TiVo's Long Road Home

Implications: The September 4th hearing has now come and gone, and still TiVo commentators seem to think that TiVo is moments away from a final, decisive win.  The reality is considerably more bleak.  TiVo's contempt request is likely to be denied, and TiVo will not gain significant leverage unless and until the court hears the full work-around issue.

Analysis: Commentators on the TiVo / Echostar litigation have been optimistic for months, mistakenly predicting that TiVo would achieve a decisive victory with yesterday's contempt motion.  I have been a nay-sayer on that hypothesis for some time, and, after yesterday, the writing seems even more sharply on the wall.

1. Echostar will not be found to be in contempt.

TiVo has argued that Echostar is in contempt because, instead of fully disabling its DVR technology, Echostar downloaded new software to the old boxes and (according to Echostar) in that way changed the boxes from infringing to non-infringing.  TiVo thinks that this very act is impermissible.  Regardless of whether the resulting modified DVR is infringing, TiVo thinks Echostar violated the injunction because the boxes are not disabled.  Me?  Hogwash.   The TiVo patent is strong enough to stop infringing products; but if the Echostar boxes do not infringe, there is no problem.  Indeed, even TiVo concedes that, if Echostar were to build a new DVR and mail it to customers, those boxes would violate the injunction only if they turn out to also infringe the patent.  But what is the difference between the boxes at issue -- where the update was sent electronically -- and the boxes that everyone agrees would be okay (sent by mail)?  No way that the injunction will be read to differentiate between these two delivery mechanisms.  Patent law is supposed to encourage infringers to create non-infringing, competing products.  Echostar did exactly what it was supposed to do, assuming the new boxes really are non-infringing.

2. TiVo faces a long fight over the work-around.

If I am right about the injunction, then TiVo's next step will be to have to fight about whether the work-around is or is not infringing.  That will be a slow process.  Indeed, Echostar has already revealed its analysis about how its work-around differs from and avoids the problems with the old boxes.  Even if TiVo is right that the new box really does infringe (an issue I'll leave for another day), the conversation here will be technical and will require serious effort and time on all sides.

3. TiVo's damages numbers are aggressive.

In the September 4th hearing, TiVo also pushed for high damages, tossing out a $220M number.  Unlikely.  After all, at least some of the boxes in the field could be immune from any damages because they are the above-discussed work-around boxes.  Moreover, TiVo's numbers included a much higher royalty rate than the one the jury awarded.  The judge might be allowed to raise the rate, sure (and might require yet another hearing to do that) but to think that the rate would go up that much seems a little preposterous.

4. The judge is annoyed, but he is a good judge.

Lastly, TiVo commentators seem to think that the judge is angry at Echostar for the way it handled this case and, as such, will come down hard on the company.  Again, I disagree.  The judge did express displeasure at how Echostar has handled parts of this fight, and understandably so.  But this is a good, smart, responsible judge, and there is no reason to believe that his emotions will cloud his judgment.  Indeed, even at the hearing, after the judge expressed his displeasure, he went back to clean substance.  That's one of the many laudable things about good judges.  They can draw a line between the little emotional reactions to hard-fought cases, and the law.