While Davis Freeberg believes recent developments in the TiVo/Echostar patent infringement suit may indicate an imminent settlement, a ZNF secret agent has a different take. -DZ
The story so far
TiVo filed a patent infringement suit against Echostar covering most of Echostar’s DVRs. In April, a jury found that Echostar infringed TiVo’s patent on all the contested claims, that the patent was valid, and that the infringement was willful. The jury awarded TiVo about $73 million dollars in damages. Later the judge in the case increased the damages to about $88 million (for interest during the period of infringement and damages and interest from the time between the jury award and the final judgment). He also ordered an injunction, preventing Echostar from further use or sale of the infringing DVRs (i.e., Echostar had to turn off more than three million of their customer’s DVRs). Echostar appealed the verdict, and was given a stay of the injunction.
What just happened
Recently Echostar made a motion to the appeals court to extend the time, by 60 days, for them to file their so-called “Blue Brief” (i.e., the appellant’s primary brief to the court). The brief was due 10/23. It was an unusual request because appeals courts are notoriously unforgiving, and would likely reject such a request unless it was for a very good reason. Tivo responded to the motion, and Echostar replied to TiVo’s response.
Today, the motion was ruled moot (i.e., irrelevant), because the court issued this order:
ORDERED: Briefing schedule stayed. EchoStar to notify this court within 14 days of date of disposition of final postjudgment motion in dist ct.
What this means is that the entire appeal has been put on hold. Why? Because the court has determined that some aspect of the “final postjudgment motion” must be resolved before the case can proceed. (This issue was probably the reason that Echostar requested the delay, but the court, being no-nonsense, realized that 60 days was arbitrary, and simply said, “tell us when it has been resolved”.)
What is the issue?
The real question is what this “final postjudgment motion” is, and what does it contain that would put the appeal on hold? Not having the actual order from the court, we have to speculate. As I see it, there are two possibilities:
Possibility 1: Texas
The final motion in the Texas court was an odd one. Enforcement of money judgments can come ten days after the judgment is entered. In the case of an appeal, there is an automatic stay of enforcement of monetary damages, but the defendant-appellant is expected to provide security for the amount awarded (usually by posting a bond). Twice TiVo and Echostar jointly requested an extension of the ten day period because “[t]he parties have been working cooperatively toward an agreement regarding the security to be provided to satisfy the requirements of Rule 62(b), but require a few more days to attempt to complete the necessary steps to finish the agreement and implement the proposed form of security.” Both times, the judge approved the requests, and eventually the parties filed a joint motion for this security that the judge approved.
So what is in the agreement? That is unknown. The motion was sealed, and therefore not available to the public. But it is possible that something in this motion needs to be resolved before the appeal can continue. What that would be, or why a cooperative effort was needed or desired for Echostar’s security is also unknown. But it seems highly unlikely that the agreement contains some kind of settlement terms that are now being resolved. It is more likely that the security provided in the form of a loan some similar device that had some benefit to both companies. It is not clear how such an arrangement would affect an appeal, however.
Possibility 2: Georgia
TiVo has an unresolved motion in a Georgia district court to compel Echostar to produce certain documents. These documents relate to the willfulness of Echostar’s infringement of TiVo’s patent.
A bit of background
When accused of patent infringement one can also be found to have willfully infringed the patent, leading to potentially enhanced damages. The accuser shows that the infringing party knew of the patent and infringed anyway. In the instant case, TiVo easily demonstrated that Echostar knew of the TiVo patent from very early on. A defense against a claim of willfulness is to show that one has made a good faith effort to evaluate the patent and reasonably believed that one was not infringing. One way to cover oneself is to obtain an opinion from counsel that there is no infringement, and to reasonably rely upon that opinion. (Note: none of this impacts whether or not one is actually infringing, or the amount of damages done to the aggrieved party. It is only relevant to the willfulness aspect of the case.)
Back to Georgia
In Echostar’s case, they obtained an opinion of non-infringement letter from the law firm Merchant & Gould after TiVo filed suit. Echostar wanted to introduce this letter into evidence for their trial with TiVo. But a consequence of introducing this evidence is that one then waives attorney-client privilege, meaning that the attorneys and their “work product” are now fair game for discovery. TiVo subpoenaed the firm’s relevant documents and sought to depose the lawyer responsible. Echostar did not comply to TiVo’s satisfaction. The Texas judge ordered Echostar to further comply, and again they did not. Echostar went to a judge in Georgia district court and asked him to block the discovery on the disputed documents. The judge ordered Echostar to produce certain documents for in camera review, which they did. The judge then ordered some of the documents to be given to TiVo’s attorney, saying that the patent review appeared to be conducted carefully, but also said:
One unusual aspect of the materials produced for the Court’s review is the number of drafts of the opinion and related communications that were maintained by Mr. Knearl and those working with him on the project. While that does not suggest any irregularity in the manner in which the opinion was prepared, it does result in a body of information which maybe provide insight into the evolution of the legal opinion rendered by Mr. Kneal. In any case where a legal opinion is offered as a defense to a claim, the possibility exists that the lawyer who drafted the opinion did so in such a way simply to support the requesting clients’ litigation position in a case. The party against whom the opinion is offered is entitled to investigate the integrity and objectivity of the opinion and specifically whether bias in favor of the party requesting it influenced the conclusions reached. Here, Mr. Knearl has produced information about the opinion’s evolution which may permit TiVo to investigate the objectivity and credibility of Mr. Knearl’s legal analysis.
Echostar again did not comply, and appealed the decision. The Appeals Court found that the district court’s original order was too broad and ordered the lower court to revise its order to comply with certain guidelines.
In the meantime, the Texas trial had already taken place, and Echostar was not permitted to introduce their advice-of-counsel defense because they had not produced the discovery documents. (This casts the willfulness verdict into question. The Texas judge took this into account when he rendered his final judgment and did not award TiVo the triple damages they sought.) But even after the jury trial there were questions to be ruled upon, so both the Texas and Georgia judges ordered Echostar to produce the M&G documents under the new guidelines. Echostar apparently partially complied, but TiVo was not satisfied, and motioned the Georgia court to enforce its order. The court’s order was on June 8th, and TiVo’s motion came on July 11th. Aside from some responses and replies to the motion and a bit of legal wrangling in August, there has been no action in the Georgia court for some time. The judge has been utterly silent (at least in the court’s docket) since the June 8th order.
Back to the appeal
Echostar finds itself between a rock and a hard place. They have to file a brief, but they don’t know whether they will face the disputed documents or not. This seems unfair, and I suspect that this was the reason they asked for a delay. I believe that the appeals proceedings have been stayed (rightly) until this issue can be resolved.
The author is not a lawyer, and is relying on public information, memory, and speculation. The author is using the terms “TiVo” and “Echostar” loosely to mean the companies, their representatives, related parties, and/or their legal representation. Any errors or misrepresentations are unintentional and will be corrected if brought to the author’s attention through the site carrying this opinion.
Update: Due to excessive overseas spam on this post, I’m disabling comments.
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