DVR battle just beginning

EchoStar Communications has won permission, for the time being, to continue selling its digital video recorder services, after a federal appeals court in Washington, D.C., issued a temporary hold on a Texas court order that block those sales.

But it appears the battle over critical digital recording technology may have just begun.

The U.S. District Court for the Eastern District of Texas had earlier ordered EchoStar to immediately stop sales of DVR service by its DISH subsidiary, upholding an earlier jury verdict that EchoStar was in violation of TiVO patents.

The appeals court’s temporary hold could give EchoStar officials time to negotiate a settlement with TiVO, but leaves the satellite company in poor negotiating position. The earlier decision by U.S. District Court Judge David Folsom in Texas to uphold the April jury verdict and impose a fine of about $90 million could also spark lawsuits by TiVO against DirecTV and cable companies who provide their own DVR services. That could have an affect across the digital TV landscape.

DVR capabilities have become a major competitive service in the digital TV world. DISH, whose services are also resold by AT&T and are a significant part of AT&T’s Homezone service, features a multi-room DVR service that the cable industry has not yet been able to duplicate. Verizon announced multi-room DVR as part of its FiOS TV service a week ago, and considers that offering a significant point of differentiation.

Now that TiVO has been able to make its patent case stick against EchoStar, however, the DVR pioneer may be able to act against other providers as well. TiVO continues to sell its service separately, but now owns only about 24% of sales to customers who also buy cable or satellite TV, according to a recent J.D. Powers & Associates study. One-quarter of satellite TV subscribers buy the DVR service from their satellite company and 38% of cable companies buy DVR service from their cable operator, the study said.

TiVO’s stock price has slumped in recent years as the company appeared to be losing ground in the DVR wars, but the Texas court decision could change all that. Judge Folsom initially gave EchoStar 30 days to stop selling DVR services and turn off existing services. The federal appeals court hold gives EchoStar some time to either negotiate a settlement or continue what the company said in a statement is ongoing work on modifications to its new and existing DVRs so they don't violate TiVo's patents.

The next step in this legal process could be telling for the entire broadband services industry.

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