[mjl12407]

Court Finds E*hoStar In Contempt In TiVo Case
Satellite Operator Ordered to Pay DVR Company Additional $103 Million


A federal court Tuesday ordered E*hoStar Communications -- now part of D*sh Network -- to pay TiVo an additional $103 million after finding the satellite operator in contempt of an order that it stop using a key TiVo DVR patent.

The U.S District Court for the Eastern District of Texas decision found that D*sh's "workaround" DVR technology infringed TiVo's intellectual property, and ordered D*sh to disable the DVR functionality of the approximately 4 million set-tops originally covered under the injunction within 30 days.

D*sh Network, in a statement Tuesday, said existing customers with DVRs are not immediately affected by the ruling. The company said it would appeal the decision, and planned to file a motion to stay the order.

"We are disappointed in the district court's decision finding us in contempt," D*sh said in a statement. "We believe a stay is warranted and that we have strong grounds for appeal. Our engineers spent close to a year designing-around TiVo's patent and removed the very features that TiVo said infringed at trial."

Analysts said the decision made it more likely that D*sh Network would enter into a licensing agreement with TiVo.

"While D*sh could continue go it alone (e.g, appeal today's ruling and win, design a new workaround), we believe that today's ruling increases the likelihood that a commercial licensing pact between TiVo and D*sh will eventually be signed, which would increase costs for D*sh," Credit Suisse analyst Spencer Wang wrote in a research note.

The Texas court had previously ruled that E*hoStar infringed TiVo's "Time Warp" patent for DVR controls, and awarded TiVo $104.6 million in damages including interest and supplemental damages accrued through Sept. 8, 2006. E*hoStar paid the damages last October after the U.S. Supreme Court declined to review the case.

In a statement, TiVo said: "We are extremely gratified by the Court's well reasoned and thorough decision, in which it rejected E*hoStar's attempted workaround claim regarding the TiVo patent, found E*hoStar to be in contempt of court and ordered the permanent injunction fully enforced... E*hoStar may attempt to further delay this case but we are very pleased the Court has made it clear that there are major ramifications for continued infringement."