DIRECTV 2002 Annual Report Download - page 33

HUGHES ELECTRONICS CORPORATION
residential and one commercial), who allege claims ranging from breach of contract to fraud,
promissory estoppel, antitrust and unfair competition claims. The plaintiffs seek unspecified damages
and injunctive relief. They claim to be bringing the complaint on behalf of all DIRECTV dealers,
including former PRIMESTAR and USSB dealers. On August 17, 2001, DIRECTV, Inc. and Hughes
successfully stayed the case and the court orally ordered the individual plaintiffs to pursue their claims
in arbitration pursuant to the arbitration clause in each of the dealer’s contracts with DIRECTV, Inc.
None of the plaintiffs instituted arbitration proceedings. In March 2002, DIRECTV, Inc. filed a motion for
a final order of arbitration. Plaintiffs then filed a motion requesting the court to order that a single
arbitration be permitted on a class wide basis. DIRECTV, Inc. removed the action to federal court,
plaintiffs moved to remand to state court and the federal court granted remand to state court on
August 8, 2002. On September 5, 2002, the state court entered its final order compelling plaintiffs to
pursue their individual claims in arbitration in Los Angeles, California, but purporting to retain
jurisdiction to determine whether the prerequisites for class treatment of dealer claims within an
arbitration are met. DIRECTV, Inc. filed a notice of appeal of the order, and the State Supreme Court
issued an order to show cause by October 14, 2002, as to why the appeal should not be dismissed.
DIRECTV, Inc. responded to the notice and on January 7, 2003, the State Supreme Court issued an
order permitting DIRECTV, Inc. to proceed with its appeal. DIRECTV, Inc. intends to vigorously seek to
enforce its arbitration agreement, to oppose plaintiffs’ efforts to obtain class treatment, and to defend
against plaintiffs’ allegations.
***
On June 27, 2000, SuperGuide Corporation (“SuperGuide”) filed suit in the United States District
Court for the Western District of North Carolina against DIRECTV Enterprises, Inc., DIRECTV, Inc. and
DIRECTV Operations, Inc., which Hughes refers to together in this paragraph as the DIRECTV
defendants, Hughes, Thomson Consumer Electronics, Inc., EchoStar Communications Corporation,
EchoStar Satellite Corporation and EchoStar Technologies Corporation, alleging infringement of three
United States patents and seeking unspecified damages and injunctive relief. Gemstar Development
Corp. was added as a third-party defendant because it asserts to have exclusive control of the patents
by reason of a license agreement with SuperGuide. Based on beneficial rulings narrowing the scope of
the asserted claims, the defendants filed motions for summary judgment, and on July 3, 2002, the
court granted summary judgment of non-infringement to the DIRECTV defendants, Hughes and
DIRECTV system manufacturers under all asserted claims of the three patents in the case. Judgment
for all defendants dismissing all claims of infringement and awarding costs to defendants was entered
on July 25, 2002. Notices of appeal to the Court of Appeals for the Federal Circuit have been filed, and
a hearing will be held in 2003.
***
On December 5, 2000, Personalized Media Communications, LLC (“PMC”) and Pegasus
Development Corporation (“Pegasus Development”) filed suit in the United States District Court for the
District of Delaware against DIRECTV, Inc., Hughes, Thomson Consumer Electronics, Inc.
(“Thomson”) and Philips Electronics North American Corp., alleging infringement of seven United
States patents and seeking unspecified damages and injunctive relief. The case has been narrowed to
24 claims for purposes of discovery, and DIRECTV, Inc. may seek further narrowing prior to trial
presently scheduled for the first quarter of 2004. Thomson has named Gemstar-TV Guide
International, Inc. (“Gemstar”), Starsight Telecast, Inc. and TVG PMC, Inc. as third-party defendants,
and has raised antitrust and patent misuse charges against Gemstar, Pegasus Development and
PMC. The antitrust counts have been transferred to a multi-district proceeding in Atlanta for pre-trial
development and have been bifurcated for separate trial. DIRECTV, Inc. has raised defenses of
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