TiVo Patent Trial Gets Under Way in Texas

The TiVo v. EchoStar Communications patent trial officially began on Wednesday. Now it’s up to a Texas jury to decide whether the satellite TV giant stole TiVo’s technology that allows viewers to skip commercials.

In a case that could have stock market and cable television industry repercussions, TiVo alleges that EchoStar, operator of the Dish Network, violated its patent on digital video recorder (DVR) technology. TiVo pioneered the category of set-top box products that allow users to record one television program while watching another.

Neither TiVo nor EchoStar could immediately be reached for comment.

Victory Expected

It will be a surprise to experienced patent litigators across the country if TiVo does not prevail in its jury trial against EchoStar this month in Marshall, Texas, said Bradford P. Lyerla, intellectual property attorney and partner with Marshall, Gerstein & Borun, an IP-specialty firm based in Chicago.

That is not because the merits of the case are so obviously favorable to TiVo. Rather it is because plaintiffs enjoy the advantage in a patent jury trial. Lyerla pointed to recent statistics for the Eastern District of Texas — where Marshall is located — that show that juries there find for plaintiffs in patent cases in about eight out of 10 trials.

“The challenge for EchoStar will be to find a way to overcome the jury’s native sympathy for the underdog, while at the same time teaching the jury what it will need to know in order to understand EchoStar’s unavoidably complicated defense,” Lyerla told the E-Commerce Times. “This is a difficult challenge for defense counsel and one that in the arcane world of patent litigation many defense lawyers are unable to surmount.”

Win or Lose?

If TiVo wins, as expected, it could unleash a slew of lawsuits against cable companies that offer other set-top boxes, or it could fill TiVo’s corporate coffers with licensing fees from the cable operators dating back five years, in some cases. If TiVo loses, it could also lose significant market share to competitors like Motorola.

A victory for TiVo could spark a sharp rise in stock prices based on the anticipation of the millions of dollars in licensing fees it could collect.

The damages from the Dish Network alone could be significant. While TiVo did not specify damages in its complaint, attorneys could ask for an amount equal to what Dish Network would have paid if TiVo had licensed its technology when it received its patent in 2001.

EchoStar’s Counter Play

EchoStar does not believe the TiVo patent is enforceable and has filed a countersuit against the DVR maker. The company claims it used technology it patented between 1998 and 2003, including “Interruption Tolerant Video Program Viewing.” That case is scheduled for trial next year in federal court in Texarkana, Texas.

Still, investors have a positive outlook on TiVo in light of the trial’s likely outcome. TiVo’s shares are up more than 35 percent since the beginning of 2006. TiVo’s stock traded at US$7.17 on Wednesday afternoon, up 1.7 percent since Tuesday’s close.