EchoStar Communications Corp. won a temporary reprieve on Friday when an appeals court said it could still sell digital video recorders that a lower court had ruled infringed on a TiVo Inc. patent.
But industry analysts said it was not clear if EchoStar, the No. 2 satellite television provider, could permanently avoid a ban on sales of the offending DVRs, which could hurt its ability to attract new customers and retain current ones.
The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., stayed a lower court injunction against EchoStar to halt the use and sale of several of its DVRs within 30 days, a ruling that could affect as many as 3 million of its 12.5 million subscribers.
If enforced, EchoStar may need to deactivate or modify units already in homes and stop selling certain new DVRs, a set-top box that can pause live TV and record dozens of hours of programs on a built-in disk drive.
It is a technical stay that could be only a few days, said Janco Partners analyst Matthew Harrigan. When you look at the pool of people who are going to be dissuaded from signing up for EchoStar and instead go to DirecTV or cable, it really would be a very serious competitive impediment.
It was unclear how long the stay will remain in effect, or if the 30-day lower court deadline would be extended as a result of the stay.
TiVo stock closed 8.2 percent higher at $7.02 per share while EchoStar dropped 30 cents, or nearly one percent, to finish at $32.45, both on Nasdaq.
JURY FOUND FOR TIVO
U.S. District Court Judge David Folsom's injunction on Thursday follows a jury decision in April in favor of TiVo's patent claim.
Folsom ordered EchoStar pay $5.6 million in interest and $10.3 million in additional damages on top of $74 million in damages awarded in April by a Texas jury.
EchoStar said the judge concluded that it did not act in bad faith or copy TiVo's technology, and denied TiVo's request for damages to be tripled.
We continue to believe the Texas decision was wrong, and should be reversed on appeal, EchoStar said in a statement. 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 had accused EchoStar of stealing its technology. EchoStar's own suit against TiVo, which claims the company used technology patented by EchoStar between 1998 and 2003, is set to start in 2007.
Analysts have suggested TiVo may use this decision to take on other companies that make and distribute DVRs.
TiVo has, we believe, gained a valuable tool to enhance the value of its intellectual property in negotiations with potential partners, said First Albany analyst Richard Baldry in a note to clients.
Satellite providers like EchoStar and rival DirecTV Group have used DVRs to woo customers away from cable companies. In turn, more cable TV providers have been placing DVRs in subscriber homes.