Englewood (CO) - A federal appeals court temporarily blocked an earlier ruling of an U.S. District Court judge in Texas that would have given Echostar Communications, better known as the operator of the Dish Network, to shut down its service to more than four million DVR devices and pay $89.6 million in damages to Tivo, which sued Echostar in 2004 for patent infringement.
Echostar's stock has been sent on a roller coaster ride early this morning after a U.S. District Court Judge David Folsom granted Tivo a "permanent" injunction against Echostar Communications that ordered the company to "stop making, using, offering for sale or selling in the United States their DVR products," including the models DP-501, DP-508, DP-510, DP-721, DP-921, DP-522, DP-625, DP-942, "and all Echostar DVRs that are not more than colorably different from any of these products." The ruling would have included the shutdown of the service and essentially the functionality of more than four million devices currently used by Dish Network subscribers within 30 days.
Judge Folsom also ordered Echostar to pay Tivo approximately $73.992 million in damages, interest in the amount of $5.638 million as well as supplemental damages in the amount of $10.317 million.
After losing $1.98 or 6% of its value, Echostar's stock recovered to a loss of only 1% in early afternoon trading on Friday when the company announced that the federal appeals court in Washington, D.C. temporarily blocked an injunction issued by a Texas Court. Echostar said that the appeals court "considers a longer-term stay of that injunction." As a result, Echostar can continue to sell and operate all of its digital video recorder models. In a statement released on Friday, the firm said that it believes that the "Texas decision was wrong, and should be reversed on appeal. We also continue to work on modifications to our new DVRs, and to our DVRs in the field, intended to avoid future alleged infringement."
Tivo sued Echostar in Federal District Court on 5 January 2004, alleging that ECC and certain subsidiaries are violating U.S. Patent 6,233,389 issued to TiVo in May 2001, known as the "Time Warp" patent. The Time Warp patent describes systems and methods for the simultaneous storage and playback of programs, supporting advanced capabilities such as pausing live television, fast-forwarding, rewinding, instant replays, and slow motion. On 13 April 2006, a Texas jury agreed with Tivo that Echostar "willfully" infringed Tivo's Time Warp patent.
Echostar is the second-largest satellite TV provider in the U.S. with a customer base of about 12.5 million subscribers.