By Brent Kendall Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- A federal appeals court on Tuesday grappled with a high-stakes patent dispute between TiVo Inc. (TIVO) and sister companies Dish Network Corp. (DISH) and EchoStar Corp. (SATS) over digital video recorders. At issue was a trial judge's decision to hold Dish and EchoStar in contempt last year for violating an injunction barring them from making or selling DVRs that infringed a TiVo patent on the technology, which allows viewers to pause and record live television. During oral arguments Tuesday, a lawyer for EchoStar and Dish said the companies shouldn't have been held in contempt because they attempted in good faith to design new technology that was different from their previous devices that were found to infringe TiVo's patent. "EchoStar removed the very features that TiVo accused of infringement," company lawyer Joshua Rosenkranz said. TiVo's lawyer, Seth Waxman, said EchoStar and Dish violated the injunction because their newer DVR devices weren't that different from previous ones that violated TiVo's intellectual property. The companies "disregarded every provision of the injunction," Waxman said. The U.S. Court of Appeals for the Federal Circuit is hearing the contempt case for a second time. In March, a three-judge panel of the court sided with TiVo in a 2-1 ruling, which would have cleared the way for the company to collect about $300 million from Dish and EchoStar. That decision sent TiVo's shares surging more than 60%. But in May, the appeals court withdrew its ruling for TiVo and said a larger panel of judges would reconsider the case, a move that sent TiVo's shares down more than 40%. A win for TiVo could help the company in other related litigation. Nine judges participated in Tuesday's oral argument. The likely outcome wasn't clear from the proceedings, but TiVo did face tough questions from some judges. Two judges, Timothy Dyk and Kimberly Moore, appeared to question the fairness of scrutinizing EchoStar and Dish's redesigned DVR devices in contempt proceedings. They questioned whether the matter should have been resolved instead through new patent infringement proceedings. Chief Judge Randall Rader previously voiced the same concerns when he dissented in the earlier ruling against the two companies. Judge Sharon Prost questioned whether the injunction against Dish and EchoStar was too broad or ambiguous. Dish and EchoStar also faced some tough questions. Judge Arthur Gajarsa, for example, questioned why the companies didn't challenge the trial judge's injunction earlier. The case dates to 2004 when TiVo sued Dish alleging that it made DVRs that TiVo claimed infringed on one of its patents. A jury in 2006 found Dish and EchoStar liable for infringing TiVo's DVR patent when they began making their own set-top boxes that could pause and record live television. A federal judge imposed contempt sanctions last year after finding that a technological redesign developed by EchoStar and Dish still infringed TiVo's patent. The case is TiVo v. EchoStar, 2009-1374. -By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com
