DIRECTV 2011 Annual Report Download - page 52

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DIRECTV
patents. The stay was lifted in November, 2011, and trial is presently scheduled for From time to time, we receive investigative inquiries or subpoenas from state
November, 2013. The suit now involves claims of four of the seven patents and federal authorities with respect to alleged violations of state and federal statutes.
originally asserted, all of which have expired, and the validity and infringement of These inquiries may lead to legal proceedings in some cases. DIRECTV U.S. has
which are disputed by DIRECTV. received a request for information from the FTC on issues similar to those recently
resolved with a multistate group of state attorneys general. We are cooperating with
Other Intellectual Property Litigation. We are a defendant in several the FTC by providing information about our sales and marketing practices and
unrelated lawsuits claiming infringement of various patents relating to various customer complaints.
aspects of our businesses. In certain of these cases other industry participants are
also defendants, and also in certain of these cases we expect that any potential ECAD. Sky Brazil, along with other video distributors in Brazil, is disputing
liability would be the responsibility of our equipment vendors pursuant to charges assessed by Escritorio Central de Arrecadacao, or ECAD, the organization
applicable contractual indemnification provisions. To the extent that the allegations responsible for collecting performance rights fees under Brazilian law. Sky Brazil has
in these lawsuits can be analyzed by us at this stage of their proceedings, we believe been withholding payments to ECAD since 2004, and has accrued amounts both
the claims are without merit and intend to defend the actions vigorously. We have we and Sky Brazil believe are adequate to satisfy amounts owed to ECAD. In order
determined the likelihood of a material liability in such matters is remote or have to continue its opposition to ECAD’s claims, in October 2011, Sky Brazil was
made appropriate accruals and the final disposition of these claims is not expected required to provide a letter of credit in the amount of approximately $85 million
to have a material effect on our consolidated financial position. However, if an which represents the contested fees plus accrued interest and penalties, for the
adverse ruling is made in a lawsuit involving key intellectual property, such ruling period from January 2004 to September 2009, plus an additional 30% required by
could possibly be material to our consolidated results of operations of any one Brazilian law. Sky Brazil’s dispute with ECAD is currently pending in the Superior
period. No assurance can be given that any adverse outcome would not be material Justice Tribunal, and there are other claims by the Brazilian pay television
to our consolidated financial position. association, known as ABTA, against ECAD before the Brazilian antitrust board, or
CADE, which may affect ECAD or the rights fees it is attempting to collect.
Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class
action lawsuits in state and federal courts challenging the early cancellation fees we Other. We are subject to other legal proceedings and claims that arise in the
assess our customers when they do not fulfill their programming commitments. ordinary course of our business. The amount of ultimate liability with respect to
Several of these lawsuits are pending, some in California state court purporting to such actions is not expected to materially affect our financial position, results of
represent statewide classes, and some in federal courts purporting to represent operations or liquidity.
nationwide classes. The lawsuits seek both monetary and injunctive relief. While the (b) No previously reported legal proceedings were terminated during the
theories of liability vary, the lawsuits generally challenge these fees under state fourth quarter ended December 31, 2011.
consumer protection laws as both unfair and inadequately disclosed to customers.
Our motions to compel arbitration have been granted in all of the federal cases, ITEM 4. MINE SAFETY DISCLOSURES
except as to claims seeking injunctive relief under California statutes. The denial of Not applicable.
our motion as to those claims is currently on appeal. 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.
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