TV Games Network Parent Loses Critical Patent Ruling

Gemstar-TVG Guide International, the parent company to the TV Games Network racing channel, suffered a serious blow in court Friday when it lost a crucial patent infringement case.

International Trade Commission Judge Paul Luckern's "initial determination" is among the worst possible outcomes expected, according to analysts and patent attorneys. The administrative law judge ruled that three of the company's patents for its on-screen interactive program guide have not been infringed by competing products sold by the Pioneer Electronics, Scientific-Atlanta, EchoStar Communications, and SCI Systems, now a unit of Sanmina-SCI Corp.

Additionally, he found Gemstar misused its "television navigation" patent, and that it is unenforceable for "failure to name a co-inventor." The judge's decision means the three companies Gemstar sued may continue to import their cable-TV set-top boxes into the United States.

Pasadena, Calif.-based Gemstar, said it would appeal the decision to the ITC as a whole, and possibly to a federal appellate court if needed.

"We are clearly disappointed ... We think the ruling is erroneous," Gemstar spokeswoman Lauren Snyder said.

EchoStar shares soared on the news, rising almost 11% in after-hours trading to a high of $20.98. Shares of Gemstar were not traded after hours but were expected to continue falling when the market reopens on Monday. Gemstar dipped to $7, a new 52-week low on June 14. The stock had been trading around $10 a month earlier and around $21 per share in March.

The ruling would prolong an important uncertainty for Gemstar, Rob Stone, an analyst with SG Cowen Securities, told Reuters News Service.

Gemstar, which publishes TV Guide magazine, is known for aggressively defending its patent claims in court. The company has filed a separate civil suit against Scientific-Atlanta over disputed patents.

Without the backing of the ITC, Gemstar has lost much of the leverage it might have otherwise been able to bring to bear to clinch an early settlement of those claims, Stone said.

Information from the Wall Street Journal Interactive contributed to this report