DIRECTV 2009 Annual Report Download - page 132

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
quarter of 2008, we received a $160 million cash capital contribution, which we recorded as ‘‘Additional
paid-in-capital’’ in the Consolidated Balance Sheets.
In order to comply with terms of the FCC order, effective February 25, 2009, we placed the shares
of DIRECTV Puerto Rico into a trust and appointed an independent trustee who oversees the
management and operation of DIRECTV Puerto Rico, and has the authority, subject to certain
conditions, to divest ownership of DIRECTV Puerto Rico. We cannot be sure that the FCC will agree
with our view that the trust is sufficient to sever all attributable links between DIRECTV and Liberty,
or that it will not require us to undertake further cumbersome and expensive measures to eliminate
such attribution. We continue to consolidate the results of DIRECTV Puerto Rico.
Redeemable Noncontrolling Interest
In connection with our acquisition of Sky Brazil in 2006, our partner who holds the remaining
25.9% interest, Globo was granted the right, until January 2014, to require us to purchase all or a
portion (but not less than half) of its shares in Sky Brazil. Upon exercising this right, the fair value of
Sky Brazil shares will be determined by mutual agreement or by an outside valuation expert, and we
have the option to elect to pay for the Sky Brazil shares in cash, shares of our common stock or a
combination of both. As of December 31, 2009, we estimate that Globo’s 25.9% equity interest in Sky
Brazil has a fair value of approximately $400 million to $550 million. As of December 31, 2008, we
estimate that Globo’s 25.9% equity interest in Sky Brazil had a fair value of approximately $325 million
to $450 million. Adjustments to the carrying amount of the redeemable noncontrolling interest were
recorded to additional paid-in-capital. We determined the range of fair values using significant
unobservable inputs including forecasted operating results, which are Level 3 inputs pursuant to fair
value accounting standards.
Litigation
Litigation is subject to uncertainties and the outcome of individual litigated matters is not
predictable with assurance. Various legal actions, claims and proceedings are pending against us arising
in the ordinary course of business. We have established loss provisions for matters in which losses are
probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or
treble damage claims, or demands that, if granted, could require us to pay damages or make other
expenditures in amounts that could not be estimated at December 31, 2009. After discussion with
counsel representing us in those actions, it is the opinion of management that such litigation is not
expected to have a material adverse effect on our consolidated financial statements.
Finisar Corporation. As previously reported, we were successful in 2008 getting the jury verdict in
the Finisar case vacated on appeal. The original verdict found the patent to be valid and willfully
infringed, and the jury awarded approximately $79 million in damages. The trial court increased the
damages award by $25 million because of the jury finding of willful infringement and awarded
pre-judgment interest of $13 million. DIRECTV was also ordered to pay into escrow $1.60 per new
set-top receiver manufactured for use with the DIRECTV system beginning June 17, 2006 and
continuing until the patent expires in 2012 or was otherwise found to be invalid. On April 18, 2008, the
Court of Appeals reversed the verdict of the district court in part, vacated the findings of infringement,
and remanded for further proceedings on the remaining issues finding that the district court had
applied erroneous interpretations of certain terms of the claims. On remand, we sought and obtained
summary judgment on invalidity of all remaining claims, and the case against DIRECTV was dismissed
on May 19, 2009. Finisar filed a Notice of Appeal, and oral argument on the appeal was held on
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