A federal jury awarded TiVo Inc. nearly $74 million in damages Thursday in a swift ending to a patent-infringement lawsuit against EchoStar Communications Corp., the parent of the Dish satellite television provider.
TiVo got most of the $87 million in damages it sought in a case that one of its lawyers called “life or death” for the company that was among the first to sell devices to pause and rewind live television.
The case in U.S. District Court in Marshall was closely watched on Wall Street, with some analysts even dropping in during the two-week trial. They said a victory would help TiVo win other royalty deals.
News of the verdict sent TiVo shares soaring nearly 20 percent, or $1.60, to $9.65 in late-session electronic trading. EchoStar shares dropped 27 cents.
EchoStar attorneys declined to comment as they left the courthouse.
TiVo General Counsel Matthew Zinn said the verdict in U.S. District Court gives the company more leverage to negotiate royalty deals with cable companies that, like Dish, use digital video recorders that function much like a TiVo.
Those rivals have taken sales away from TiVo by offering boxes and service at lower prices. Zinn would not rule out suing cable companies that use other boxes, but he called it a last resort.
“We’re just trying to build products that people use and enjoy, and this gives us more runway to do that,” said James M. Barton, a TiVo co-founder whose name is listed first on the company’s most important patent.
The 10-member jury deliberated just over two hours after hearing two weeks of highly technical testimony from engineering experts.
“It wasn’t unanimous to start with, but we were very close,” said jury forewoman Cathy Lindsey, a school secretary. “We took good notes. At the end of (TiVo’s rebuttal case on Tuesday), I put my notebook up and thought, I’m done.”
An electrical engineer paid by TiVo said the EchoStar boxes relied on technology covered by TiVo patent, but two experts hired by EchoStar said the designs were different.
“We just looked at the evidence and tried to maintain the big picture,” said juror Brenda Dotson, a third-grade teacher.
TiVo claimed EchoStar violated its patent for a “multimedia time warping system” to pause, rewind or fast-forward live TV programs by recording them on a hard drive. EchoStar’s own original box “didn’t work. It was a disaster,” TiVo lawyer Sam Baxter said during closing arguments.
In closing arguments, EchoStar attorney Harold McElhinny said TiVo was using EchoStar as a scapegoat for its own failure to compete against other makers of set-top boxes. He said TiVo’s box was overpriced at a time when Dish and cable companies were giving away recorders to new subscribers.
McElhinny highlighted TiVo’s financial problems — it has lost nearly $650 million since its founding in 1997 — which he blamed on erratic decision-making.
The $87 million request was based on a financial consultant’s estimate of how much TiVo would have earned if EchoStar had not sold more than 4 million of its own recorders using TiVo technology. “This is life or death for them,” Baxter said of TiVo.
The jury awarded $73.99 million instead of $87 million because it was not convinced TiVo had done everything it could to promote its patent, which was approved in 2001, according to the jury forewoman. As a result, jurors based damages starting in January 2004, when TiVo filed the lawsuit.
Separately, TiVo announced Wednesday that it has extended an agreement with its largest partner, satellite TV provider DirecTV Group Inc., for three more years. Recently it struck an agreement with Comcast Corp., the nation’s largest cable operator.
TiVo sold its first box in 1999, and its ability to let viewers skip through commercials soon made it a cultural catch-phrase, spawning the verb “tivo” — to manipulate live TV programs.
But Alviso, Calif.-based TiVo was soon undercut on price by Dish and cable providers who used recorders made by other companies including Motorola Inc., News Corp., and a unit of Cisco Systems Inc.
Barton and fellow co-founder Michael Ramsay testified that TiVo couldn’t win licensing deals, other than one with Dish rival DirecTV, because cable operators didn’t respect TiVo’s willingness to enforce its patents. A change in attitude led TiVo to sue much-bigger EchoStar in January 2004, they said.
Englewood, Colo.-based EchoStar had $8.4 billion in sales last year, compared to $172 million for TiVo.
EchoStar attorneys feared jurors would sympathize with TiVo in a David vs. Goliath battle. Lindsey, the jury forewoman, said she didn’t see it that way.
“TiVo is a substantial company in its own right,” she said.
Neither Lindsey nor any of the other jurors own a TiVo, but U.S. District Judge David Folsom said he did.