Dish Network 1998 Annual Report Download - page 76

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–29
In connection with the News Corporation litigation that arose in 1997, EchoStar has a contingent fee
arrangement with its lawyers, which provides for the lawyers to be paid a percentage of any net recovery obtained in
its dispute with News Corporation. Although they have not been specific, the lawyers have asserted that they may be
entitled to receive payments in excess of $80 million to $100 million under this fee arrangement in connection with
the settlement of the dispute with News Corporation. EchoStar intends to vigorously contest the lawyers’
interpretation of the fee arrangement, which it believes significantly overstates the magnitude of its liability
thereunder. If the lawyers and EchoStar are unable to resolve this fee dispute under the fee arrangement, the fee
dispute would be resolved under arbitration. It is too early to determine the outcome of negotiations or arbitration
regarding this fee dispute.
WIC Premium Television Ltd.
On July 28, 1998, a lawsuit was filed by WIC Premium Television Ltd. (“WIC”), an Alberta corporation, in
the Federal Court of Canada Trial Division, against certain defendants which include: General Instrument
Corporation, HBO, Warner Communications, Inc., John Doe, Showtime, United States Satellite Broadcasting
Corporation, ECC and two of ECC’s wholly-owned subsidiaries, Dish, Ltd. and Echosphere. The lawsuit seeks,
among other things, an interim and permanent injunction prohibiting the defendants from activating receivers in
Canada and from infringing any copyrights held by WIC. It is too early to determine whether or when any other
lawsuits and/or claims will be filed. It is also too early to make an assessment of the probable outcome of the
litigation or to determine the extent of any potential liability or damages.
On September 28, 1998, WIC filed another lawsuit in the Court of Queen’s Bench of Alberta Judicial
District of Edmonton against certain defendants, which also include ECC, Dish, and Echosphere. WIC is a company
authorized to broadcast certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges
that the defendants engaged in, promoted, and/or allowed satellite dish equipment from the United States to be sold in
Canada and to Canadian residents and that some of the defendants allowed and profited from Canadian residents
purchasing and viewing subscription television programming that is only authorized for viewing in the United States.
The lawsuit seeks, among other things, interim and permanent injunction prohibiting the defendants from importing
hardware into Canada and from activating receivers in Canada and damages in excess of the equivalent of US
$175 million. It is too early to determine whether or when any other lawsuits and/or claims will be filed. It is also
too early to make an assessment of the probable outcome of the litigation or to determine the extent of any potential
liability or damages.
Broadcast Network Programming
Section 119 of the Satellite Home Viewer Act authorizes EchoStar to substitute satellite-delivered network
signals its subscribers, but only if those subscribers qualify as “unserved” households, defined in the Satellite Home
Viewer Act, those that, among other things, “cannot receive, through the use of a conventional outdoor rooftop
receiving antenna, an over-the-air signal of Grade B intensity (as defined by the FCC) of a primary network station
affiliated with that network.” Historically, EchoStar obtained distant broadcast network signals for distribution to its
subscribers through PrimeTime 24, Joint Venture (“PrimeTime 24”). PrimeTime 24 also distributes network signals
to certain of EchoStar’s competitors in the satellite industry.
The national networks and local affiliate stations have recently challenged PrimeTime 24’s methods of
selling network programming (national and local) to consumers based upon infringement of copyright. The United
States District Court for the Southern District of Florida has entered nationwide preliminary and permanent
injunctions preventing PrimeTime 24 from selling its programming to consumers unless the programming was sold
according to certain stipulations in the injunction. The preliminary injunction took effect on February 28, 1999, and
the permanent injunction is set to take effect on April 30, 1999. The injunctions cover “distributors” as well. The
plaintiff in the Florida litigation informed EchoStar that it considered EchoStar a “distributor” for purposes of that
injunction. A federal district court in North Carolina has also issued an injunction against PrimeTime 24 prohibiting
certain distant signal retransmissions to homes delineated by a contour in the Raleigh area. Other copyright litigation
against PrimeTime 24 is pending.