In a case that could reverberate through the pay TV industry, EchoStar on Wednesday appealed a judge's decision that its software workaround still infringes patents held by TiVo.
Also Wednesday, EchoStar bought time on an order issued a day earlier that it must, within 30 days, disable more than 4 million DVRs used by customers of Dish Network, its sister company. EchoStar asked for and received a temporary stay of the order, gaining yet another reprieve in a case that has dragged on more than five years.
On Wednesday, though, investors behaved as if TiVo finally has defended its valuable DVR patents and will use its newfound leverage to pressure Time Warner Cable, Cablevision and others into striking licensing deals—presumably more lucrative than those TiVo has with Comcast, Cox and DirecTV.
TiVo shares soared 53 percent on Wednesday to $10.70, on trading volume 35 times higher than average, and Dish shares sank 10 percent.
The stay will allow EchoStar to keep Dish DVRs running for about two months before a court rules whether the stay should be lifted or made to run the duration of an appeal, which would tack on 18 months or so.
EchoStar also is appealing a $103 million, plus interest, penalty a judge ruled Tuesday that it must pay to TiVo. That's on top of a similar amount EchoStar already has paid TiVo.
"This outcome is very close to a best-case scenario for TiVo," Kaufman Bros. analyst Todd Mitchell said. Bernstein Research analyst Craig Moffett called the ruling "indistinguishable from a worst-case scenario" for Dish.
"Dish Network's inability to effectively design a software workaround to TiVo's DVR patents certainly raises our concern about the risk to other DVR providers," said Pali Research analyst Richard Greenfield, who mentioned Time Warner Cable, Cablevision, Verizon, AT&T, Charter Communications and Mediacomm.
TiVo CEO Tom Rogers recently said he has not been seeking new licensing arrangements—with much enthusiasm, at least—because he would prefer to strike such deals after a legal victory against EchoStar.
"I hate to use the word 'leverage,' but we think that the resolution here will be one that will substantially increase the perception of value of our intellectual property," Rogers told Wall Street analysts in January.
Goldman Sachs analyst Ingrid Chung said Tuesday's ruling against EchoStar "has negative ramifications for Time Warner Cable and Cablevision" because the price of licensing agreements with TiVo likely has climbed.
Cablevision and Time Warner Cable would not comment Wednesday, but Cablevision has been focusing on network DVR technology, which stores programming remotely rather than in set-top boxes in users' homes.
Cablevision intends to test the product in the summer, much to the dismay of Time Warner, News Corp., Disney, CBS and others that are seeking to legally block the rollout of a network DVR because they say it would infringe the copyrights of movies and TV programming they own.
Analysts were nearly unanimous Wednesday in the opinion that EchoStar will be inclined to strike a deal with TiVo, rather than take more chances with a legal system that overwhelmingly has sided with TiVo for five years.
Referring to Dish/EchoStar CEO Charles Ergen's penchant for poker, Moffett said Tuesday's ruling "is a reminder that, sometimes, gamblers lose."
Ergen is relentless, though, and EchoStar showed no hints Wednesday that it is throwing in the towel. "We believe we have strong grounds for appeal," the company said.