DIRECTV 2005 Annual Report Download - page 42

THE DIRECTV GROUP, INC.
On December 5, 2000, Personalized Media Communications, LLC and Pegasus Development
Corporation filed suit in the U.S. District Court for the District of Delaware against DIRECTV, Inc.,
The DIRECTV Group, Thomson Consumer Electronics and Philips Electronics North American Corp.,
alleging patent infringement and seeking unspecified damages and injunctive relief. On May 14, 2003,
the court stayed the case pending outcome of reexaminations of the patents by the U.S. Patent Office.
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On June 27, 2000, SuperGuide Corporation filed suit in the U.S. District Court for the Western
District of North Carolina against DIRECTV Enterprises, LLC, DIRECTV, Inc. and DIRECTV
Operations, LLC, which we refer to together in this paragraph as the ‘‘DIRECTV defendants,’’
DIRECTV Group, Thomson Inc., EchoStar Communications Corporation, EchoStar Satellite
Corporation and EchoStar Technologies Corporation, alleging patent infringement 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 Corporation. On July 3, 2002, the court granted summary judgment of
non-infringement to the DIRECTV defendants, DIRECTV Group and DIRECTV system
manufacturers under all asserted claims of the patents in the case. Judgment for all defendants
dismissing all claims of infringement and awarding costs to defendants was entered on July 25, 2002.
On February 12, 2004, the Court of Appeals for the Federal Circuit affirmed the decision in part and
reversed in part, and remanded the action for further proceedings.
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Independent Retailer Litigation. On May 18, 2001, plaintiffs Cable Connection, Inc., TV
Options, Inc., Swartzel Electronics, Inc. and Orbital Satellite, Inc. filed a class action complaint against
us in Oklahoma State Court, alleging claims similar to those in the Garcia matter described in
(b) below on behalf of all DIRECTV dealers. The plaintiffs seek unspecified damages and injunctive
relief. After several procedural hearings and orders, the matter is now pending before the American
Arbitration Association.
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Darlene Litigation. On October 18, 2004, Darlene Investments, LLC, or Darlene, filed suit in the
circuit court for Miami-Dade County, Florida, against us and certain of our subsidiaries (including
DLA LLC), News Corporation, and others, or collectively the Defendants. The suit alleges fraud and
violation of fiduciary, contractual and other duties owed Darlene and to DLA LLC by one or more of
the Defendants. Among other things, Darlene alleges that the Sky Transactions were unfair to DLA
LLC and its members, including Darlene. Darlene further alleges that we entered into an oral put
agreement that would have required DLA LLC to acquire Darlene’s interest in DLA LLC based on a
pricing formula and that Darlene was fraudulently induced to release its rights under that put and
other rights. Darlene seeks injunctive relief to preclude DLA LLC from consummating the Sky
Transactions, $1 billion in damages and other relief. We have agreed to indemnify News Corporation
against claims by Darlene. We believe Darlene’s claims are without merit and we are defending against
these claims.
We and certain other defendants filed in state court motions to compel arbitration of certain
claims and to dismiss others for improper venue, and on November 3, 2005, the judge entered an order
essentially staying the proceedings pending the arbitration between Darlene, DIRECTV and DLA LLC.
We and Darlene have filed demands for arbitration under the terms of the dispute resolution provision
of the DLA LLC limited liability company agreement. The parties have agreed upon a potential
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