“Of course, one of the big news items of the day is going to be TiVo, TiVo winning a major lawsuit, $103 million the judge ruled in their favor against Echostar and the Dish Network. A five year legal battle and it will continue, however, it made 38% out of the gate, a significant win for TiVo.” Fox Business Network 6/3/2009

A Texas court ruled in favor of TiVo (TIVO) in a long standing patent dispute with Echostar (SATS) owners of Dish Network.  The case has been in court for the better part of five years and on Tuesday afternoon the court ruled against a work around claim made by Dish Network in order to avoid patent infringement.  Among the biggest stories here is that Echostar will be required to pay TiVo in excess of $103 million, which is in addition to the $105 million that Echostar had already paid in August of 2008.  In order for Echostar to continue using this technology, they have no other choice now then to sign a licensing agreement baring a reportedly unlikely appellate success.  Not surprisingly, TiVo shares are trading much higher this morning, as much as 45% in premarket trading.

The ruling is clearly a win for TiVo, and even though the stock price does not reflect it as of yet, it is an equally big loss for Echostar.  They spent millions in research and development costs in an attempt to work around the features that were disputed in the TiVo case.  The company has asked the court to delay enforcement because they fear losing customers if DVR service is no longer available for a period of time.

Based on our methodology, TiVo’s big gain today has made the stock appear very close to Overvalued.  As of our report on TiVo written at the beginning of the week, we had its valuation as Fairly Valued; however, we had a rationally expected price range of $7.15 to $10.05.  Of course, these are based on estimates prior to the court ruling, but it is unlikely that this will substantially change those figures.  After all, TiVo has only made a substantial profit greater than 4 cents per share in one quarter in its history as a public company.  No one knows how much a licensing deal with Echostar could add to the bottom line, but if you were lucky and patient enough to have reaped the benefit of this patent dispute, it might be an opportune time to take some gains off of the table.