DIRECTV 2010 Annual Report Download - page 120

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
In June 2010, the Venezuelan government established the SITME, an it is the opinion of management that such litigation is not expected to have a
alternative to the official process for exchanging foreign currency. Venezuelan material adverse effect on our consolidated financial statements.
entities can purchase U.S. dollar denominated securities through the SITME; During the year ended December 31, 2010 an arbitration panel determined
however, trading volume is limited to $50,000 per day with a maximum equivalent that, pursuant to a contractual indemnity provision, one of our vendors was
of $350,000 in a calendar month, subject to certain limitations. The SITME has required to reimburse us $28 million for legal fees and settlement payments
established a weighted average implicit exchange rate of approximately 5.3 bolivars incurred and pay accrued interest to us for patent infringement claims settled by us
fuerte per U.S. dollar. in previous periods. We received the cash payment during the year ended
As a result of the closing of the parallel exchange process in May 2010, we December 31, 2010 and recorded $25 million as a reduction to ‘‘General and
have been unable to repatriate excess cash balances and as a result, we have realized administrative expenses’’ and $3 million as ‘‘Interest income’’ in the Consolidated
lower charges for the repatriation of cash in 2010. Our ability to pay U.S. dollar Statements of Operations.
denominated obligations and repatriate cash generated in Venezuela in excess of Finisar Corporation. As previously reported, we were successful in 2008
local operating requirements is limited, resulting in an increase in the cash balance getting the jury verdict in the Finisar case vacated on appeal. The original verdict
at our Venezuelan subsidiary. We expect to continue our practice of repatriating found the patent to be valid and willfully infringed, and the jury awarded
cash generated in Venezuela in excess of local operating requirements. At such time approximately $79 million in damages. The trial court increased the damages award
that exchange controls are eased, accumulated cash balances may ultimately be by $25 million because of the jury finding of willful infringement and awarded
repatriated at less than their currently reported value, as the official exchange rate pre-judgment interest of $13 million. DIRECTV was also ordered to pay into
has not changed despite continuing high inflation in Venezuela. These conditions escrow $1.60 per new set-top receiver manufactured for use with the DIRECTV
are also expected to affect growth in our Venezuelan business which is dependent system beginning June 17, 2006 and continuing until the patent expires in 2012 or
on our ability to purchase set-top boxes and other components using U.S. dollars. was otherwise found to be invalid. On April 18, 2008, the Court of Appeals
Using the official 4.3 bolivars fuerte per U.S. dollar exchange rate as of reversed the verdict of the district court in part, vacated the findings of
December 31, 2010, our Venezuelan subsidiary had Venezuelan bolivar fuerte infringement, and remanded for further proceedings on the remaining issues finding
denominated net monetary assets of $85 million in excess of Venezuelan bolivar that the district court had applied erroneous interpretations of certain terms of the
fuerte denominated monetary liabilities, including cash of $169 million as of claims. On remand, we sought and obtained summary judgment on invalidity of all
December 31, 2010. 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
Litigation January 6, 2010. On January 8, 2010, the Court of Appeals affirmed per curiam
Litigation is subject to uncertainties and the outcome of individual litigated the grant of summary judgment on all claims. This case is now resolved and there
matters is not predictable with assurance. Various legal actions, claims and will be no further proceedings in this matter.
proceedings are pending against us arising in the ordinary course of business. We Intellectual Property Litigation. We are a defendant in several unrelated
have established loss provisions for matters in which losses are probable and can be lawsuits claiming infringement of various patents relating to various aspects of our
reasonably estimated. Some of the matters may involve compensatory, punitive, or businesses. In certain of these cases other industry participants are also defendants,
treble damage claims, or demands that, if granted, could require us to pay damages and also in certain of these cases we expect that any potential liability would be the
or make other expenditures in amounts that could not be estimated at responsibility of our equipment vendors pursuant to applicable contractual
December 31, 2010. After discussion with counsel representing us in those actions, indemnification provisions. To the extent that the allegations in these lawsuits can
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