DIRECTV 2007 Annual Report Download - page 42

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THE DIRECTV GROUP, INC.
2006, the jury determined that we willfully infringed this patent and awarded approximately $79 million
in damages. On July 7, 2006, the Court entered its final written judgment which denied Finisar’s
request for an injunction and instead granted DIRECTV an ongoing royalty. Under this grant, we
would be obligated to pay Finisar $1.60 per new set-top box manufactured for use with the DIRECTV
system beginning June 17, 2006 and continuing until the patent expires in 2012 or is otherwise found to
be invalid. The Court also increased the damages award by $25 million because of the jury finding of
willful infringement and awarded pre-judgment interest of $13 million to Finisar. Post-judgment interest
accrues on the total judgment.
We filed a notice of appeal to the Court of Appeals for the Federal Circuit on October 5, 2006,
and Finisar also filed a notice of appeal on October 18, 2006. A bond was submitted to the District
Court in the amount of $127 million as required security for the damages awarded but not yet paid
pending appeal plus interest for the anticipated duration of the appeal. We were successful in obtaining
an order that post-judgment ongoing royalties shall be held in escrow pending outcome of the appeal.
Through December 31, 2007, the ongoing royalties amounted to $33 million, which has been paid into
escrow. Oral arguments on the appeal and cross-appeal were heard by the Court on January 7, 2008.
Based on our review of the record in this case, including discussion with and analysis by counsel of
the bases for our appeal, we have determined that we have a number of strong arguments available on
appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the
judgment against us will ultimately be reversed, or remanded for a new trial in which we believe we
would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail
in this matter; therefore, we have not recorded any liability for this judgment nor are we recording any
expense for the compulsory license.
***
Other. We are subject to other legal proceedings and claims that arise in the ordinary course of
our business. The amount of ultimate liability with respect to such actions is not expected to materially
affect our financial position, results of operations or liquidity.
(b) No previous reported legal proceedings were terminated during the fourth quarter ended
December 31, 2007.
***
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
***
33