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).