Shares of TiVo Inc. advanced nearly 25% after the U.S. patent office upheld a key piece of intellectual property for the maker of digital video recorders, seen as a minor victory in its legal battle with EchoStar Communications Corp.
TiVo shares ended the day up $1.48, or 24.7%, at $7.46. EchoStar shares were off 14 cents at $42.70.
EchoStar, meanwhile, said in a statement that the decision by the patent office doesn't affect a pending patent-infringement case TiVo filed against it. One analyst cautioned that a legal victory isn't guaranteed, and that the company still faces challenges.
"We think the news is likely to shift further momentum in TiVo's favor, as appeals phase winds down," said Standard & Poor's analyst Tuna Amobi. "Still, final outcome of the suit does not seem certain to us."
TiVo, in a statement, said the U.S. Patent and Trademark Office found all of its claims on the "time-warp" patent to be valid after a reexamination requested by EchoStar. The Alviso, Calif., TiVo said it hopes the U.S. Court of Appeals will uphold the district-court judgment that went against EchoStar.
The suit, filed by TiVo in 2004, revolves around TiVo's claim that EchoStar is stealing its "time-warp" technology, which allow viewers to pause, fast-forward and rewind live television programs.
Pioneered by TiVo, the DVR has since been used on TV set-top boxes provided by cable providers, satellite companies and telecom service providers as an additional service. Other set-top box makers such as Cisco System Inc.'s Scientific-Atlanta and Motorola Inc. employ the same technology.
Shares shot up on the perception that the U.S. Patent and Trademark decision would sway the federal circuit appeals case. EchoStar doesn't believe it will.
"We are disappointed in the Patent and Trademark Office's decision ...We are hopeful that the Federal Circuit will reverse the district court and find that we do not infringe TiVo's patent," the Englewood, Colo., company said in a statement.
Ahead of the announcement, J.P. Morgan analyst Barton Crockett upgraded TiVo's stock, saying it was "worth a high-risk shot."
In a note, the analyst said there is a 70% chance that TiVo will ultimately prevail against EchoStar. He added that the rollout by Comcast Corp. of DVRs with TiVo technology will also drive near-term interest in the stock.
