EchoStar loses crucial ruling in TiVo case, vows appeal

The US Court of Appeals for the Federal Circuit upheld a lower court judgement that would force EchoStar to disable its DVR functionality in as many as eight million subscriber boxes, delivering what might be a fatal blow to the company's chances for victory in the case.

The panel of judges did however reject the lower courts ruling that Dish's workaround was "insufficient" to avoid infringement, giving the company some good news. Either way experts argue that the ruling likely means that the satellite television provider will be forced to enter into a costly settlement to prevent its customers from having their service interrupted.

"Faced with an imminent shut-down of millions of DVRs (the precise number has never been disclosed), we believe Dish will be faced with a gun-to-the-head settlement requirement," Sanford Bernstein senior analyst Craig Moffett wrote in a research note on Wednesday.

Moffett believes that the costs to EchoStar to replace the infringing DVRs could run as high as $3 billion, depending on how many have already been replaced.

TiVo hailed the ruling, and said it intended to pursue a rapid resolution to the battle. "We look forward to the permanent injunction against EchoStar and Dish Network finally being enforced with respect to the DVRs they must now disable," the company said in a statement. "This ruling also paves the way for TiVo to receive substantial damages and contempt sanctions."

Even with its back seemingly against the wall, EchoStar for the moment remains defensive, saying it would appeal the ruling to the US Supreme Court and would seek a stay of the injunction that would force it to shut down the DVRs while doing so.

Spokesperson Marc Lumpkin said that current customers would not be immediately affected by the ruling. "The disablement ruling covers only certain older generation MPEG2 DVRs," he said. "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."

Regardless of EchoStar's continued defiance, its legal position now is very shaky. The Supreme Court only hears a few dozen cases each year, and may end up refusing to hear the case at all. If that happens, the company will have no choice but to settle with TiVo, and it could be at terms it may find unfavorable.

The fight between EchoStar and TiVo stretches all the way back to 2004, when TiVo originally sued the company. A court found EchoStar guilty of infringing on TiVo's "Time Warp" patents, and first ordered the disabling of infringing DVRs in August 2006, although that ruling was immediately stayed pending appeal.

Wednesday's ruling stems from a court ruling in March 2010.