TiVo Stock Soars 30 Percent After Dish Network Patent Ruling

Judges find Dish Network in contempt of court for violating an earlier ruling that it should shut off 6 million DVRs that infringe patents held by TiVo.

TiVo beat Dish Network in another legal round concerning their 6-year-old patent dispute, and its stock soared 30 percent on Wednesday.

In the latest development before the case potentially heads to the U.S. Supreme Court, an appeals court agreed that Dish is violating an earlier ruling that it should shut off about 6 million DVRs that infringe patents held by TiVo.
Dish has already paid TiVo some $300 million and has upgraded millions of DVRs so that they presumably no longer use TiVo’s patented technologies, but it hasn’t shut down the DVRs that still do. Wednesday’s ruling moves TiVo closer to forcing shutdowns at Dish or making it strike a licensing deal.
Some analysts have speculated that Dish, or its sister company EchoStar, would rather purchase TiVo outright than license its technology.
After the big move in TiVo shares Wednesday – up $2.47 to $10.84 — the company sports a $1.3 billion market capitalization. But with $209 million in the bank, its enterprise value is $765 million.
“The affirmation means that TiVo will receive at least $90 million in a damages award initially by the district court,” Janney Capital Markets analyst Tony Wible told his clients on Wednesday.
“We believe the court’s order requires Dish to disable all DVRs that used the original software, which gives TiVo significant leverage that could force a settlement and eliminate a need to revisit the infringement provision,” he said.
Wible said that given TiVo’s success in defending its patents, its shares should trade in the $22-$37 range.
Wednesday’s ruling, though, only affects Dish’s older DVRs, and the question of whether the upgraded products still infringe hasn’t been settled. Also unclear is whether Dish was correct in simply changing its technology instead of disabling it, as a judge years ago ruled it should.
“The disablement ruling covers only certain older generation MPEG2 DVRs,” Dish said in a statement issued to the media. “We have already upgraded many of these customers and, if we are unsuccessful in obtaining a stay, we will work as quickly as possible to upgrade the remaining customers to our current generation DVRs, as these are not at issue in the ruling.”
“This marks the second time that the district court’s contempt ruling has been upheld by the Court of Appeals,” TiVo said. “This ruling also paves the way for TiVo to receive substantial damages and contempt sanctions regarding the DVRs that EchoStar and Dish Network failed to disable.”