The day before yesterday I posted on the fascinating and important TiVo v. EchoStar case. Today I wanted to follow up with some, let's say, color commentary on EchoStar's litigation tactics. This isn't dispositive, of course, but it does seem to add some insight into the notion that EchoStar is taking advantage of questionable litigation tactics rather than respecting property rights in its dealings with TiVo. You'll recall that, in the case, EchoStar lost at trial, ignored the judge's order to stop infringing, was held in contempt, and continues infringing today. This has resulted in numerous legal proceedings, all managing to keep TiVo bogged down in litigation as EchoStar continues to misappropriate TiVo's intellectual property. Although EchoStar has accrued substantial legal expenses-and damage awards from both a jury and the judge-they are dwarfed by its DVR revenues. It turns out that courtroom shenanigans are no stranger to EchoStar. Just last week, a state trial judge in Manhattan found that EchoStar exhibited grossly negligent behavior in a case involving Cablevision's VOOM subsidiary. The language in VOOM v. EchoStar characterized EchoStar's misconduct (allowing critical e-mail evidence to be destroyed) in an exceedingly harsh manner, holding that EchoStar "systematically destroyed evidence in direct violation of the law and in the face of a ruling by a federal court that criticized EchoStar for the same bad-faith conduct . . . ." The judge went on to characterize EchoStar as engaging in "procedural gamesmanship" and noted "EchoStar's pattern of questionable – and, at times, blatantly improper – litigation tactics." The court further described EchoStar's conduct as "precisely the type of offensive conduct that cannot be tolerated by the courts." It rebuked "EchoStar's last-minute finagling with expert reports, believing that it can play fast and loose with the rules of procedure in order to enhance its litigation posture . . . throughout this litigation, EchoStar has been hoist by its own petard." Arguably EchoStar has made this type of legal strategy part of its business model. In the TiVo case, like many others, EchoStar's gamesmanship and its propensity to abuse the law has become a central issue. In an amicus brief submitted by agricultural organizations in the TiVo case, the groups argue: "EchoStar's conduct in this case . . . and in other cases, displays a propensity to flout court orders," and goes on to cite several examples of this behavior, including: breaking promises to the court (CBS Broad. Inc. v. EchoStarCommc'ns Corp., 276 F. Supp. 2d 1237, 1246 (S.D. Fl. 2003)); patently unmeritorious claims of error (CBS Broadcasting Inc. v. EchoStar Commc'ns Corp., 450 F.3d 505, 523, 526 (11th Cir. 2006)); misleading and coercive communication (Air Commun. & Satellite Inc. v. Echostar Satellite Corp., 38 P.3d 1246, 1254 (Colo. 2002)); and even frivolous actions (Dominion Video Satellite, Inc. v. EchoStar Satellite L.L.C., 430 F.3d 1269, 1278 (10th Cir. 2005)). Further, in a 2004 case, one federal judge claimed that "EchoStar's action rises to the level of conscious wrongdoing" (EchoStar Satellite Corp. v. Brockbank Ins. Servs., No. 00-MK-1513, 2004 U.S. Dist. LEXIS 31130 (D. Colo. Feb. 4, 2004)), another chided EchoStar for failing "in its duty of candor . . . .We admonish EchoStar for this abuse of process" (EchoStar Satellite Corp. v. Young Broad. Inc., 16 F.C.C.R. 15070, 15076 (Aug. 2, 2001)). Of course any good lawyer advocating for his client may push the envelope, and some of these procedural matters are governed by standards that are less than clear. But this is a worrisome list of excesses, and should certainly raise eyebrows in the TiVo case. Of a piece with this, in addition to the problem of EchoStar's overall strategy of delay, avoidance and misappropriation in the TiVo case, is also EchoStar's fantastic claim that upholding the lower court's contempt proceeding would inflict serious hardship on the firm, causing it to lose a substantial fraction of its present and future customer base (to the tune of $90 million per month). Unfortunately, this customer base was built, indisputably (that is, undisputed even by EchoStar which does not challenge the underlying infringement finding), on the back of TiVo's misappropriated technology. It is like the child who murders her parents and then throws herself on the mercy of the court as an orphan. It seems absurd to listen to EchoStar claim hardship from the prospect of losing business it never earned in the first place. As Richard Epstein noted in his amicus brief in the case: In effect EchoStar's argument is that once it has built up a large business on the back of someone else's patents, it should be allowed to reap those profits for the indefinite future. The size of its own illicit gains becomes the tool it deftly uses to extend its illicit activity indefinitely. This approach creates the perverse outcome that the longer the defendant is able to wiggle away from legal sanctions, the stronger is its case to continue on its unlawful path. EchoStar's claims of large future losses prove only one thing: that its large monthly losses make the damages awarded for TiVo in 2006 look puny relative to the continuing harm from EchoStar's misbehavior. The VOOM holding is just the latest in a serial pattern of courtroom distractions and legal delays. It seems EchoStar has made a practice out of disobeying court orders and pushing the legal system to the limits. Like the TiVo case, VOOM and others demonstrate that a determined party can drag out the legal process and prevent the other side from obtaining a remedy for harm it has suffered. As I noted the other day, this is particularly true for software devices and other complex products, where trivial changes can be exaggerated in an effort to run out the clock on a patent. In the TiVo case the stakes are enormous. EchoStar is working to undermine the role of the courts in enforcing the intellectual property rights that facilitate innovation. And more, a victory for EchoStar would send a message to large and small companies, innovators and capitalists that abusing the court's rules of procedure is not only fair game, but also a legitimate business tactic. Related Articles EchoStar's 'Egregious' Acts Threaten Court Defense (businessweek.com) TiVo V. EchoStar: Abusing The Courts Instead Of Respecting The Patent (blogs.forbes.com) Filed under: business, intellectual property, litigation, markets, patent, technology Tagged: Digital video recorder, DVR, EchoStar, litigation, Patent, Richard Epstein, TiVo
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