An appeals court has upheld a lower court's ruling that Dish Networks' DVRs infringe on software patents held by TiVo. In a unanimous opinion (PDF) issued earlier today, the US Court of Appeals for the Federal Circuit upheld a district court jury's verdict that DVRs made by Dish Network infringed on patent 6,233,389 for a "multimedia time warping system." The court also remanded the verdict on hardware patent infringements back to the district court for further proceedings.

There's more good news for TiVo: the $89.6 million damage award to TiVo was also upheld, and the court left open the possibility that the lower court could award additional damages based on the time that has elapsed since the original verdict and today's ruling. Last, and perhaps most troubling for Dish, the company faces the very real possibility that it will be barred from selling DVRs and forced to disable the functionality on devices already in customers' homes. That's because the appeals court affirmed a permanent injunction against their sale an operation and said that the stay against its enforcement will end once the appeal becomes final.

TiVo originally sued Dish Networks (formerly known as EchoStar) back in 2005. The jury's verdict against Dish came in April 2006, with the injunction issued in August 2006. Dish filed a countersuit against TiVo, but that suit was put on hold while the US Patent and Trademark Office reexamined the patents in question. This past November, the validity of the patents was reaffirmed.

With the validity of the patents, the damage award, and the jury verdict all upheld upon appeal, Dish appears to be out of options. The satellite TV provider is now faced with the unpleasant decision of whether to stop selling DVRs and shut off its DVR service, hope against hope that the Supreme Court decides to hear the case, or write an eight- or nine-figure check to TiVo to cover damages and license the patents. At this point, the latter option is Dish Network's best bet.