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TiVo Inc. scored a major victory in its four-year patent fight
with rival EchoStar when the Federal Circuit Court of Appeals affirmed
a jury verdict for TiVo of $74 million – with interest now estimated
at $94 million.
The Federal Circuit also reinstated a permanent injunction against EchoStar,
a remedy rarely imposed in the wake of the Supreme Court's 2006 ruling in eBay
Inc. v. MercExchange that patent injunctions are not automatic.
The Jan. 31 Federal Circuit opinion affirmed the verdict of a federal jury in
Texas that EchoStar infringed TiVo's patents on "time-shifting" technology
that enables television viewers to replay, pause, fast forward or reverse programs
as they view them.
While the court rejected TiVo's claims that EchoStar had infringed patents on
its time-shifting hardware devices, it affirmed the jury's verdict that EchoStar
had infringed patents on the software that operates the devices.
And even though the court upheld only part of the verdict, it affirmed the damages
award in full because the jury's calculation was not predicated on particular
claims. The $74 million award included $33 million in lost profits and $41 million
in royalties.
TiVo filed the case in 2004 against EchoStar, which now operates as Dish Networks.
TiVo alleged that two EchoStar digital video recorders (DVRs) infringed patent
claims covering its own DVRs.
In reversing TiVo's hardware claims, the Federal Circuit
found that one of EchoStar's devices did not separate the incoming
program's audio and visual streams into separate buffers, as required
under TiVo's patent, and that the other did not reassemble those streams
as described in the patent.
When the court turned to TiVo's software claims, expert testimony proved
to be the decisive factor for the court in interpreting a key patent
term, "object."
EchoStar's expert gave a more restrictive meaning to the term, defining
it as an item written with an object-oriented computer programming
method such as C++ "that encapsulates data and the procedures
necessary to operate on that data and can inherit properties from a
class or another object."
TiVo's expert defined it more broadly as "a software term that
describes a collection of data or operations."
The trial court accepted TiVo's definition as that which persons of
ordinary skill in the art would understand and the Federal Circuit
affirmed that conclusion.
"Because the intrinsic evidence did not limit the scope of the software
claims in the manner that EchoStar urges, and because the district court's
construction of each of the claim terms was soundly based on the extrinsic
evidence proffered by TiVo, we find no error in the court's decision not to
limit the software claims to embodiments employing object-oriented programming
such as C++," the opinion explained.
The Federal Circuit also rejected EchoStar's contention
that, even accepting TiVo's construction, the evidence failed to support
a finding of infringement.
EchoStar's expert testified that because TiVo's software patent covered
a "collection" of data and operations, it required all data
and operations to be grouped together within the software code or even
within a single file.
TiVo's expert countered that a collection exists when the relevant
subroutines are part of the same program and are "able to interact
and get access to the data they need to."
The Federal Circuit sided with TiVo, finding that EchoStar's expert
relied solely on his opinion, without "any objective support" for
his testimony.
Finally, EchoStar argued that its DVRs did not infringe TiVo's patents
because they did not contain software that extracted the audio and
visual data. Instead, it argued, its devices used hardware to move
the data from the physical source to a temporary buffer.
The circuit court found this argument unpersuasive, reasoning that "software
alone cannot extract data from a physical device; it can only control
hardware that extracts data."
"What matters," the court continued, "is whether the operations
performed by the interaction of software and hardware in the accused DVRs,
taken as a whole, are covered by the claim term."
The evidence was sufficient to allow the jury to reach this conclusion,
the Federal Circuit found. "It was reasonable for the jury to
find that the two-part process of moving data from the physical data
source to the source object, as practiced in the EchoStar devices,
constitutes extraction by the source object of video and audio data
from the physical data source, as those terms are used in the 'extracts'
limitation of the software claims."
The battle between TiVo and EchoStar over these patents has not been
confined to the federal courts. In November, the U.S. Patent and Trademark
Office, after reexamining TiVo's time-shifting patent, issued a final
decision that it is valid and enforceable.
The lawsuit had been on hold pending USPTO action, and its decision
opened the door for the Federal Circuit to hear this appeal. Dish Networks
issued a statement saying it would appeal this decision.
The case is TiVo Inc. v. EchoStar Communications Corp., No. 2006-1574 (Fed. Cir. Jan. 31, 2008).
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