Updated: Federal Appeals Court Presses Replay On Dish-TiVo Patent Dispute

TiVo’s March court victory in its patent battle with Dish and EchoStar (NSDQ: SATS) could be erased, as a federal appeals court has agreed to rehear the case. The pronouncement wasn’t unexpected. The legal fight, which has dragged on for six years, concerns whether the satellite companies infringed on TiVo’s DVR patents. TiVo (NSDQ: TIVO) released a short statement responding to the U.S. Court of Appeals decision, saying, “We are disappointed that we do not yet have finality in this case despite years of litigation,” adding that it will fight on.

Two months ago, two members of a three-judge federal court panel sided with a lower court ruling that held Dish and its sister Echostar in contempt of a permanent injunction prohibiting infringement on its DVR patents. But Dish and EchoStar indicated that they were not about to give up and therefore would seek an en banc review by the full 11-judge U.S. Court of Appeals for the Federal Circuit.

Still, a review by the Texas appeals court doesn’t mean that the satellite companies will ultimately prevail. But after this, the legal battle doesn’t have much further to go. In any case, the market has issued its decision on the news, sending TiVo shares down almost 37 percent just after noon eastern time, while Dish’s stock price was up nearly 6 percent.

Updated: Lazard analyst Barton Crockett said that the decision was surprising and that has forced him to rethink TiVo’s outlook. After consulting an outside attorney, Lazard concluded that the development is “exceptionally cautionary for TiVo,” and that the investment bank is lowering its rating to “hold.” Crockett thinks the odds are low, but there is a “meaningful chance” that the en banc panel could reverse the March decision that found Dish in contempt.

If that happens, this would put TiVo back to square one in terms of trying to prove that Dish