MARSHALL, Texas – TiVo Inc. (TIVO) shared details of its technology with Dish Network, which later used it in its own TiVo-like boxes that can pause and rewind live television programs, a TiVo co-founder said Wednesday.
Former Chief Executive Michael Ramsay made the comment during testimony on the first day of TiVo's patent-infringement lawsuit against EchoStar Communications Corp. (DISH), the parent of Dish Network.
Lawyers for EchoStar, however, produced internal TiVo documents that appeared to credit EchoStar for developing its own technology.
TiVo has not said how much it is seeking in damages, but an opposing lawyer said the company would ask the jury in federal district court here to award it more than $100 million.
TiVo spent years pursuing a deal in which Dish Network would pay it for using its set-top boxes, similar to an agreement that TiVo has with DirecTV (DTV), the other big satellite broadcaster. But Ramsay claimed the negotiations were "mostly one-way" and that Dish Network began selling its own boxes using TiVo technology.
Ramsay was the first witness in a case expected to last two weeks. Analysts say the outcome could affect TiVo stock and determine whether it can pressure cable companies to pay licensing fees for the digital video recorders, or DVRs, that they lease to subscribers.
In an opening statement, EchoStar attorney Harold McElhinny said the satellite provider developed its own technology that differs from TiVo in several ways.
For example, he said, the EchoStar box doesn't translate analog signals into digital because satellite systems are already digital.
McElhinny said other companies were working on devices that recorded live TV on a hard drive long before TiVo was started in 1997.
"We have 1,500 engineers at EchoStar. We built it ourselves," McElhinny said.
He suggested TiVo sued EchoStar because it was unable to turn a profit due to tough competition.
During cross-examination of Ramsay, McElhinny showed e-mails of TiVo executives discussing EchoStar's rival box.
In one, former TiVo President Morgan Gunther said, "EchoStar owns its own technology."
In another, an unnamed TiVo employee said EchoStar appeared to have "a homegrown solution" for digital video recording.
McElhinny said TiVo will ask the jury for more than $100 million in damages, but that TiVo offered its invention to Dish Network free if Dish helped advertise TiVo.
After TiVo co-founders Ramsay and Jim Barton appear, testimony in the case is expected to take a technical turn as each side trots out expert witnesses to describe the inner workings of the boxes.
TiVo has become something of an icon, with its name now being used to describe the action of recording a TV show. The company has never translated its status into profits, however. It has lost nearly $650 million since its founding.
The Alviso, Calif.-based company faces competition from bigger companies that also make digital video recorders, or DVRs. They include Motorola Inc. (MOT); NDS, a unit of News Corp. (NWS); and Scientific-Atlanta Inc., which has been bought by Cisco Systems Inc. (CSCO.)
Its biggest customer, DirecTV, plans to switch to NDS boxes next year.
Conversely, EchoStar, based in Englewood, Colo., earned $1.5 billion last year as Dish Network has grown to 12 million subscribers.
It was no accident that TiVo chose to file its lawsuit in an East Texas city of about 24,000 residents. The federal courts in Marshall and other East Texas cities are known for handling patent cases quickly — a boon to plaintiffs.
Lawyers not connected to the case say it will be difficult for EchoStar to make its technical-sounding defense to local jurors, who favor plaintiffs about three-fourths of the time. EchoStar says the TiVo patent is unenforceable.
EchoStar has filed a countersuit against TiVo. That case is scheduled for trial next year in federal court in Texarkana, Texas.
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