DIRECTV 2009 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2009 DIRECTV annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

DIRECTV
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 the invalidity of all remaining claims, and the case against DIRECTV was
dismissed on May 19, 2009. Finisar filed a Notice of Appeal with the Fifth Circuit Court of Appeals,
and oral argument on the appeal was held on January 6, 2010. On January 8, 2010, the Court of
Appeals affirmed per curiam the grant of summary judgment on all claims. This case is now resolved
and there will be no further proceedings in this matter.
Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class action lawsuits in state
and federal courts challenging the early cancellation fees DIRECTV U.S. assesses its customers when
they do not fulfill their programming commitments. Several of these lawsuits are pending—some in
California state court purporting to represent statewide classes, and some in federal courts purporting
to represent nationwide classes. The lawsuits seek both monetary and injunctive relief. While the
theories of liability vary, the lawsuits generally challenge these fees under state consumer protection
laws as both unfair and inadequately disclosed to customers. Each of the lawsuits is at an early stage.
Where possible, we are moving to compel these cases to arbitration in accordance with our Customer
Agreement, but in states such as California where the enforceability of the arbitration provision is
limited, we intend to defend against these allegations in court. We believe that our early cancellation
fees are adequately disclosed, and represent reasonable estimates of the costs we incur when customers
cancel service before fulfilling their programming commitments.
From time to time, we receive investigative inquiries or subpoenas from state authorities with
respect to alleged violations of state statutes. These inquiries may lead to legal proceedings in some
cases. Currently, we are the subject of an investigation by a multistate group of state attorneys general
regarding alleged violations of their respective state consumer protection statutes. The state of
Washington, originally a part of the multistate group, filed an action in Washington state court in
December 2009 seeking injunctive relief and civil penalties of up to $2,000 per violation of
Washington’s Consumer Protection Act. The multistate investigation and the Washington lawsuit allege
a variety of purported violations of the statutes, but primarily allege that we do not adequately disclose
the terms and conditions of consumer offers, including subscriber commitments and early cancellation
fees. We are cooperating with the multistate group by providing information about our sales and
marketing practices and customer complaints. We are defending the Washington lawsuit.
Liberty Media Corporation Litigation. We have been notified that a purported class action was filed
on February 9, 2010 in Delaware Chancery Court against certain past and present directors of Liberty
Media Corporation alleging, among other things, that the defendants breached their fiduciary duties as
Liberty board members in connection with the business terms and approval process by Liberty
stockholders of the merger of Liberty Entertainment, Inc. with a subsidiary of DIRECTV as part of the
Liberty Transaction. The plaintiff purports to represent approximately 85 former LMDIB stockholders
(other than the defendants) that allegedly held approximately 1.8 million LMDIB shares prior to the
consummation of the Liberty Transaction. The complaint alleges, among other things, that John Malone
and certain other LMDIB stockholders received disparate allocation of consideration in the Liberty
Transaction. The complaint seeks equitable reallocation and disgorgement of the improper
consideration received by the defendants and other relief. The defendants are seeking indemnification
and have tendered defense of this litigation to DIRECTV pursuant to agreements executed as part of
37