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A split ruling of the U.S. Court of Appeals for the Federal Circuit upheld a lower court’s sanctions and infringement damages order against digital television equipment company EchoStar Corp. that have ballooned to more than $200 million. The March 4 ruling in TiVo Inc. v. EchoStar Corp. upheld an Eastern District of Texas sanctions ruling in TiVo Inc. v. Dish Network Corp. Dish Network was an EchoStar subsidiary until the companies separated in 2008. EchoStar is now one of Dish Network Corp.’s main technology partners. TiVo sued EchoStar in 2004 for infringing a patent allowing television viewers to record and play television broadcasts at the same time by using a digital video recorder (DVR). On Sept, 4, 2009, Chief Judge David Folsom of the Eastern District of Texas ordered EchoStar to pay $2.25 per DVR subscriber per month to TiVo for the contempt period — from April 18, 2008, through July 1, 2009. The $2.25 includes $1.25 for continued infringement and $1 for sanctions. Folsom estimated that continued infringement payment would total about $110 million and the sanctions payment would add up to about $90 million. During the hearing about whether EchoStar was in contempt of the district court’s June 2009 permanent injunction order, Folsom rejected EchoStar’s argument that its redesigned products no longer infringed the TiVo patent. In his majority opinion, Circuit Judge Alan Lourie rejected EchoStar’s argument that a contempt hearing “is proper only when the redesigned devices are alleged to infringe in the exact same manner that has already been adjudicated to infringe.” “EchoStar’s proposed standard would make it almost impossible for a district court to employ a contempt proceeding to enjoin infringing products,” Lourie wrote. “Compelling the parties to undertake a new trial every time there is a dispute over previously adjudicated infringing products would fail to serve the goals of judicial economy.” Circuit Judge Randall Rader wrote an ardent nine-page dissent, maintaining that the majority ruling “punishes a good faith design-around effort.” “TiVo should not be able to bootstrap its new, previously abandoned infringement theory to that [infringement] verdict,” Rader wrote. “If TiVo believes that EchoStar’s new design still infringes its patent, it should file a new infringement suit, not attempt to short circuit a full proceeding.” EchoStar’s lead counsel in the appeal, E. Joshua Rosenkranz, a New York partner who heads Orrick, Herrington & Sutcliffe’s Supreme Court and appellate litigation practice, declined to comment. EchoStar and its subsidiaries issued a press release stating that the company was “disappointed in the Federal Circuit’s split decision,” and it plans to see an en banc review by the full Federal Circuit. “We also will be proposing a new design-around to the district court for approval,” stated EchoStar. “At this time, our DVR customers are not impacted.” EchoStar is on the hook for other payments besides the sanctions. In January 2008, the Federal Circuit affirmed the jury’s verdict that EchoStar devices infringed the software claims of TiVo’s patent-in-suit. The appellate upheld the jury’s $74 million verdict for lost profits and reasonable royalties. But the Federal Circuit reversed a portion of the jury verdict, which ruled that EchoStar’s DVRs infringed TiVo’s hardware claims. On June 2, 2009, Folsom issued a permanent injunction against EchoStar. He also boosted the jury award to $192.7 million by tacking on interest, supplemental damages and damages accrued during the stay of the injunction. The damages fees and sanctions just keep adding up, said Andrei Iancu, a litigation and intellectual property partner at Los Angeles-based Irell & Manella and a co-counsel on the appeal. Iancu said TiVo hasn’t yet claimed damages and sanctions that have built up since July 1, 2009. “The case has been pending for a long time, and EchoStar deploys quite a high number of infringing units,” Iancu said. Sheri Qualters can be contacted at [email protected].

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