• by Wayne Friedman , May 2, 2011

Dish Network got rid of a big legal question mark and then offered up even better news for investors.

The satellite TV programmer agreed to settle its longtime, seven-year legal dispute with TiVo regarding infringement of TiVo's patent of its DVR technology. Dish will pay the digital video technology company $500 million.

This news -- and strong first-quarter financial results -- sent Dish's stock price soaring 12% to $28.22 in midday trading.

Under the deal, certain DVR patent licenses are granted to each other -- including giving a license to Dish for TiVo's "Time Warp' patent, the original patent in dispute. At the same time, EchoStar granted TiVo a license under certain DVR-related patents for TiVo-branded, co-branded and other products.

EchoStar is the equipment business for Dish; Dish Network is the programming service.

In return, TiVo will help Dish promote the Blockbuster digital video service. Dish recently purchased the remaining assets of Blockbuster. TiVo initially sued Dish and EchoStar in 2004 for infringing on patents covering digital video recorder technology.

Analysts believe this Dish-TiVo deal resolves a longstanding question mark over the satellite programmer and should allow for future growth.

Tom Rogers, president and CEO of TiVo, stated: "The compensation from this settlement, including the resulting reduction in legal expenditures, puts TiVo in an enviable financial and strategic position."

Dish Network chairman and chief executive officer Charlie Ergen said: "We believe that our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo's Time Warp patent, which ultimately will allow us to enhance the performance of our award-winning DVRs."

On the same day as the TiVo announcement, Dish Network's first-quarter 2011 net income more than doubled its first quarter 2010 results: $549 million versus $231 million. Revenue was up 5.5% to $3.22 billion.

After three quarters of subscriber losses, Dish added some 58,000 new customers, now totaling 14.2 million.