Post a JobOn Monday, Morrison & Foerster named Harold McElhinny co-managing partner of the firm in recognition of what chairman Keith Wetmore called his "success at building quality, enthusiasm, and productivity" in the firm's IP practice. But McElhinny didn't exactly get to savor the moment. On Tuesday one of the most stinging losses of his career -- a $73.9 million infringement verdict in 2006 against MoFo client EchoStar Communications -- went from bad to really, really bad: Marshall, Texas federal district court judge David Folsom found EchoStar in contempt and added another $103 million to the pile of money EchoStar owes to the plaintiff in the case, TiVo Inc.
Folsom's rulings are the latest skirmish in an epic battle that has only intensified since the 2006 verdict. EchoStar appealed the jury's finding, but in January 2008 the U.S. Court of Appeals for the Federal Circuit upheld the judgment. Then EchoStar asserted in federal court in Marshall that it had redesigned its digital video recorders so they no longer infringed TiVo's patent. (The argument was an attempt to avoid paying damages that might have accrued during a stay of judgment in effect for EchoStar's appeal.) But at a May 2008 hearing, TiVo's lead counsel, Morgan Chu of Irell & Manella, argued that the purportedly redesigned digital video recorders ran afoul of the permanent injunction againt EchoStar's infringing DVRs.
After the hearing MoFo tried an end-run around East Texas, filing a declaratory judgment suit in Delaware federal district court that sought a ruling of non-infringement for its new DVRs. Irell pushed to transfer the Delaware case to Texas, even as Chu continued to pursue contempt proceedings against EchoStar in Marshall.
In the space of a week, TiVo and Irell succeeded on both fronts. Last Thursday Delaware federal district court judge Joseph Farran Jr., ruled the declaratory judgment case belonged in East Texas. Five days later, Judge Folsom added injury to insult, handing down the contempt ruling and amended judgment against EchoStar.
Folsom based the additional $103 million on damages TiVo suffered during a 20-month period between the jury verdict and the Federal Circuit's ruling. The amount falls shy of the $220.3 million that Irell sought for TiVo, but exceeds the $16.4 million that MoFo said EchoStar was required to pay. "The harm caused to TiVo by EchoStar's contempt is substantial," Folsom wrote in the contempt opinion. "EchoStar has gained millions of customers since this court's injunction issued, customers that are now potentially unreachable by TiVo."
MoFo's McElhinny referred our call for comment to Dish Networks, EchoStar's new owner. Dish Networks said in a statement that it was "disappointed" in the contempt finding and amended judgment. "Our engineers spent close to a year designing around TiVo's patent and removed the very features that TiVo said infringed at trial," the company said, adding that it would appeal Judge Folsom's rulings and would file a motion to stay his order with the Federal Circuit. "We believe a stay is warranted and that we have strong grounds for appeal," the company said. (It's worth noting that analyst David Miller of Caris & Co. was less optimistic about Dish Networks' chances. The Federal Circuit, he wrote in an alert to TiVo shareholders, "already granted one stay on appeal, and is not likely to grant another.")
Chu referred our call to TiVo, which was, not surprisingly, more upbeat about the Texas rulings. The company said it was "extremely gratified by the court's well reasoned and thorough decision."
Don't be surprised if both companies turn to a different set of lawyers for the appeal. During the appeal of the jury verdict, TiVo brought in Seth Waxman of Wilmer Cutler Pickering Hale and Dorr and EchoStar used Federal Circuit veteran Donald Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
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TiVo Wins $103 Million in Contempt Ruling Against EchoStar
Morrison & Foerster's loss is Irell & Manella's gain
The American Lawyer
June 3, 2009
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