TiVo hits setback in patent dispute against Dish

Wed, 06/09/2010 - 8:20am
The Associated Press

SAN FRANCISCO – The U.S. Patent and Trademark Office has ruled against digital video recording pioneer TiVo Inc. in a dispute over a key piece of technology that has changed the way millions of people watch television.

The 32-page decision marks another round in a back-and-forth battle between TiVo and Dish Network Corp. The companies have been locked in a lawsuit for the past six years over the technology that allows viewers to rewind, pause or fast-forward live TV.

TiVo, based in Alviso, Calif., alleges Dish's digital video recorders infringe on its "time warp" patent. A three-judge panel in federal appeals court sided with TiVo in March, but that ruling is now under review.

The United States Patent and Trademark Office had a different take in its ruling filed last week. In what is supposed to be its final action in the matter, the office rejected two of TiVo's patent claims.

Englewood, Colo.-based Dish had requested the office review TiVo's "time warp" patent, citing obviousness and prior art. "Prior art" refers to evidence that an invention is not original and doesn't merit a patent, which the patent office may not have been aware of when it originally approved the patent.

TiVo shares dropped 26 cents, or 3.4 percent, to $7.44 in after-hours trading. They earlier finished regular trading down 45 cents, or 5.5 percent, at $7.70. The stock hit a new year low of $7.57 during the day's trading session, far below its previous bottom of $8.10.

This court ruling is likely to have a bigger impact on TiVo and Dish.

Until the appeals court granted a broader review of the case, Dish faced the prospect of having to pay $300 million in damages and could have been forced to disable millions of its DVRs infringing on TiVo's patent. TiVo still expects to prevail in the court case.

TiVo said in a statement Tuesday that it is "disappointed" with the Patent and Trademark Office's decision and that the company will keep working with it "to explain the validity of the claims under review."

The company added that the Patent and Trademark Office decision is distinct from the company's lawsuit against EchoStar Corp., so it doesn't have an effect on that case.

In a note to investors, Stifel Nicolaus analyst Rebecca Arbogast noted that TiVo can challenge the office's decision – an action that could last for a couple of years.

Meanwhile, JPMorgan analyst Bridget Weishaar said in a client note that she doesn't think the office's decision will hamper the review of TiVo's suit with Dish.

Dish Network and its sister company EchoStar said they were "pleased" with the office's decision.

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