legal dispute, which analysts said was an overhang for both stocks. However, analysts said the Dish payment is less than they had projected.

Dish shares, also buoyed by a better-than-expected quarterly earnings report, closed up 19 percent after setting a new 52-week high of $29.95, while TiVo's stock rose 3 percent.

Wells Fargo analyst Marci Ryvicker called the settlement and first-quarter results announced by Dish just before the deal news "significant positives" for Dish's stock. “Dish had more of the negotiating leverage,” she said. Sanford C. Bernstein analyst Craig Moffett also expressed positive surprise from Dish's point of view. "The TiVo settlement was for far less than we had expected," he said. And Evercore Partners analyst Bryan Kraft echoed that notion, saying the settlement's terms are "a significantly more positive outcome than the $2 per DVR subscriber per month fee that we forecasted."

In their settlement, the parties also granted certain DVR patent licenses to each other. Importantly, TiVo granted Dish a license under its Time Warp patent and certain related patents. Meanwhile, EchoStar granted TiVo a license under certain DVR-related patents for TiVo-branded, co-branded and other products. 

In addition, TiVo will play a role in helping Dish promote the Blockbuster digital video service.

“We have tremendous respect for TiVo’s management, and we have always said that regardless of the outcome of the case, there were many ways that we could work together with TiVo,” said Dish chairman and CEO Charlie Ergen. “The results of TiVo’s formidable intellectual property enforcement program speak for themselves, and consequently, we are pleased to put this litigation behind us and move forward. Additionally, we believe that our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo’s Time Warp patent, which ultimately will allow us to enhance the performance of our award-winning DVRs.”
Said Tom Rogers, president and CEO of TiVo: “The compensation from this settlement, including the resulting reduction in legal expenditures, puts TiVo in an enviable financial and strategic position.”

He also said the company will continue to defend its intellectual property. TiVo has been involved in legal disputes with other telecom and technology firms, such as Microsoft, AT&T and Verizon.

Rogers acknowledged though that TiVo could have earned a bigger payment if it had continued the legal showdown, but said the courts worked slowly, meaning the process may have dragged on for several years amid rising legal costs.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai